News | January 2, 2008

Settlement Resolves Future Structure, Independence Of PJM Market Monitoring Unit

Valley Forge, PA - Parties working out the details of the relationship between PJM Interconnection and its market monitor have filed a settlement with the Federal Energy Regulatory Commission, PJM announced recently.

The settlement agreement would result in market monitoring services being provided by an external firm, Monitoring Analytics, LLC, to be headed by Dr. Joseph Bowring, the current, internal market monitor. The parties also agreed on a means to provide confidential market information to state commissions and to protect such information from being inappropriately released.

"I appreciate the diligence of all involved in these discussions. Under the able leadership of FERC Chief of Staff John Moot, the parties have achieved a structural design that assures all stakeholders of the independence of this vital function," said Karl V. Pfirrmann, PJM interim president and chief executive officer. "We look forward to working with Dr. Bowring and his team in a renewed, positive environment that ensures effective monitoring of the PJM wholesale markets, which have been and will remain competitive in the future."

"The staff of the market monitoring unit at PJM and I look forward to working cooperatively with PJM and all market stakeholders to help ensure the PJM markets remain robust and competitive," said Dr. Bowring. "We thank John Moot for taking on and performing this difficult and critical role, and we thank all the participants for their constructive participation in the settlement process."

Signaling to the PJM members that this settlement "marks a significant new milestone for the PJM market," Karl Pfirrmann and Dr. Bowring sent PJM members a joint letter recently, stating, "With this agreement, we will move forward with clearer lines of responsibility and recognition that the Market Monitoring Unit be independent and effective, so that the PJM Market can remain competitive and strong."

Key provisions of the settlement include:

  • Under the PJM tariff, the Market Monitoring Unit (MMU) will be an independent, external entity under contract with the PJM board and approved by the FERC. No one will have the right to interfere with or edit MMU actions, investigations or reports.
  • The initial market monitoring contract will be for six years beginning June 1, 2008.
  • The contract can only be terminated with FERC approval.
  • The settlement provides the MMU with direct access to PJM data and ensures the MMU's ability to control its information technology and data.
  • The market monitor's proposed annual budget for market monitoring services would be reviewed by the PJM Finance Committee, the PJM board and representatives of state regulators. Disputes over the proposed budget would be resolved by the FERC.
  • State commissions would be able to receive confidential information from PJM or the MMU provided the commissions certify to the FERC that they have adequate procedures to protect against release of the information.

PJM and Monitoring Analytics have an agreement for market monitoring services. The agreement addresses the transition from an internal to an external monitor as well as rates, payments, data access and other matters.

The settlement discussions were instituted by a FERC order in September. In response to a complaint about PJM's interaction with the Marketing Monitoring Unit and the issue of its independence, the commission found that PJM had not violated its tariff. The commission also found that significant tension between PJM management and the market monitor could compromise the MMU's ability to perform its tariff-defined functions, and found that the market monitor should no longer report to PJM management. The FERC called for settlement discussions among the parties to work out a new organizational structure for market monitoring in PJM.

A copy of the joint statement by PJM and Dr. Bowring can be accessed at: > Documents > Recent FERC Materials .

PJM Interconnection ensures the reliability of the high-voltage electric power system serving 51 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the operation of the region's transmission grid, which includes 6,038 substations and 56,250 miles of transmission lines; administers a competitive wholesale electricity market; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

SOURCE: PJM Interconnection