How Competitive are PJM’s Markets? Maryland Wants to Know

Michael Giberson

Platts is reporting that the Maryland Public Service Commission is considering hiring an outside law firm to evaluate whether there is sufficient evidence of a lack of competitiveness in PJM’s power markets to bring a case before the Federal Energy Regulatory Commission.

[Maryland PSC chairman Steven] Larsen told Platts his agency believes that a lack of competition may have contributed to a sharp increase in electricity rates last year at one of the state’s largest utilities, Baltimore Gas & Electric. BG&E rates were set to rise by more than 70% last summer after a retail rate freeze imposed under the state’s restructuring law expired and the company acquired power through a wholesale market auction.

On Wednesday, the Maryland PSC subpoenaed records from Baltimore Gas & Electric Co. “at the request of Gov. Martin O’Malley” in order to better understand how much the company profits from selling power.

During last year’s gubernatorial campaign in Maryland, there was much talk about the price increases in the state that were to follow the expiration of a long-term retail rate cap. O’Malley, in particular, attacked decisions made by the state’s PSC, and promised to to fire the five existing commissioners and “replace them with independent and competent members who will protect the public” should he be elected.

The (Baltimore) Sun said:

The [subpoena] reflects a more activist role by the commission since Gov. Martin O’Malley replaced several appointees of his predecessor, Republican Robert L. Ehrlich Jr., effectively taking control of the regulatory panel.

O’Malley, who campaigned on a pledge to block a steep BGE electricity rate increase but found that he was unable to do so, sent the PSC a letter this month asking for expedited hearings on the corporate relationship.

Independent and competent, in this case, apparently means dedicated to the governor’s interests.

Other recent PJM and Maryland news: The (Annapolis, MD) Capital reports on a Maryland PSC planning meeting at which PJM warned that “to keep up with Maryland’s growing demand for power, three new 600-megawatt power plants should be constructed by 2017.”

The Philadelphia Inquirer reports on the sudden departure of PJM CEO Phillip Harris, adding some broader background but not zeroing in on the central role allegedly played by Harris’s remarks on PJM’s market monitoring controversy.


3 thoughts on “How Competitive are PJM’s Markets? Maryland Wants to Know

  1. “On Wednesday, the Maryland PSC subpoenaed records from Baltimore Gas & Electric Co. “at the request of Gov. Martin O’Malley” in order to better understand how much the company profits from selling power.”

    Energy reporters should be required to take the Public Utility Reports “PUR Guide” course before they begin reporting on utilities, so that they might have some fundamental understanding of how distribution utilities “profit”. The same might be said of new governors, though I suspect in Governor O’Malley’s case, he would simply prefer not to know what he knows.

  2. Ed, I agree with you; the distinction between regulated vs. unregulated is often lost on reporters, policy makers, and the general public. However, I blame CEG’s management for failure to grasp (early on) that record profits at the holdco level during a period of rising rates at the utility opco level creates tremendous headline, reputation, and political risks. Now CEG faces the possibility that it will have to divest its utility, which will hurt its equity price and cost of debt.

  3. Ed, I agree with you; the distinction between regulated vs. unregulated is often lost on reporters, policy makers, and the general public. However, I blame CEG’s management for failure to grasp (early on) that record profits at the holdco level during a period of rising rates at the utility opco level creates tremendous headline, reputation, and political risks. Now CEG faces the possibility that it will have to divest its utility, which will hurt its equity price and cost of debt.

Comments are closed.