PJM defends plan to allow coal and nuclear plants to build costs into market price
PJM, which operates the electric grid for Pennsylvania and 12 other states, on Thursday defended a plan to change its rules so that coal, nuclear and some other generators can build their costs into the market price of electricity.
The proposal, in a paper published Wednesday, would result in a net increase in retail power prices of 2 to 5 percent and would give the coal and nuclear plants, some of which are scheduled for retirement, the opportunity to pass their costs to consumers, PJM said.
PJM, whose system serves some 65 million people, said the change would enable all generators contributing to its grid to compete to set energy market prices, and that customers would benefit from more market transparency and better operational efficiency.
But critics said the plan interferes with market forces that would eventually force the closure of coal and nuclear plants that can’t build their costs into PJM’s pricing structure, and is not justified by any concerns about maintaining reliability.
Rob Altenburg, director of the Energy Center at the environmental group PennFuture, said the abundant and growing supply of natural gas-fired power generation in Pennsylvania will replace the aging coal and nuclear plants when they retire, indicating that there’s no issue over maintaining grid reliability.
The proposed pricing reform represents a distortion to the market, without which the older inflexible plants would simply be retired, he said.
“What is the pressing need to give this segment of plants above-market pricing?” Altenburg asked.
If the plan is accepted, energy bills will go up to build the revenue of plants that should be phased out, he said. “This is an increase in costs to consumers that is going to make coal and nuclear plants raise their revenue.”
The plan, if approved by the Federal Energy Regulatory Commission, would represent a change to PJM’s structure, which does not allow the costs borne by so-called inflexible generating units – those such as coal and nuclear that are unable to respond to changing power demand in a matter of minutes – to be built into the “clearing price” — at which the quantity of electricity supplied equals the quantity demanded.
Adam Keech, PJM’s executive director of market operations, said the plan aims to set a clearing price that reflects all the units that are operating, not just those that meet the current rules.