PA Environment Digest Blog: PJM Tells 2 House Committees Competitive Electric Markets Significantly Reduced Prices For PA Ratepayers; Grid Will Remain Reliable Into The Future

Monday, March 11, 2019

PJM Tells 2 House Committees Competitive Electric Markets Significantly Reduced Prices For PA Ratepayers; Grid Will Remain Reliable Into The Future

On March 11, F. Stuart Bresler, III, from the PJM Interconnection, the interstate electric grid operator, told two House Committees competitive electricity generation markets have served Pennsylvania consumers well by significantly reducing electricity prices.

Bresler said “the production and transmission of wholesale electricity in Pennsylvania is reliable today and will continue to be so into the future” regardless of expected power plant closures.

He said there was no action Pennsylvania needed to take from a grid reliability standpoint to maintain that reliability.

“Both PJM and Pennsylvania hold a more diverse fuel mix portfolio today than has been the case historically. Coal, natural gas, and nuclear power generation now comprise a more balanced share of the overall portfolio for both installed capacity and energy production,” Bresler said.

He noted a 2018 PJM study on fuel security found the electricity grid system is currently fuel secure “even under extreme but credible operating conditions.” PJM is, however, taking a deeper look at the fuel security issues.

Bresler appeared before the House Environmental Resources and Energy and Consumer Affairs Committees in separate informational meetings.

On the subject of what he called out-of-market programs states have been adopting to prevent the closure of certain power plants or for pricing carbon emissions, Bresler said these programs tend to “perturb” the electricity market and prevent the right price signals from being sent at the wholesale level.

He emphasized PJM is entirely neutral on the kinds of out-of-market programs states adopt. (At the same time as these meetings, Rep. Mehaffie was unveiling a legislative initiative to prevent the premature closure of nuclear power plants in Pennsylvania costing $500 million a year.)

Bresler said PJM has proposed a rule change by the Federal Energy Regulatory Commission that would make sure these state programs are considered separately from the PJM market and any changes in prices related to those programs to ratepayers are paid by the customers in the states that adopt them.

On the increasing use of natural gas to generate electricity in the state, Bresler said, “Pennsylvania electric consumers saw the immediate benefits of the industry’s game-changing innovation that is shale extraction. Over the last decade of shale gas development, Pennsylvania consumers have seen significant declines in wholesale energy costs.

“Without competitive electricity markets, consumers could have been locked into outmoded, high-cost power generation technologies,” Bresler added. “Instead, Pennsylvania’s 13-million residents saw the market react with agility to reflect the new pricing dynamics of low cost fuel and highly efficient new technologies. This is a major success for Pennsylvania and its consumers.”

Bresler said Pennsylvania has developed the most robust generation development market among the PJM states.

“In 2018 alone, 19 new or upgraded natural gas plants – totaling over 5,000 megawatts of capacity – came online in Pennsylvania. An additional 7,500 megawatts of new natural gas projects in Pennsylvania are presently being studied by PJM.

“This is also a major success for Pennsylvania and its consumers,” said Bresler. “Importantly, given the open, transparent, nondiscriminatory markets in place in our region and supported by Pennsylvania’s policies, these resources have been financed and constructed mostly by merchant developers. As such, investment risk is assumed by the developers, not by end-use customers as was the case under the vertically integrated monopolies that existed before restructuring.”

He noted a 2017 PJM study found “... no upper bound that would constrain the levels of natural gas the [electric] system could accept to operate reliably.” A follow up study in 2018 on the issue of fuel security found the grid system to be fuel secure “even under extreme but credible operating conditions.” PJM is now looking deeper into the fuel security issue, however.

Click Here for a copy of Bresler’s written testimony. Click Here for the attachment to his testimony.

Click Here for a video of the House Environmental Committee meeting. Click Here for a video of the House Consumer Affairs Committee meeting.

Rep. Daryl Metcalfe (R-Butler) serves as Majority Chair of the House Environmental Committee and can be contacted by calling 717-783-1707 or sending email to: dmetcalf@pahousegop.com. Rep. Greg Vitali (D-Delaware) serves as Minority Chair and can be contacted by calling 717-787-7647 or sending email to: gvitali@pahouse.net.

Rep. Brad Roae (R-Crawford) serves as Majority Chair of the House Consumer Affairs Committee and can be contacted by calling 717-787-2353 or sending email to: broae@pahousegop.com. Rep. Robert Matzie (D-Beaver) serves as Minority Chair and can be contacted by calling 717-787-4444 or sending email to: rmatzie@pahouse.net.