By Rory D. Sweeney

CHICAGO — Consumer advocates urged PJM’s Board of Managers last week to do more to engage end-use customers.

“I think sometimes in wholesale energy market matters and maybe even before federal regulators, it seems like things get a little distant from those who pay the bills,” said Robert Mork of the Indiana Office of Utility Consumer Counselor, and president of the Consumer Advocates of the PJM States, at the board’s annual meeting with consumer and environmental advocates May 15.

“We do ask the board to help us communicate to the PJM staff how important it is to get those who are paying, the customers, involved in the process early on as opposed to later in the process,” said Greg Poulos, CAPS’ new executive director. “We have heard PJM talk about creating more opportunities for customers to be involved in their energy choices.” (See related story, Retiring CAPS Head Dan Griffiths Feted at Annual Meeting.)

Incremental Auctions

Poulos pointed to PJM’s incremental capacity auctions as an important entry point for demand response owners, who often can’t secure resources three years into the future, as required for participation in the Base Residual Auction. He said that continual rule changes “really create a lot of chaos for customers who are willing to participate.”

Nearly two dozen representatives from the state consumer advocate programs within PJM’s footprint, along with D.C., took advantage of the sole opportunity each year to address the board. The advocates are organized through CAPS, but as Poulos explained, consensus on any issue can be hard to come by.

A prime example, he said, has been how advocates view subsidies for generation resources. It’s a “critical question,” he said, because it largely determines advocates’ preferences on how PJM should respond to state energy-policy actions.

“They’re on all sides of this issue: wanting very true markets or wanting very strong abilities for states to have state actions,” Poulos said. “We are all over the place, and that’s not a bad thing. … We need to make sure our members are educated.”

CAPS representatives also pressed the board to be mindful of costs and better integrate renewables, DR and energy efficiency. Dave Evrard, Pennsylvania’s assistant consumer advocate, noted the importance of including energy efficiency in PJM’s load forecasting model to ensure the RTO doesn’t purchase too much capacity. Poulos said PJM needs to ensure all cleared capacity is a physical resource and to protect against the “dramatic” price swings that can occur when capacity is replaced in incremental auctions.

“One of our concerns overall as a group that comes up a lot is that consumers don’t pay two times, three times or four times for these resources,” he said.

Cost Containment

Evrard also called on PJM to include cost containment measures in its competitive transmission planning process. The RTO is in the process of instituting competitive bidding rules in time for an upcoming project consideration window but has acknowledged it won’t have enough time to consider cost containment ideas.

“Consumer advocates look at cost caps and cost containment as essential consumer protection,” Evrard said. “I realize there are myriad issues. … I don’t discount those.”

He indicated he’s been paying attention to debates on the topic, including a campaign by several merchant transmission developers, including LS Power, to have cost containment be a deciding factor. (See Who Decides? Panel Highlights Blurred Jurisdiction on Tx.)

“I know there are some entities that have sort of proposed that cost containment shouldn’t just be a consideration, but rather it should be elevated so if I come in with a project that has a specific cost-containment proposal, from the very beginning, I should enjoy some sort of preference,” he said. “I don’t know if the PJM consumer advocates want to go quite that far, but … we are very interested in what emerges from that.”

PJM has yet to complete a competitively bid transmission project since FERC opened the process to competition with Order 1000. Its first attempt, a transmission line across the Delaware River that connects to the nuclear plants on New Jersey’s Artificial Island, has been mired in controversy for years. While the board resumed the project in April, complaints remain about PJM’s proposed method of allocating the costs to customers.

Representatives of Delaware, which stands to shoulder more than $260 million of the project’s projected $280 million cost, have offered the loudest and most consistent opposition, arguing that their state — which has far fewer ratepayers than other PJM member states — will be disproportionately impacted. They say PJM’s usual allocation method, which is based on resolving downstream power-flow issues, is not appropriate because the project is instead meant to resolve grid-reliability issues that are beneficial to all members.

Ruth Ann Price, Delaware’s deputy public advocate, called it “trying to fit a square peg into a round hole” and said the problem needs to be addressed communally because “if it goes badly, we’re all going to be blamed for this.”

She thanked the board for its “sensitivity” in considering Delaware’s perspective on the topic. The board suspended the project in August and called for a complete reanalysis by PJM staff. That analysis resulted in changes to the project’s scope that cut the price tag nearly in half. LS Power was awarded the project in part because its bid included cost caps that provided “greater cost certainty,” PJM said. In approving PJM’s analysis, the board instructed staff to report on cost-allocation alternatives. (See Board Restarts Artificial Island Tx Project; Seeks Cost Allocation Fix.)

For future projects, Price said, the board should require more transparency about submitted bids and ensure customers receive essential information. “States should know to a reasonable statistical approximation what these projects mean in terms of costs to their residents,” she said.

More transparency is also needed, she said, with incumbent TOs’ supplemental projects. “PJM must take more responsibility, I believe, in ensuring stakeholders that these projects are necessary and fundamental to the wellbeing of the transmission system,” she said.

No Fait Accompli

Among the calls for more engagement, there was also gratitude for the inclusion that already exists. Price praised PJM for facilitating CAPS members’ involvement in transmission planning. “We welcome being a part of that process rather than be presented with a plan that is fait accompli,” she said. “We would like to have more discussion about how the project flow works, and how our states can get more involved and more knowledgeable.”

“We are so happy not to be ignorant of the implications of things that come before PJM and being in the position of just saying ‘no’ and then litigating — which 10 years ago, we were kind of in that position,” said Jackie Roberts, director of the West Virginia Consumer Advocate Division.

She praised PJM officials for having a constructive relationship with the Independent Market Monitor, Joe Bowring’s Monitoring Analytics. She said PJM CEO Andy Ott assured her during the formation of the Reliability Pricing Model capacity market that “‘a strong Market Monitor gives my markets credibility and validity.’”

Roberts said, however, that advocates are “worried” about the renewal of the Monitor’s contract when its current pact with PJM expires in 2019. In 2013, state regulators forced PJM to remove contract language that they said would undermine the independence and quality of the monitoring function. (See PJM, Monitoring Analytics Sign New Contract.)

“We’re looking forward to an easy and un-stressful contract consideration when his contract is up,” Roberts said.

‘Gross Mismatch’ in Generation Sources

Several environmental groups also outlined their concerns during the meeting with the board. Jennifer Chen of the Natural Resources Defense Council said concern over subsidies for renewable generation should be tempered by the recognition that “that almost all resources get some level of subsidies or preferential treatment.”

She said states have the right to express generation preferences through subsidies, and PJM can’t be in the position to judge which ones should trigger a repricing mechanism or the minimum offer price rule. She said a “gross mismatch” exists between what generation sources consumers want, as indicated in polls, and what is procured through PJM’s markets.

While some of the issue is in price formation, other causes could be operational. She questioned why transmission and injection rights couldn’t be seasonal to better accommodate resources that perform differently throughout the year.

“We’re in a good position to implement some changes and not be timid about it,” she said.

Mike Jacobs of the Union of Concerned Scientists took issue with PJM’s recently issued reliability whitepaper for suggesting that some technologies are unable to adapt to provide ancillary services such as frequency response, voltage control or ramping capabilities. (See PJM: Increased Gas Won’t Hurt Reliability, Too Much Solar Will.)

“We shouldn’t assume they are free and available from some providers and not from others,” he said. “The paper has essentially predetermined its outcome.”

Dan Griffiths, who retired last week as CAPS’ executive director, ended the session on a positive note, saying he is confident the PJM markets will find a way to coexist with state policies. With 13 states and D.C., Griffiths said, PJM has an advantage over single-state ISOs.

“The bigger [the RTO] is, the more it tempers state incentives to meddle in markets,” he said. “We will work out the current problem, I know.”