FERC Changes to PJM Power Grid Drive Up Costs, Pollution — Critics Claim

By altering ways grid operator buys capacity, Federal Energy Regulatory Commission sparks warnings from BPU, energy companies, consumer advocates
Coal-burning power plantCredit: peggydavis66 via Creative Commons (CC BY-SA 2.0)
Coal-burning power plant

Higher energy bills to consumers. Increased use of more-polluting fossil-fuel plants. A shift away from cleaner ways of producing power, like solar and offshore wind.

According to critics, those are the consequences of a month-old decision by the Federal Energy Regulatory Commission to require PJM, operator of the nation’s largest power grid, to revamp how state-subsidized generation is treated in competitive energy markets.

As a result, a request has been made that the agency reconsider and clarify its December decision requiring the grid operator to include electricity from sources in its capacity market, a step aimed at bringing the price of clean power in line with that produced by fossil fuels.

Making no friends in energy market

Few in the energy market like the decision — including state regulators, consumer advocates and even energy suppliers.

“Make no mistake: the alternative to granting a rehearing is increased consumer harm in the form of higher prices and worse environmental outcomes,’’ the New Jersey Board of Public Utilities said in a brief it filed Tuesday. Those outcomes, the board said, will impair the state’s efforts to fight climate change.

The revamped policy is viewed by advocates as a way for FERC to fix the energy market, where subsidies for renewable energy and nuclear power distorts competition.

But critics argued the proposal fails to consider the “externalities’’ of the benefits of cleaner generation, such as lower pollution that contributes to health costs and reduced greenhouse-gas emissions that cause global warming. They also argued the order disrupts long-standing rules to allow states to decide what types of generation should provide power in their jurisdictions.

The end of PJM?

“If the commission does not reverse course, state clean-energy efforts will be frustrated and the PJM market will be at risk for dissolution,’’ according to the brief by BPU. It repeated a threat from its president in the past when he threatened to pull New Jersey out of the PJM market.

BPU president Joseph Fiordaliso cited the dispute during the commission’s bimonthly meeting.

“I don’t think we can overstate the importance of its submission to FERC,’’ he said, referring to the agency’s filing. “Potentially, it can harm many of the initiatives we are putting in place.’’

The original order, issued in a narrow 2-1 vote by FERC, also sparked criticism from one of its commissioners who estimated it could cost consumers about $2.4 billion annually in PJM.

New Jersey Division of Rate Counsel, in a separate brief, agreed. “It will obligate millions of consumers in the PJM service area to buy more capacity than they need, at enormous and unnecessary cost,’’ she said.

Like other filings, Public Service Enterprise Corp. also argued the order would disrupt state efforts to deal with climate change, a policy the commission should back in the absence of federal policies to address the problem.

“Instead, FERC imposes unnecessary burdens on states and utilities seeking to achieve environmental objectives,’’ the company said. It cited its awarding of zero-emission credits to help prop up its nuclear power plants as a way of achieving those goals.

Even PJM argued in a brief that there should be a rehearing on the issue, saying the order would put in place an inefficient and detrimental system for consumers.

The PJM’s Independent Market Monitor backed the order, saying it defines a clean path to defining competitive wholesale power markets in the grid.

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