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RPM Not Providing for Long-Term SOS Needs, Maryland's Nazarian Says
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March 7, 2011
PJM's Reliability Pricing Model, "may provide near-term value to system reliability, [but] these short term solutions will not provide for long-term SOS needs," Maryland PSC Chairman Douglas Nazarian said in testimony protesting proposed changes from PJM and the PJM Power Providers Group regarding RPM's Minimum Offer Price Rule (EL11-20).
Comments and protests on both proposals were due Friday, and the filings were hardly surprising. However, of greater interest is the Maryland PSC's protest, which included pre-filed testimony from Nazarian, in which the chairman discusses the state's current SOS structure and current review of procurements at the PSC, and makes several conclusions regarding the SOS process.
For example, Nazarian testifies that, "[r]equiring IOUs’ SOS portfolios to include long-term contracts with new generation would provide for long-term resource adequacy for the benefit of customers, which PJM’s transmission planning process and annual BRAs [Base Residual Auctions] have been unable to do."
Elsewhere, outside of Nazarian's testimony, the PSC in comments noted that, "the current generation resources in the State are highly concentrated among only a few suppliers."
"As a result, the wholesale markets that serve Maryland customers are not as efficient as they could be, and PJM must invoke administrative mitigation to roughly approximate the results that would accrue naturally if there were more robust competition. The lack of vigorous competition in wholesale markets undoubtedly affects the prices offered in the PSC’s SOS procurement process to customers’ detriment. Long-term power purchase agreements that bring new players into the markets will enhance competition and benefit customers," the PSC said.
Nazarian also laid the groundwork for supplemental capacity purchases in Maryland. Although the originally forecasted deficiencies in Maryland capacity predicted in 2007-08 may have been delayed, Nazarian cited looming retirements of generation due to environmental regulations, as well as anticipated rapid demand growth due relocations into Maryland under the Base Realignment and Closure process.
"Because no new generation has been added and the transmission lines that were planned have been deferred indefinitely, the cause of those concerns has not been addressed, and, at best, the potential for serious deficiencies has only been postponed, not eliminated," Nazarian testified.
"[T]he rolling blackouts may not be coming in the summer of 2011 or 2012, but the time to plan in order to prevent them in the summers of 2014, 2015, and 2016 is now," Nazarian said.
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