CAMBRIDGE, Md. — The Federal Energy Regulatory Commission may need to rethink its fuel-agnostic policies to preserve coal and nuclear generation threatened by environmental rules and market forces, Commissioner Tony Clark told the PJM Annual Meeting last week.
Clark said the threats to baseload coal and nuclear resources and the increasing reliance on natural gas-fired generation – “which has traditionally been our nation’s most volatile fuel source” – are exposing “cracks in the foundation of the system.”
“The loss of that traditional backbone, especially nuclear … is something to which we should probably give more than just a passing shrug,” Clark said. “It’s something we need to come to grips with.
“We have to acknowledge this would be … a major shift in what FERC has traditionally defined as its role, and it leads us down some corridors we’ve been very reluctant to get into because it gets straight into the heart of this very grey area of the states’ prerogative over integrated resource planning and FERC’s oversight of wholesale markets and bulk power system reliability.”
Clark noted that governors in New England are formulating a proposal regarding lack of pipeline cap. “The answer that we seem to be hearing from the New England region is ‘We’d like to see if FERC can build those natural gas infrastructure costs into our electricity markets.’”
He also noted initiatives by Maryland and New Jersey to contract with new gas-fired generators — efforts that were rejected by federal courts.
“At this point I probably have more questions than answers,” he said. “These are discussions we [states and federal officials] have to have because we are in this together.”
Winter Repeat Could Undermine Markets
A repeat of the price volatility and operational problems that occurred in January could undermine competitive markets in PJM, Clark said.
“If reliability suffers or we have a continuing cycle of [high] electricity prices, especially in the Eastern markets because of lack of infrastructure or fuel-source security, then it becomes an existential threat to these markets themselves,” Clark said Wednesday. “If you have repeated problems … there will be a call, make no doubt about it, in a number of these states to significantly rethink how these markets are structured.”
The Market Monitor raised a similar concern in its State of the Market report for the first quarter, saying that “non-market solutions may appear attractive,” when markets are stressed.
“Top-down, integrated resource planning approaches are tempting because it is easy to think that experts know exactly the right mix and location of generation resources and the appropriate definition of resource diversity and therefore which technologies should be favored through exceptions to market rules,” the Monitor said.
Pennsylvania Reacts
In Pennsylvania, one of the first states to adopt electric competition, officials are considering regulatory and legislative changes as a result of winter price spikes.
Through March, more than 9,100 consumers had contacted the state Public Utility Commission over electric prices that quadrupled in some cases. More than 5,700 customers filed formal complaints, while at least 50,000 customers have dropped competitive suppliers and returned to their local utilities’ default service since March.
The PUC last month proposed regulations that would require contracts to be more transparent about the volatility of variable rates and provide customers better access to historical pricing data. The PUC also has proposed reducing the time it takes to change electricity suppliers.
A bill that would cap variable rate hikes at 30% made it out of a Pennsylvania House committee but didn’t make it to the floor before the House recessed earlier this month.
