Maryland Public Service Commission Releases Position on Reliability Pricing Model Proposed by PJM
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December 14, 2004
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Christine Nizer, Manager
Office of External Relations
(410) 767-8047

Baltimore, MD – Today the Maryland Public Service Commission (“Commission” or “PSC”) released its position on the Reliability Pricing Model (“RPM”) proposed by PJM.

¬†¬†Chairman Kenneth D. Schisler stated, “The Commission believes that preserving reliability in today’s electric markets is our most important public policy objective. We applaud PJM for developing an initial proposal for a next generation reliability model. However, we want to ensure that the model is fully developed and tested prior to implementation. We have recommended a number of aspects of the proposal that need further work, and we feel the entire integrated model needs to be subject to close experimental scrutiny.”

The Commission held a legislative style hearing on November 8, 2004 in which PJM Staff, Commission Staff, the Office of the People’s Counsel and nine interested parties active in the electric market in the PJM region participated. Based on this hearing and feedback from the various stakeholders, the Commission determined that the pricing model developed by PJM is a positive step in providing a forward price signal with a locational capacity component. The Commission also believes that another benefit of this proposal is RPM’s integration with the PJM Regional Transmission Expansion Planning Protocol.

The Commission is concerned however that the RPM proposal has not been subjected to economic analysis and testing and believes that prior to implementation extensive experimentation and analysis should be conducted. In particular, the demand curve and market power mitigation mechanism for this model are still under development and both of these components must be clearly evaluated prior to implementation. The Commission is also concerned that the cost assignment of capacity to load serving entities sends inappropriate price signals. Furthermore, because the locational capacity component is such a valuable aspect of this model the Commission is concerned that the RPM should not be phased in without the locational component. The Commission understands that certain components of the model are still under development and our comments are based on the proposal as it stands today.

Chairman Schisler stated, “As PJM moves to create a new pricing model we must act prudently and cautiously, constantly maintaining a focus on system reliability. We look forward to continuing a dialogue with PJM, other state commissions and stakeholders to help improve the final outcome of the RPM proposal and ensure reliability for consumers.”

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