Duquesne Light, Customer-Focused Coalition Urging Feds to Block Sharply Higher Electricity Prices Resulting From Flawed Pricing Model

Jun 03, 2008, 01:00 ET from Duquesne Light

    PITTSBURGH, June 3 /PRNewswire-USNewswire/ -- Duquesne Light is part of
 a broad-based coalition of state public utility commissions (including
 Pennsylvania's), consumer groups, industrial customers, municipalities,
 co-ops, and other distributors of electric power that formally filed a
 complaint with the Federal Energy Regulatory Commission (FERC) to block
 "shockingly higher" electricity price increases caused by a fatally flawed
 pricing model established by the PJM Interconnection, LLC, the independent
 organization responsible for coordinating the region's electricity market.
     In the complaint, the parties urge FERC to act to prevent PJM from
 imposing "unlawful rates" that will result in customers paying
 "significantly higher capacity charges than justified ... with no
 discernable benefit, while existing electric generation receive an
 unwarranted windfall." The complaint urges FERC to "prevent the
 continuation of the harmful effects of PJM's unjust and unreasonable
 implementation of the new capacity model, 'RPM' (Reliability Pricing
 Model), which sets prices administratively." The requested relief would
 become effective June 1, 2008, and continue over the next three years.
     The transition auctions of the new RPM were held by PJM in rapid-fire
 succession over a six-month period in 2007 and early 2008. They resulted in
 capacity costs to the PJM region of $22 billion ($450 million in Duquesne
 Light's service territory) over a three-year period that began June 1,
 2008. The parties to the complaint estimate that this amount is
 approximately 10 times the cost of building the same amount of capacity and
 owning it free and clear. The complainants called upon FERC to use its
 "broad remedial authority" to protect customers from further extreme prices
 and to establish just and reasonable rates.
     The PJM pricing model has not meaningfully added new generation
 capacity, as PJM intended, but has resulted in enormous windfalls to
 existing generation. The parties urge the use of a transition pricing
 system judged by FERC to be fair and equitable that would gradually
 increase prices over a three-year period rather than the sudden jump that
 will occur if the PJM market results stand.
     The complaint, which was filed by a broad coalition serving millions of
 consumers throughout the Mid-Atlantic states, reflects the continued angst
 over RPM from both suppliers and customers. Joining Duquesne Light in
 advocating for Pennsylvania residents through the filing are the PA Public
 Utility Commission, the Office of Consumer Advocate and the PJM Industrial
 Customer Coalition.
     Following the sweeping deregulation of the energy industry, Congress
 granted FERC authority over the governance structure and operating rules of
 the emerging independent system operators. These new entities were formed
 to maintain system reliability for the nation's electric grid and to ensure
 efficient wholesale market operations. PJM Interconnection, one of those
 operators, also has the responsibility to plan for adequate long-term
 transmission needs.
     About the RPM Buyers Group
     Friday's FERC filing was made by the RPM Buyers group, which is
 comprised of state regulatory commissions, municipal electric utilities,
 joint power agencies, rural electric cooperatives, end-use customers, state
 consumer advocate offices, and load serving entities ("LSEs") that depend
 on the reliable electric service RPM is intended to support, and pay for
 the capacity acquired through PJM's RPM capacity mechanism. RPM Buyers
 contend they have suffered actual harm by paying high capacity prices
 resulting from the implementation of RPM auctions without receiving
 benefits of the same or similar magnitude.
     The RPM Buyers include the Maryland Public Service Commission, the
 Delaware Public Service Commission, the Pennsylvania Public Utility
 Commission, the New Jersey Board of Public Utilities, Public the Power
 Association of New Jersey, the Maryland Office of People's Counsel, the
 Office of the People's Counsel of the District of Columbia, the Southern
 Maryland Electric Cooperative, Inc., the Allegheny Electric Cooperative,
 Inc., the Blue Ridge Power Agency, the Office of the Ohio Consumers'
 Counsel, the New Jersey Department of the Public Advocate, Division of Rate
 Counsel, the Pennsylvania Office of Consumer Advocate, the PJM Industrial
 Customer Coalition, the American Forest and Paper Association, the Portland
 Cement Association, Duquesne Light Company, the United States Department of
 Defense and other affected executive agencies.

SOURCE Duquesne Light