PJM announced this morning that the Board of Managers has approved a new contract with Monitoring Analytics, PJM’s independent market monitor. The contract, which must be approved by the Federal Energy Regulatory Commission, runs through 2019.
The contract ends — for the time being, at least — the latest dust-up among PJM and its stakeholders over the independence of the market monitoring function.
In March, states, industrial consumers and cooperatives protested the board’s plan to issue a request for proposals for monitoring services. The stakeholders said the board’s proposed RFP contained language that would undermine the independence and quality of the monitoring function. They also expressed concern that PJM would suffer a loss of institutional knowledge if it replaced Monitoring Analytics, LLC, which has been operating as the Market Monitor under the terms of a 2008 FERC settlement (EL07-56).
The board responded in April by announcing it was negotiating a new contract with the company and dropping plans to put the contract out for bid.
On July 2, however, the Organization of PJM States, which represents state regulators, sent a letter to the board complaining that it had not been consulted in the drafting of the new contract.
“We are frankly baffled by an apparent reluctance on the part of the board to consult with OPSI on the new contract language prior to the execution of the contract,” wrote Maryland Public Service Commissioner Lawrence Brenner, chairman of OPSI’s market monitoring committee. “…As a procedural matter it is doubtful that FERC created the OPSI Advisory Committee if the only beneficiary of its advice was to be the commission itself.”
Brenner told RTO Insider today that OPSI received a copy of the 19-page contract after it was signed July 8. He said OPSI may work with PJM and the monitor to address its concerns in PJM’s filing seeking FERC approval of the contract.
“There are a couple areas where we’ve suggested that some clarification would be helpful,” he said. He declined to go into specifics, saying he was speaking for himself and not OPSI.
Asked what OPSI’s exclusion from the negotiations said about its relationship with PJM, Brenner said “I wouldn’t read too much into it. We have a pretty good relationship with the board.
PJM President and CEO Terry Boston said in a statement that “robust, independent monitoring services are essential to PJM’s ability to administer fair and efficient wholesale electricity markets.
“The competency, integrity and analytical capability of the Monitoring Analytics staff is well known and appreciated at PJM and we look forward to continuing to work productively with them for the benefit of the region we serve.”
Monitoring Analytics President Joseph Bowring also issued a statement, saying “We look forward to a productive relationship with the board, with PJM and with PJM members in the coming years.”
A Ph.D. economist, Bowring has served as PJM’s market monitor since 1999. At a FERC technical conference in 2007, Bowring accused then-PJM President Phil Harris and his allies of attempting to muzzle him by squelching his reports and cutting his budget. Following an investigation, Harris resigned and FERC approved a settlement in which Bowring formed Monitoring Analytics and was awarded a six-year contract. The contract was worth about $10 million per year.
Brenner said yesterday that OPSI will be looking closely at the new contract provisions that govern the balance between the monitor’s independence and the board’s right to provide oversight of its performance.
“Both the market monitor and PJM tell us that the negotiations were very respectful and not contentious,” Brenner said. “All those things are a change from some years ago.”
