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P3 urges FERC to protect PJM
from pro-gas New Jersey law
February 2, 2011

The PJM Power Providers (P3) brought a complaint to FERC yesterday, hoping to insulate the RTO's capacity market from a law passed in New Jersey to subsidize natural gas plants.  The law, signed by Gov Chris Christie, R, last week, could face legal challenges in other venues, too, but P3 brought what it could before the FERC, the lobby's President Glen Thomas told us yesterday.

          The group asserted that FERC has jurisdiction over the regional wholesale power market, said Thomas, including "a responsibility to protect consumers in all 14 jurisdictions across the PJM footprint." The commission should not let New Jersey's "misguided actions … impact those in other states and those who are investing in the wholesale market under the market rules."

          The law would give about $2 billion to subsidize up to 2,000 MW of electrical generation in New Jersey, the Sierra Club said this week.  The environmental group opposes the law on the grounds that it will boost greenhouse gas emissions.

          Potential beneficiaries include LS Power's West Deptford project, a 1,200 MW combined cycle plant.  Competitive Power Ventures could benefit, too.

          New Jersey is not the only state in Eastern PJM to want to build its own generation outside the capacity market.  Maryland has a regulatory process open that is looking at doing the same (RT, Jan-31).

          A consistent criticism of the capacity market is that it has not led to new generation in eastern PJM, though it has boosted DR significantly in the region.  DR aggregators and their customers oppose the New Jersey law since it hurts their competitiveness, said Thomas.

          With the lower power demand due to the economy and efficiency programs, PJM has recently pushed back projected needs for new capacity in New Jersey, said Thomas.  PJM recently predicted the state will not reach the demand level forecasted for 2014 until 2020.

          The P3 complaint lists changes to PJM's reliability pricing model (RPM) capacity market to insulate it from the New Jersey law or any other action from any state aimed at interfering with the federally-regulated wholesale market.

          If FERC grants the complaint as-is, all bids into the capacity auctions would be reviewed to determine whether they are consistent with the cost of new generation.  Any generation that has a consistent price or can show it did not get a subsidy will be exempt from the new rules.

          Resources trying to "game the market" by bidding low costs while simultaneously seeking other customer subsidies would have their bids reset.  PJM and its market monitor would review all bids.  Any resource that gets its bid reset would have the right to petition FERC.

          "FERC cannot allow one state to undermine the markets that other states depend upon," said Thomas.


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