LaFleur warns against PJM plan altering ‘fundamental’ energy market mechanics
LaFleur on Wednesday became the third commissioner this month to issue a warning about pending market changes at regional grid operators.
At the DOE’s annual meeting of its Electricity Advisory Committee, the federal commissioner said that PJM’s energy market repricing proposal — now pending with stakeholders — could change the fundamentals of wholesale energy markets.
Currently, real-time energy markets operate by allowing the next resource that can respond to a pricing signal set the locational marginal price (LMP) of electricity, LaFleur noted. The PJM proposal would alter that construct, allowing inflexible coal and nuclear units to set the LMP, raising energy market prices between 2% and 5% by the grid operator’s estimate.
“I think it’s something we’re going to have to think very hard about because this is the fundamental energy market and how we price things,” LaFleur said. “I don’t think it’s something that we should change lightly but should we get a proposal from PJM we’ll obviously give it serious thought.”
PJM’s energy market proposal is not its only plan giving federal regulators pause. Last week, Commissioner Robert Powelson warned that any proposal to reform its capacity market would not receive his support at FERC without input from states, which are largely opposed a proposal from the grid operator’s staff to set up a two-part capacity auction.
In a rare move, PJM later in the week filed two proposals at FERC — the staff’s plan and an alternative from the independent market monitor — asking federal regulators to help it choose a policy direction.
LaFleur acknowledged that move was unusual, having only been tried by ISO-New England before, but that she appreciates “PJM giving us different ideas to work with” when market participants cannot agree.
“Our life would be easier if things would come in and the RTOs said ‘This got a 95% vote at the stakeholder meeting and everyone loves it’ … but that’s rarely the case,” LaFleur told reporters after the meeting. “What they said is they need some policy guidance from the commission and then they’ll do the final design work, so it’ll be on us.”