Jay Hancock is not happy with the PJM power market

Michael Giberson

From the Baltimore Sun, Jay Hancock explains he is unhappy with electric power restructuring in Maryland and with the PJM market. I think he hits some targets and misses others.

Assessing the particulars would require a lot of detailed work, probably better done by someone other than me. One big source of agreement concerns stranded costs policy; I agree with Hancock that ratepayers were, uh, “not well served” is the polite way to say it, by stranded cost policy. This conclusion is easier to see in retrospect than it was at the time, but large and small consumers were loudly opposed at the time. (Of course stranded cost policy is better seen as one more failing of regulatory policy than as something appropriately pinned onto deregulated markets.  Stranded cost policy was settled the same way as any cost allocation process in the previous nine decades of utility rate regulation: regulators and utility lawyers arguing over what should be done while consumers mostly were relegated to the sidelines. Yet restructuring was the reason stranded cost recovery were called for, so restructuring is implicated in this particular kick-in-the-pants delivered by regulators to consumers.)

ASIDE: It was nice of Hancock to call the American Public Power Association a “beacon of intelligence” and one of the “honest information brokers” around, after all he had been kick-off speaker for an APPA symposium held a few days ago. I tend to see APPA more like other industry trade associations: good on some issues, but primarily interested in defending their own interests. One thing that cuts in APPA’s favor is the diversity of market positions among its members. The balance among members helps to keep the organization’s positions in balance at least on some power market design issues (but for a little residual wishing that they could put select pieces of the restructuring genie back into the bottle from whence it came).

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One thought on “Jay Hancock is not happy with the PJM power market

  1. Thank you Michael,

    This is a comment I posted under Hankock’s follow up article “What electricity re-regulation would look like.”

    Dear Mr. Hancock,

    I agree with the idea of the messed-up wholesale electricity market that you posted yesterday. The problem with those incomplete markets begs complete markets that enable a virtuous circle, instead of backwards to the obsolete properties of vertical integration that lack said virtuous circle. The need is to go forward with retail and wholesale markets that mutually reinforce each other.

    At the center of such complete markets is the emergent smart grid that does not require capacity markets. Please take a look at an article that starts with “The Electricity Without Price Controls (EWPC) Architecture Framework (EWPC-AF) is a basic innovation that greatly simplifies today’s exceeding complex power industry. The EWPC-AF emerged to replace the century old Investor Owned Utilities (IOUs) Architecture Framework (IOUs-AF) and its incremental extensions, such as Open Transmission Access, Capacity Markets, NERC Mandatory Requirements, and now the regulated architecture Smart Grid,” in the link http://bit.ly/8XJlra

    Best regards,

    José Antonio Vanderhorst-Silverio, PhD
    Creator of the EWPC-AF

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