The grid operator that coordinates the wholesale electricity markets in the U.S. Midwest has been lobbying for and against varying efforts to prop up uneconomic coal and nuclear plants in the region, according to emails obtained by the Energy and Policy Institute through state and federal record requests. The emails offer a glimpse into communication between policymakers and grid operator lobbyists, which are little known but crucial players in determining the nation’s electric mix.
The emails between Department of Energy employees and Ohio lawmakers with PJM Interconnection detail how the grid operator has advocated against certain solutions to keep certain plants afloat with state officials, but that it’s done so in part by assuring those officials that PJM intends on addressing the situation with its own proposals for market reforms. PJM coordinates the wholesale electricity market in all or parts of 13 states in the Midwest and Mid-Atlantic along with the District of Columbia. The PJM-backed proposals have been less publicly controversial, but could still increase the electricity bills for millions of people.
Communication with Ohio state lawmakers
PJM’s Kerry Stroup, manager of legislative and regulatory affairs, and Ohio State Representative Bill Seitz exchanged emails several times throughout the 2017 session regarding legislation about power plants owned by FirstEnergy.
On May 31, 2017, Stroup sent a letter to Rep. Seitz and Sen. Bill Beagle to say that the grid operator was concerned about House Bill 178 and Senate Bill 128, legislation to provided $300 million a year to FirstEnergy through zero-emission credits, and the consequences the policy would have on the wholesale market PJM oversees. Stroup said it was more efficient to address wholesale market prices through wholesale market reforms, and noted that PJM is already examining the rules that govern how prices are formed in the market. (Stroup also expressed similar concern over bills to prop up two coal plants run by Ohio Valley Electric Corp, House Bill 239 and Senate Bill 155.)
On June 13, Seitz and other lawmakers sent a letter to Stroup thanking him for PJM’s comments about the legislation and included a list of dozens of questions for the grid operator to answer by June 30.
However, emails reveal that Seitz and his colleagues did not actually draft the letter but that FirstEnergy had coordinated with lawmakers and drafted their responses to send back to the grid operator. On June 12, FirstEnergy’s lobbyist, Ty Pine, emailed and attached the letter he wanted Seitz to send to PJM.
Stroup replied a few days later with the answers to FirstEnergy’s drafted questions.
Meanwhile, Stroup sent a letter to Seitz on June 15 that referenced a June 7 conversation regarding the FirstEnergy legislation, again saying that the proposed legislation would impact the market and that PJM has proposed a mechanism – the Capacity Market Repricing Proposal – to accommodate state policies into the wholesale market. PJM has since filed that proposal along with another proposal to FERC and has asked the federal regulators how to proceed.
The Ohio legislation did not advance last year and FirstEnergy Solutions, a subsidiary of the Ohio-based utility FirstEnergy Corporation, filed for bankruptcy restructuring on March 31, 2018, due to its coal and nuclear power plants. The utility has also made a request to Energy Secretary Rick Perry to order PJM to bail out nuclear and coal power plants in its region under Section 202(c) of the Federal Power Act, which allows the Department of Energy to issue emergency orders to grid operators to keep plants online
Communication with DOE
In June 2017, as then-Department of Energy staffer Travis Fisher (now an advisor for FERC Chairman Kevin McIntyre) and his colleagues worked on a review of power grid reliability for a study that was commissioned by Secretary Perry in April, PJM’s Craig Glazer, vice president of federal government policy, sent a memo titled, “Some Thoughts on Key Market and Operations Reforms: A Perspective from PJM Interconnection.”
The information Glazer provided to Fisher had already been made public when PJM CEO Andy Ott testified at a May 2017 FERC technical conference and was then again laid out in a June 2017 report released by the grid operator.
DOE’s finalized grid study recommended what PJM had suggested to Fisher, which was to change energy price formation in the wholesale markets: “The record now supports energy price formation reform, such as the proposals laid out by PJM and others,” read one of the DOE policy recommendations in the report.
Secretary Perry, however, instead used the grid study as justification for his 90-day fuel supply bailout proposal, which PJM criticized as overly radical and which FERC later rejected. Nevertheless, what PJM instead proposed in its FERC filing, issued by Glazer and Jennifer Tribulski, was what the grid operator had been calling for all along: address price formation through reforms through an order given by FERC.
In the rejection of DOE’s 90-day fuel support bailout proposal, FERC did, in fact, direct each grid operator to report back in 60 days about how to change market rates, which PJM has since done.
In response to the proposals, PJM’s Independent Market Monitor, Monitoring Analytics, which monitors and analyzes the wholesale market to ensure that it is operating fairly and without discrimination, not only criticized Perry’s proposal but also said that PJM’s recommendation was similarly harmful to the market and stated that it “shares characteristics with the DOE Proposal.” The Market Monitor additionally criticized Exelon for its role in pushing PJM to reform the market.
PJM successfully managed to get DOE to promote price formation, but Perry took a different course of action. Nevertheless, a “stealth” bailout for coal and nuclear power plants could still occur via the proposed wholesale market pricing reforms that have been proposed to FERC by PJM. If one of the proposals is enacted, then 65 million customers in the PJM region could see an increase in their electricity bills.
PJM’s Political Spending and Lobbying Expenditures
The private communication between PJM and federal and state policymakers is not the only cause of concern for stakeholders who are advocating for greater transparency from PJM.
Public Citizen identified at least $456,500 in campaign contributions made by PJM to the Republican Governors Association and Democratic Governors Association. PJM’s response to the complaint provided a tacit admission that the grid operator was in the room with state decision makers in order to influence policy. A spokesperson said that the payments to the governors’ associations were “annual business counsel membership fees that allow PJM to provide input and participate in policy summits on energy industry topics that could impact PJM’s members.”
In the complaint, Public Citizen also notified FERC that it “has recorded millions of dollars in PJM lobbying expenditures using at least five different lobbying firms that also have not been disclosed to FERC or stakeholders, contrary to Commission precedent.”
Earthjustice, on behalf of Sierra Club and the Union of Concerned Scientists, noted in its joint comments filed in the docket that FERC has required grid operators to report on external affairs activities in order to provide all stakeholders the opportunity to seek further information.
“RTO/ISO engagement in activities that look like lobbying, potentially in support of legislation or other proposals that are highly controversial among stakeholders, without check threatens confident in the RTO/ISO independence that is the bedrock of competitive wholesale markets. Such engagement can undercut the perception of RTO/ISO responsiveness to the needs of customers and other stakeholders …
Reporting obligations provide a critical check on activities that are otherwise suspect, where backed by the Commission’s expectation that RTO/ISOs will response to requests for further clarification.
To ensure transparency and confidence in their independence, RTO/ISOs should post monthly reports on all meetings with public officials in the same manner as ISO-NE.”
Read more from EPI about wholesale grid operators’ private communication with policymakers: