posted on Sunday, September 23, 2007 6:03 PM by Jennifer Rinker

FERC Finds PJM Not in Violation of Tariff in Months-Long Dispute with Customers over Independence of Market Monitor

In response to PJM Interconnection, Inc.'s (PJM) Offer of Settlement to resolve its much-publicized  dispute regarding the independence of PJM's Market Monitoring Unit (MMU) and allegations of tariff violations, interested parties on August 22 gave the Federal Energy Regulatory Commission (FERC)  a wide range of options to pursue in response to the Offer of Settlement, including: (1) setting the dispute for evidentiary hearing; (2) invoking settlement judge procedures; or (3) postponing action on the matter pending the agency’s action on the Advanced Notice of Proposed Rulemaking's goal to develop industry standards for the MMU structure. 

On September 20 FERC concluded that there was no evidence that PJM violated its tariff; thus no hearing was necessary.  Nevertheless, FERC ruled that the evidence was more than sufficient to demonstrate that the PJM MMU reporting requirements are unjust and unreasonable.  While the MMU before was under an "unusual degree of supervision" by PJM management, FERC directed in its order that, whatever other conclusion the parties may reach during settlement proceedings, the resolution must include provisions that the MMU report solely to the PJM Board or an independent committee of the Board.   Commissioner Suedeen Kelly noted in her statements that more specific tariff provisions are needed to promote a stronger working relationship between the MMU and its overseer and to engender confidence in market operations.

In its September 20 Order and Commission open meeting, FERC acknowledged and commended the complainants and Dr. Joseph Bowring for bringing this important matter to the Commission's attention, commended PJM Board's prompt and positive actions in promoting settlement discussions with its Offer of Settlement, and expressed its opinion that "a consensual resolution is most likely to restore confidence in the efficient, impartial and competitive operation of PJM's markets and in the monitoring of those markets."  Commissioner Jon Wellinghoff added that the pending rulemaking will help define the role of an MMU, but cautioned that it is PJM itself, in the settlement procedures with customers, that can best restore confidence in the markets PJM administers.  If not, then the agency made clear it is ready to step in and resolve structural and functional issues surrounding the PJM MMU.