posted on Thursday, October 26, 2006 2:35 PM
by
Gunnar Birgisson
Diverse Opposition to Settlement on PJM Capacity Rules
A wide range of stakeholders has gone on record opposing a proposed settlement to restructure the capacity market in the PJM Interconnection. The settlement was submitted to FERC 13 months after the PJM Interconnection proposed to FERC its Reliability Pricing Model (RPM), and five months after FERC issued an order finding the existing capacity unlawful.
Parties opposing the settlement – although for divergent reasons – included utilities, generators, marketers, state agencies, and a municipal utility. Various parties contend the settlement is too complex and will not increase competition, induce new infrastructure investment, or lower prices for consumers. Among the objections by generators and marketers are the delayed implementation of locational deliverability areas, a suppressed demand curve for use in the capacity auction, opportunities for buyers to exercise market power, low cost-of-new-entry calculations that would suppress auction prices, and a failure to provide continuity in the prices received by new entrants in the auction. State agencies, on the other hand, argued the prices received by new entrants in the auction were being maintained too long at higher levels, and also took issue with other features of the settlement.
After receiving another round of comments, FERC will issue an order on the proposed settlement, which could consist of rejecting the settlement, accepting it unchanged and applying it to all market participants, modifying parts of it and applying it to everyone, or accepting it for some parties and severing contesting parties to enable them to litigate their issues of concern.