Regional transmission organizations (RTOs) must be more transparent in their operations and accountable to the states where they operate, says Malcolm Woolf, Director of the Maryland Energy Administration.

“We are at the mercy of PJM,” the Middle Atlantic regional transmission operator, said Woolf. “We’re increasingly aware we do not have the tools we need to solve problems” of electricity supply and price for state citizens.

RTOs like PJM are accountable to their shareholders, the private utilities that own the transmission wires. But accountability to the states where they operate is “missing,” Woolf told a joint meeting of the National Association of Clean Air Agencies, the National Association of State Energy Officers, and the National Association of Regulatory Utility Commissioners.

The Northeastern and north central US and California all elected in the 1990s to move from state-regulated monopoly electricity providers to market-based systems. Regulators required utilities to split into separate generating, transmission and retail distribution companies. Retail companies remained state-regulated but dependent on private RTOs and generators for power. RTOs are overseen by the Federal Energy Regulatory Commission (FERC).

We are at the mercy of PJM,” – Woolf

Competition was sold as keeping electricity prices down better than regulation. The first crack in that idea came with California’s electricity crisis in 2000-01, and federal and state regulators have been “tweaking” market legal constructs ever since, trying to achieve optimum functioning.

Maryland and New Jersey recently rebelled after their ratepayers were charged higher costs in areas of transmission congestion. Both states say their ratepayers forked over an extra $1 billion, allegedly to incentivize generation or transmission to relieve the shortage.

Read more detailed Breaking Energy coverage of this issue here.

But with no projects proposed in the congested areas, both states have struck out on their own to get new generation built, offering incentives to generators to locate new natural gas plants in the congested areas.

PJM wants to build new transmission lines instead, and has appealed to FERC to try to stop that construction. However, most of the new state projects cleared PJM’s recent capacity auction. It’s unclear what any side’s next step will be.

“We can’t afford to buy back our generating plants” making re-regulation elusive, said Woolf. He indicated Maryland officials, including Gov. Martin O’Malley, are trying to figure out alternatives.
Coordination with RTOs is increasingly important as new environmental rules require pollution control backfits, taking generating capacity off-line for months of installation.

The two states may have a new ally. The auction also produced another constrained area, in northeastern Ohio where FirstEnergy is closing older coal plants. Bids to guarantee capacity for that area at the auction ended up triple the price elsewhere.