BPU Files with Federal Court, Wants FERC Rehearing on New Way to Pay for Power

Tom Johnson | August 1, 2016 | Energy & Environment
New Jersey, fearing spikes in power prices, joins with other states to roll back PJM scheme to increase grid reliability

Richard Mroz, president of the state Board of Public Utilities
The state is renewing its efforts to spur a federal agency to reconsider a decision that officials in New Jersey and elsewhere say is increasing electric bills to consumers.

In a filing with a federal court, the state Board of Public Utilities is seeking a rehearing on a controversial new system of paying power suppliers for electricity. The issue divided the three commissioners of the Federal Energy Regulatory Commission.

The system has increased payments to suppliers for power to maintain the reliability of the region’s electric grid. It was adopted after a bitter cold snap during the winter of 2012-2013 nearly led to rolling blackouts because some generators could not provide promised power because of the extreme weather.

New Jersey, other states, and consumer advocates all opposed the new rule, fearing it would spike power prices, a worry shared by environmentalists who earlier this month challenged the new system in court, too.

The state BPU is challenging the decision by FERC to deny it a rehearing on the issue, known as the PJM Capacity Performance construct, in the U.S. Court of Appeals for the D.C. Circuit.

“FERC has not examined whether approving the Capacity Performance construct makes financial sense for consumers,’’ said BPU President Richard Mroz.

In its request for rehearing, the state argued that the FERC approval was arbitrary and capricious. In part, it also contended the federal agency failed adequately to consider the costs and benefits of the new rule and a flawed penalty provision.

Under the new system, if a supplier agrees to provide power and fails to deliver on the contract, it is subject to punitive penalties. The penalty provision could lead some suppliers to refrain from offering electricity up in an annual auction run by PJM Interconnection, the operator of the regional power grid, according to some critics, an outcome that could lead to higher prices.

In the past year, however, power prices dropped, a sign that at least temporarily, the worst fears of critics have failed to be realized. But clean-energy advocates oppose the rule, saying it impedes investment in less polluting ways of making electricity, such as solar panels and wind farms.

“We, as a board, will continue to advocate New Jersey’s interest in this case and any others that impact upon ratepayers and the regulated utilities,’’ Mroz said.

The state was joined in its request for a rehearing by the Public Power Association of New Jersey and several other parties.