[Baltimore Sun] People’s Counsel: PJM to blame for soaring energy prices | GUEST COMMENTARY
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With its members raking in billions of dollars from PJM’s contrived market rules, it should come as no surprise that the Electric Power Supply Association (EPSA), in an opinion piece this month in The Baltimore Sun, is defending how the regional power operator sets its market rules.
As a result of PJM’s July auction, generator costs will soar to $14.7 billion starting next June, up 800% from the previous year when they were $2.2 billion. The windfall profits for EPSA members are for power plants that will be performing essentially the same service they provided in the previous year for a fraction of the cost. Immediately following the auction, the stock prices jumped by more than 10 percent for several generation companies with plants in the region. If PJM doesn’t change course, even higher record-setting costs could be in store in the next auction in December.
EPSA’s op-ed spreads misinformation to defend these windfall profits and the PJM policies that make them possible. EPSA mimics past statements of PJM that disingenuously blame Maryland for shutting down generating plants, when it is EPSA’s own members that are making retirement decisions. EPSA is wrong, for example, when it says “PJM formally requested state lawmakers” to keep the H.A. Wagner power plant running. The decision about Wagner was not the state lawmakers’ decision to make; rather it belonged to EPSA member Talen Energy, the owner of the Brandon Shores and Wagner power plants.
PJM’s market rules create these windfalls for generators, and Talen is one of the biggest winners. Under PJM’s rules, Talen will be paid hundreds of millions to keep Brandon Shores and Wagner around for reliability until a new transmission line is built. But under PJM rules, Talen does not have to bid these “reliability must run” (or RMR) power plants into the PJM auction — even though the central purpose of the auction is to ensure future system reliability. And because of the way PJM has constructed the market, the exclusion of the RMR units drives up auction prices region-wide, meaning more profits for Talen’s other plants. Talen alone benefitted from PJM’s RMRs and capacity market rules for the July auction by as much as $360 million, for just one delivery year, according to a report on the auction we released in August.
Region-wide, PJM’s failure to account for RMR plants in the auction — an outlier policy differing from other regional markets — cascades across the PJM region and may have raised costs by as much as $5 billion. Incredibly, the exclusion of the RMR plants’ 2,000 megawatts (MWs) of capacity — less than 1.5 percent of the 135,684 MWs that cleared the auction — impacted billions in costs across the entire PJM region that includes 13 states and Washington, D.C. It is unreasonable to have market rules that enable generation companies to influence their profits and leave captive customers vulnerable to drastic increases in utility bills.
The capacity market is just part of the problem. PJM’s failure to plan ahead for transmission investments is also wreaking havoc and costing customers. For the Brandon Shores retirement, the planning failures enable avoidance of a competitive procurement for the transmission solution. In fact, despite federal policies to promote competitive procurements because they can save customers in transmission costs, over the last decade PJM has enabled most transmission spending to evade competitive procurements, contributing to a tripling of transmission costs in just the last 10 years.
Our office has challenged PJM’s market rules and its transmission planning failures for their inefficient results that are causing extraordinary cost increases for Maryland customers. The auction results alone will cost Maryland consumers hundreds of dollars a year. Yet the EPSA op-ed mischaracterizes the Office of People’s Counsel’s cost and planning challenges as opposition to “every recent transmission project in the state.” In fact, OPC generally does not oppose new transmission projects, and we have taken no position on the siting of recent transmission lines, including the Piedmont Reliability Project and the transmission facilities for addressing the eventual retirement of Brandon Shores.
EPSA’s efforts to blame Maryland obfuscate PJM’s own responsibility and EPSA members’ windfall profits resulting from PJM policies — its contrived auction market rules, its transmission planning failures and other PJM decisions that elevate the interests of generation companies and utilities over the interests of the customers the market is supposed to be serving. Another auction is scheduled for December that will set prices for the year beginning June 1, 2026. One small but significant step we have asked PJM to take — before customers are sacked with another year of inflated bills to pay windfall profits to EPSA members — is to reflect RMR plants in the upcoming auction.
David S. Lapp (davids.lapp@maryland.gov) is the Maryland People’s Counsel.
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