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Environmentalists Challenge Grid Operator’s New ‘Reliability’ Regulation

Opponents argue rule will drive up prices to consumers and encourage the use of fossil fuels to detriment of clean-energy alternatives

natural gas power plant

A new rule designed to promote reliability of the power grid is being challenged by a quartet of interest groups saying it increases prices to consumers and hinders clean-energy alternatives.

The Sierra Club, Natural Resources Defense Council, Earthjustice, and the Union of Concerned Scientists filed a lawsuit Friday challenging a federal agency’s approval of the new regulation adopted by the operator of the nation’s largest power grid, PJM Interconnection.

The regulation provides power suppliers with more lucrative payments if they agree to provide electricity at times when it may be needed because of high demand, but slams them with stiff penalties if they fail to deliver when called upon.

The controversial regulation was adopted by PJM in the wake of an unusually bitter cold snap in the winter of 2014, when many suppliers were unable to supply power, straining the reliability of the grid. New Jersey officials were not happy with the rule, fearing it could spike prices to consumers.

For the most part, sizeable price increases have yet to occur. This past February, while prices inched upward for the electricity most of the state’s utilities bought for their customers, officials attributed much of the rise to higher investments in upgrades to transmission lines and other reliability issues.

In challenging the rule, the groups argued that it is tailored to fossil-fuel units rather than clean-energy sources, such as solar and wind power. They also contended that the new regulation would increase electric bills for the 61 million customers served in the PJM region, which covers 13 states, including New Jersey.

“PJM’s rules would significantly increase costs to customer and punish the same clean-energy and demand resources that helped keep the lights on during the extreme weather events in the last couple of years,’’ said Casey Robert, staff attorney of the Sierra Club. “These new rules give polluting fossil fuels an unfair advantage to detriment of energy customers’ wallets.’’

When proposed, PJM projected the new regulation could end up costing customers a few dollars more a month on their utility bills. A recent capacity auction overseen by the grid operator seemed to deflate fears about a big spike in prices when costs fell from the previous year to ensure there is enough power to keep the lights on.

Still, the rule is spurring a lawsuit.

“We’re challenging FERC’s (Federal Energy Regulatory Commission’s) approval of PJM’s new rules for how it acquires electricity to serve customers in the future because they favor expensive, polluting power plants over clean energy,’’ said Jennifer Chen, an attorney with the NRDC. “That’s a bad deal for consumers and environment.’’

Mike Jacobs, a senior energy analyst with the Union of Concerned Scientists, said PJM’s new rules represent a step backward in the effort to advance a cleaner, more affordable and reliable grid.

The new rule was generally backed by power suppliers who argued it will improve system reliability and drive the energy sector to invest in electric and gas infrastructure. After a series of severe storms, that is happening to a great extent in New Jersey, driven in part by the state Board of Public Utilities.

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