HERSHEY, Pa. — As PJM’s chief operating officer, Audrey Zibelman helped design PJM’s Reliability Pricing Model. Now the chair of the New York Public Service Commission, Zibelman says she has a “different prism” for viewing capacity markets.

“Centralized procurement may not be good for everything we want to do as states,” she told the Mid-Atlantic Conference of Regulatory Utilities Commissioners’ (MACRUC) annual education conference last week.

Zibelman criticized rules that restrict states’ ability to contract for capacity, such as buyer-side mitigation constructs that she said force ratepayers to pay twice for the same resource.

“That’s frankly absurd. That’s saying the rules of the market are form over substance,” Zibelman said. “We need to sit with [the Federal Energy Regulatory Commission] as partners and say ‘We have a whole issue about how procurement’s going to happen, particularly post-111(d) [the Environmental Protection Agency’s proposed rule to cut carbon emissions].’

“It’s a complex issue and there isn’t a single solution but it’s got to start with a good conversation between us and FERC.”

Officials from Maryland and New Jersey, who have been frustrated by court rulings in their attempts to contract for generating capacity, also called for changes.

Dianne Solomon, chair of the New Jersey Board of Public Utilities, vowed, “We’re going to continue to flex our state’s rights.” The BPU has filed for rehearing of an appellate court ruling that invalidated contracts it ordered utilities to sign with a natural gas-fired generator. (See Rebuffed by Courts, CPV Seeks FERC End-Around.)

Maryland Commissioner Lawrence Brenner said he has also seen the capacity issue from two vantage points, having helped negotiate a settlement over PJM’s RPM while an administrative law judge for FERC (ER05-1410).

“The capacity market tried to adjust for bilateral contracts and self-supply but there was a balance sought so as not to sink the basic capacity market,” Brenner said. “And it turned out that some of those balancing mechanisms were a little too creaky to work.”

FERC Commissioner Philip Moeller suggested state rule changes could relieve some of the pressure on the capacity markets, which were designed to ensure sufficient supply for peak loads and provide the so-called “missing money” needed to supplement energy and ancillary services revenues.

“I’d like to see my colleagues at the state level consider real-time pricing,” Moeller said. During high load periods, he said, “you can’t expect people to act altruistically for more than a couple of days.”

Robert Powers, chief operating officer of American Electric Power, called Moeller’s real-time pricing suggestion “interesting.” But he asked “how much tolerance is there to send these [price] signals?”

Pennsylvania Public Utility Commission Chair Robert Powelson said that he supports the capacity market, which he said sends appropriate market signals.

But he said his state is concerned about the lack of stability in market rules. Consumer advocates and demand response providers have also grown weary of the rule changes. (See Consumer Advocates to PJM: No More Changes, Please.)

“Mike Kormos, Terry Boston and Andy Ott — very bright guys — but I think in my state we’ve reached a bit of a fatigue level with: What’s the next iteration of the BRA [base residual auction]?” Powelson said. “What’s going to happen next?”