Grid operator ‘dismayed’ by utility bribery scandal

Source: By Arianna Skibell, E&E News reporter • Posted: Thursday, September 24, 2020

Leaders of the nation’s largest grid operator, PJM Interconnection, yesterday denounced a utility bribery scandal that unfolded within its footprint in Illinois amid an ongoing dispute over the extent of wrongdoing.

“The board is dismayed regarding this conduct,” said Ake Almgren, chairman of PJM’s board of managers, during the grid operator’s annual meeting with public interest and environmental stakeholders, held virtually due to the ongoing coronavirus pandemic. “These activities contravene our values.”

Commonwealth Edison Co., the Midwest’s largest utility and a subsidiary of Exelon Corp., recently admitted to arranging patronage jobs and using bribes to secure passage of energy legislation in the Illinois capital. The politically powerful utility has agreed to pay a $200 million fine to settle a federal investigation of its lobbying practices (Energywire, July 20).

During yesterday’s wide-ranging meeting, attendees also voiced concerns about a lack of transparency in the PJM decisionmaking process and recent market rule changes from the Federal Energy Regulatory Commission, which they warned could harm states’ clean energy policy priorities.

Tyson Slocum, director of the Energy Program at watchdog group Public Citizen, demanded to know how PJM’s board planned to respond to ComEd’s admission. In a Sept. 14 letter, Slocum, along with the Union of Concerned Scientists’ director of climate and energy, Angela Anderson, called on PJM to suspend Exelon and all its subsidiaries’ voting rights in the PJM stakeholder process for three years.

“The suspension of voting and other PJM governance membership privileges currently enjoyed by Exelon and its subsidiaries during this three-year period is a reasonable consequence for their illegal actions that gave them undue influence in PJM,” they wrote.

“That influence has had the impact of penalizing new, clean generation, interfering with state goals to reduce carbon emission,” said the letter.

During the meeting, Almgren said the board had met to discuss Slocum and Anderson’s letter and intends to formally respond. Following the meeting, Slocum said that while he doesn’t expect the board members to “go far enough,” he’s pleased that they intend to take some action.

In a Sept. 18 letter responding to the advocates’ demands, Kathleen Barrón, the senior vice president for government and regulatory affairs and public policy at Exelon, urged PJM to take no action, calling the demands “unprecedented.”

“The letter contains factual errors, misleading characterizations, and a misunderstanding of PJM’s Operating Agreement,” she wrote. Barrón said the conduct at issue relates only to ComEd and there has been no allegation of wrongdoing for its parent company Exelon, Exelon Generation (ExGen) or any other Exelon entity.

“The small number of ComEd senior employees that orchestrated the misconduct no longer work for the company and the ComEd lobbying activities had nothing to do with PJM or any wholesale market or operations issue,” she wrote.

“While is it convenient for [Public Citizen and UCS] to conflate ComEd’s lobbying activities related to distribution rate policy with ExGen’s advocacy in support of clean energy policy, they are misleading the board when they allege that the conduct described in the [bribery case] was related to the zero emission credits (ZECs) that were adopted in the Future Energy Jobs Act (FEJA),” Barrón added, referring to a 2016 Illinois law that included subsidies for two of the company’s nuclear power plants.

Focus on consumers, climate

Also present at the meeting was the Consumer Advocates of the PJM States Inc., or CAPS. The nonprofit organization’s members represent 65 million consumers in the 13 PJM states and the District of Columbia.

Bill Fields, a CAPS member and president of the Maryland Office of People’s Counsel, said PJM does not routinely examine the cost-effectiveness of proposals, as its mission statement requires. He warned that there is a lack of understanding around how PJM’s markets will function with state mandates for higher percentages of renewable generating resources.

“What products or attributes are going to be needed for PJM to provide that reliability for the least cost?” he said.

PJM President and CEO Manu Asthana said it’s an ongoing conversation about how the grid will operate with the evolution of resources, economic and market conditions, and changing consumer priorities. Asthana said he is eager to discuss what the “consumer perspective on decarbonization” is and what role PJM should play in that process.

Jackie Roberts, another member of CAPS and a West Virginia consumer advocate, said transmission owners have too much power in the stakeholder process. “All members are created equal, but some are more equal,” she said.

Asthana pushed back and said parties often question PJM’s independence when the grid operator doesn’t rule in their favor.

Casey Roberts, a senior attorney with the Sierra Club’s Environmental Law Program, zeroed in on an order FERC issued last year that upended how state-backed energy resources could compete in capacity markets.

Capacity markets offer a way for the grid operator to ensure there will be enough power generation to meet demand into the future, typically three years out. Generation resources like a coal plant or wind farm bid into PJM’s periodic auctions to qualify to provide electricity in later years.

Opponents have warned that the FERC decision threatens to hurt states’ ability to direct their electricity mix toward more renewable or nuclear energy, and some states are now weighing a market exit.

“We appreciate PJM’s recognition of the need for a better path forward and willingness to be public in this view,” Roberts said. “But PJM needs to be more proactive in bringing stakeholders together for a solution.”

Roberts suggested that PJM revert to a so-called residual capacity market. Utilities can procure capacity outside PJM’s capacity market to meet state policy goals or other economic objectives and reduce the amount they need to buy through PJM, she said.

“PJM could continue to set the rules on how much capacity value different resource types have, how much each load-serving entity is responsible for purchasing, accountability measures for capacity resources, and PJM could continue to hold load-serving entities accountable and prevent leaning on the system,” she said.

The meeting concluded with a line of heated questioning by Slocum, who challenged PJM on the grid operator’s practice of charging membership fees for anyone seeking to attend certain meetings.

“I don’t understand why finance committee meetings where ratepayer money is spent by PJM are closed to the public,” Slocum said.

Asthana said he “know[s] there’s a sticking point around the $2,500 a year for membership fees.”

“But those are the rules set by our members. I’m not going to opine on how affordable $2,500 is.”