Commissioner Kelly's statement on PJM Interconnection,
L.L.C. Reliability Pricing Model
“As staff's presentation summarized, this order addresses
PJM's Reliability Pricing Model (RPM) proposal.
This draft order finds that the current non-locational capacity
construct is no longer just and reasonable, basically because
it truly is the case that not all participating generation can
reach all load throughout the massive PJM region, yet they are
currently all priced the same as though they can.
Prices for capacity that are set equal based on the idea that
all participating generation is physically deliverable when it
actually is not, are appropriately found unjust and unreasonable.
Furthermore, setting just and reasonable rates for capacity is
an important effort with far-reaching effects.
If prices are too high, more generation could be built than is
needed and that would be wasteful.
On the other hand, and of perhaps even more importance, if the
prices are too low not enough generation will be built.
In that case we risk consequences ranging from the merely unpleasant,
such as increased rates for energy, to the downright disruptive
and possibly dangerous, such as brownouts and blackouts.
Obviously, the issue must be addressed and I would like to stress
that this draft order proposes to address this issue in a way
that is consistent with, and respects, traditional state jurisdiction
over generation adequacy.
One example of this respect is the "opt-out" findings of this
order, which will ultimately permit any company that can prove
it can meet its own capacity needs over a reasonable period of
time to opt out of PJM's capacity construct.
Our job at the Commission is to get a system in place that works
and is just and reasonable for those who choose not to opt out.
This draft order is our first step toward doing so and I am pleased
to vote for it on that basis.
My thanks to the staff team and to my colleagues for all of the
hard work on this very important order.”
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