MARYLAND PUBLIC SERVICE COMMISSION PROTESTS GENERATORS’ ATTEMPTS TO PREVENT NEW GENERATION IN MARYLAND

Today, the Maryland Public Service Commission ("Commission") strongly protested proposals by the PJM Power Producers Group ("P3") and PJM Interconnection, L.L.C. ("PJM") and that would, if accepted, prevent the Commission from ensuring reliable, cost-effective electric service for Maryland’s citizens. P3 and PJM have asked the Federal Energy Regulatory Commission ("FERC"), on an expedited basis, to change the rules that govern auctions for "capacity" – essentially the capability to produce or refrain from using electricity. Capacity costs account for about one-[fifth] of the typical electric bill in Maryland.

The Commission vigorously opposes the proposed changes, which would protect existing generators and thwart new generation in Maryland and elsewhere. The Commission’s Protest relies on testimony from a leading economist, Professor Jerry Hausman, the MacDonald Professor of Economics at the Massachusetts Institute of Technology, and from the PSC’s Chairman, Douglas R. M. Nazarian.

The Commission asks FERC to reject P3’s and PJM’s proposals, and urges FERC not to rush to judgment. Chairman Nazarian summarizes the Commission’s position in his testimony (at p. 4):
"Modifications to the [rules] that P3 and PJM seek raise complex questions of federal and state policy that call for thoughtful and careful consideration. [FERC] should not take actions that will penalize state-initiated new generation programs and, in very real terms, prevent states from taking appropriate steps to ensure reliable, long-term supplies of electric service for their citizens and ratepayers. Whatever else might be said about the evolution away from old-school regulation toward markets, it is bad public policy if market structures preclude states from playing a meaningful role in planning the electricity future of their citizens and ratepayers. If [FERC] really intends that state utility commissions in restructured states such as Maryland are required to sit back and hope that market forces keep the lights on, [FERC] should say so in so many words. If, as we believe, [FERC] never intended that market structures supplant states’ historical and critical planning role, it must carefully ensure that states’ authority in this regard is preserved."

The Commission is currently assessing (in Case No. 9214) whether to direct Maryland’s investor-owned utilities to enter multi-year contracts that would support construction of new generation facilities that might be needed to serve the long-term demand for electricity in the State. P3 and PJM have asked FERC to change the rules in mid-game, claiming that long-term contracts would be an exercise of "buyer market power." The Commission’s Protest shows how P3’s and PJM’s radical proposals are anticompetitive and anti-consumer.  The Commission’s Protest and testimony demonstrate that the changes P3 and PJM are attempting to impose would "penalize and possibly destroy state-mandated programs designed to develop new generation facilities that will be consistent with the state’s needs, policies, and priorities."

If FERC allows further proceedings, the Commission will present a comprehensive analysis of the proposed changes and will suggest improvements that will protect against any improper "buyer market power" "without impinging on states’ legitimate initiatives to bring value to electric customers by entering long-term contracts to support new generation resources."