States espouse need for increased role at PJM as concerns mount over resources, costs

State officials called for increasing their role in PJM Interconnection decision making as the regional organization grapples with multiple challenges, including resource adequacy in the region.

Speaking during a panel discussion on the future of PJM governance at a conference held by William & Mary Law School's Center for Energy Law and Policy May 20-21, an official with Pennsylvania Governor Josh Shapiro's office said the grid operator's current structure is inadequate.

"We want PJM to work, but PJM also has to work, and right now, from our perspective, it's not working," Jacob Finkel, Shapiro's deputy secretary for policy, said. "If it were working, we would not have a capacity market that's in deficit, and capacity prices that are being capped."

Finkel said the first change the governor would like to see is "more of a voice and role for the states."

While he applauded PJM for teeing up "promising" ideas in a whitepaper proposing three frameworks for reforming its markets, he said there is "no way" to ask states to decide among options listed "when the states don't have a seat at the table or a role" in how PJM is working.

Secondly, he said the executive organ of PJM needs to be able to execute more quickly to meet current challenges, rather than decisions bogging down in lengthy stakeholder processes.

Upcoming forum

The comments come as Federal Energy Regulatory Commission Chairman Laura Swett announced plans for a July 23 conference focused on PJM's governance and stakeholder process. The meeting will focus on "identifying and evaluating actionable reforms to improve PJM's ability to address system needs in a timely and efficient manner."

Swett said that despite governance challenges for a regional transmission operator which spans 13 states and the District of Columbia, FERC still expects PJM to plan transmission, maintain grid reliability during extreme weather, and adapt to shifting power generation resources and technology changes.

"If this can't be landed given PJM's huge and diverse footprint, perhaps it simply has grown too big to function," Swett said in May 12 comments at PJM's annual meeting in Baltimore.

Kelsey Bagot, chair of the Virginia State Corporation Commission, speaking on the panel with Finkel May 20, said states will need to be precise about what their roles should be.

"I don't think the solution is less state involvement. I think it's careful, strategic, narrow state involvement where it's appropriate," Bagot said. States are not necessarily seeking to be the policy makers at PJM, but are seeking structural and procedural changes in the stakeholder process, she suggested.

Others cautioned about adding complexity to an already cumbersome stakeholder process at PJM.

Considering contours of state role

Former FERC Chairman Mark Christie said he would "personally love to see" states have Federal Power Act Section 205 filing rights on transmission cost allocation.

Section 205 filings, generally made by utilities pursuant to the Federal Power Act, cover proposed changes expected to affect the rates, terms, or conditions of wholesale power sales or interstate transmission.

Bagot, in turn, suggested it would be important for states to be comfortable with cost allocation, but that given the diversity of public policies, states should not be deciding or vetoing all transmission projects.

Craig Glazer, who coordinates PJM's regulatory and legislative policies before the federal government, said that setting aside structural debates, it would be helpful to have more of the PJM states showing up to meetings to shed light on state positions on difficult topics that relate to state policies.

"We are sitting there in the stakeholder process saying, 'but this is a state issue, this is a state issue,' but not enough states are participating in that process," Glazer said. "On issues like curtailment priority, I don't know what state X's position is on that, etc."

He noted that RTO is working on the PJM Governors Collaborative and also has the Organization of PJM States, which is funded by PJM members, and there is also participation of the Consumer Advocates of the PJM States.

Elsewhere, Marji Philips of LS Power, pushed back on Finkel's stance, questioning how states could play a constructive role if multiple states are unable to come to agreement on a question such as cost allocation.

"Three states want this, four states --what's the mechanism for you to be productive and add value if you guys can't agree on anything other than a large principle of we want lower prices, which we all do."

Vince Duane, principal with energy consulting firm Copper Monarch and a former PJM official, offered his view that much of the consternation about PJM governance and the state role stems from ambiguities about what type of institution PJM is.

"Right now, PJM is a private entity, and I think what that means is looking at the membership and saying who among this membership owns this organization, because the ownership will control and control will mean decision making and decision making will mean execution."

Finkel said he appreciated some of the philosophical questions being raised, but ultimately states and governors are responsible.

"If your lights go out, if your bill goes up, you never heard of PJM," he said. "In the real world, the states are already taking the brunt of that, and they need to commensurately have a seat at the table."

Amid these questions about the role of states in PJM decision making, PJM has called on member states to act on data center cost allocation.

"Absent appropriate safeguards, it is possible that these costs will be allocated to other consumers in the states, including residential consumers," PJM's management board said in a recent letter to stakeholders. "We reiterate our ask here as PJM does not have the authority to allocate costs directly to retail customers."

From the end of June and into August, PJM plans to hold a series of workshops to gather stakeholder feedback on ways to address the grid operator's power market challenges.