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Electricity Cost Savings Plan Not a Done Deal

Electricity Cost Savings Plan Not a Done Deal

By Vince Conti

A proposal to put a lid on rising electricity supply prices in New Jersey and other states for two years, beginning next summer, was welcomed by government officials and consumers when it was announced in January.

But the plan, which its backers claimed would save consumers an estimated $21 billion over that time period, has not yet received a key federal approval, an approval that is not guaranteed.

The proposal, by PJM Interconnection, the electricity grid operator for all or parts of 13 states, including all of New Jersey, would establish both a cap and a floor for supply prices at PJM’s annual electricity power auction this summer and next. (The result of a PJM auction is not felt until the following year.)

It came in response to a complaint filed with the Federal Energy Regulatory Commission inspired by last year’s PJM auction, which will lead this June 1 to a projected 17% increase in the supply portion of consumers’ bills in New Jersey.

That increase was approved in February by the state Board of Public Utilities, which will also consider a request by Atlantic City Electric, the utility that serves South Jersey, for an 8% hike for another portion of electricity bills, distribution. The request is now scheduled to be taken up in August.

Meanwhile, PJM’s price cap proposal has run into opposition. On March 17, LS Power Development, one of the power generators that participates in the PJM auction process and that would be affected by a cap on prices, has challenged what PJM proposes to do.

“It is impossible for market participants to have confidence in PJM’s markets and stakeholder proceedings if PJM is willing to repeatedly and unilaterally upend its market rules in response to externalities, with little to no deliberation with stakeholders.”

That comes from LS Power’s filing with the Federal Energy Regulatory Commission, in which LS Power is asking FERC to consider its objections when acting on the PJM filing for the price cap.

FERC, an independent agency of the federal government located in but independent of the Department of Energy, has the power to deny the cap plan, and therefore the $21 billion in estimated savings for consumers. Its decisions cannot be reviewed by the secretary of energy, but they are reviewable by the courts.

The PJM plan before the agency is to set a roughly $325/megawatt-day price cap and a $175/megawatt-day price floor for the 2026/27 and 2027/28 delivery year auctions. The proposed cap would not have any impact on last year’s auction, which led to the 17% June 1 supply rate hike.

The proposal came after Pennsylvania Gov. Josh Shapiro, with the support of other governors within the PJM service area, including Gov. Phil Murphy, complained to the FERC because of the supply rate increase.

The governors reacted positively to the proposed cap, which they said would prevent a recurrence of the kind of increase about to hit consumers in June.

But some ratepayer advocates, like New Jersey Rate Counsel Brian Lipman, have attacked the other end of the PJM proposal, the price floor. They object to a minimum price greater than zero, arguing that the price floor proposed is higher than the average of previous auctions.

Lipman, in a press release but not a formal filing with FERC, said some of the record-setting pricing is due to an anticipated increase in the demand for electricity. “Most of the increase is due to PJM’s failure to fix its market rules or timely interconnect new generation supply,” he said.

Speaking of the BPU, Lipman said in the same release, “The board’s authority is limited at the federal and regional level, but [it] must carefully examine every state-level filing before it with an eye towards affordability.”

FERC has yet to publicly announce when it will decide on the cap filing by PJM.

So the situation is this:

*There are those who want a cap and those who do not, those who want a floor and those who do not, and those – the vast majority – who want lower prices in an environment in which demand is outstripping supply.

*The BPU, which has twice pushed off a decision on Atlantic City Electric’s request for the 8% increase in its distribution rate, will sooner or later have to come up with a ruling.

*The only certainties seem to be the 17% increase that will go into effect on June 1, the fact that the next auction for electricity capacity is scheduled for July, less than four months away, and the fact that regardless of all of the interactions among the many players, electricity supply continues to lag behind rapidly growing demand, a condition not conducive to lower or even stable prices.

Contact the reporter, Vince Conti, at vconti@cmcherald.com.

Reporter

Vince Conti is a reporter for the Cape May County Herald.

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