PJM Wants to Replace Independent Market Monitor With Cheaper and Less Independent Variety

The new and mysterious "PJM Insider" employs one of the most annoyingly trite and overused headline words in today's "Com­menters Blast PJM Plan to Shop for Market Monitor."  Who pays for this slop anyhow?  Geek overload alert!

Who is the Market Monitor and why should you care, little consumer?

The Market Monitor describes its function as PJM's electric market babysitter this way:

"Since 1999, the PJM Market Monitoring Unit has been responsible for promoting a robust, competitive and nondiscriminatory electric power market in PJM by implementing the PJM Market Monitoring Plan. Under the PJM Market Monitoring Plan, the PJM Market Monitoring Unit has been responsible for monitoring compliance with the rules, standards, procedures, and practices of PJM markets. We observe and comment on actual and potential design flaws in market rules, standards, and procedures, and identify structural problems in PJM markets that may inhibit robust and competitive markets. We monitor the potential of market participants to exercise undue market power, the behavior of market participants that is consistent with attempts to exercise market power and the market performance that results from the interaction of market structure with participant behavior. We monitor the actions of PJM and the impact of those actions on market outcomes."

PJM Insider wraps up the Market Monitor history very succinctly:

"Mon­i­tor­ing Ana­lyt­ics is headed by Joseph Bowring, a Ph.D. econ­o­mist who has served as PJM’s mar­ket mon­i­tor since 1999. In April 2007, Bowring sparked a firestorm at a FERC tech­ni­cal con­fer­ence when he accused then-PJM Pres­i­dent Phil Har­ris and his allies of attempt­ing to muz­zle him by squelch­ing his reports and cut­ting his budget.

More than a dozen PJM stake­hold­ers, includ­ing sev­eral of those who filed the let­ters this week, responded by fil­ing a com­plaint call­ing on FERC to take steps to ensure the monitor’s independence.

Fol­low­ing an inves­ti­ga­tion by an inde­pen­dent coun­sel hired by PJM, Har­ris resigned and FERC approved a set­tle­ment between PJM and Bowring. The set­tle­ment called for Bowring to form an inde­pen­dent com­pany, which was awarded a six-year con­tract as PJM’s mar­ket monitor."

Six years will be up next year.  The PJM Cartel's Board of Managers has proposed issuing a Request for Proposals for a new Market Monitor.  It seems that the Board hasn't articulated why they would want to replace the current one, just mumbling something about budgets and costs.  I guess they've never heard the phrase, "if it ain't broke, don't fix it."

Instead PJM's Board wants to make some changes to the way the Market Monitor operates.

1.    Selection of the new Market Monitor will be subjective and secret.

2.    Conflict of interest disclosure does not include any prior relationships with market participants (you know, those 800-pound gorilla incumbent generation & transmission companies who are supposed to operate "separately") or relationships with Board members.  I kind of find this last one distinctly odd... why would so many entities objecting to this RFP be pointing this out if it wasn't a real possibility.  Scary.

3.    There is no minimum service level.  Any company could work up a proposal for minimal monitoring for a minimal price, then turn around and jack it all up if they are selected and then find out they can't handle the job.  Sound familiar, PATH opponents?  Or maybe a new Market Monitor could just do a crappy job for a lower price.  Collectively, we may all save a million or two, however, the savings will most likely come at the price of higher electric rates as our gorillas rob us blind with shady practices.  Now, isn't that a great idea?

4.    The Board wants to control the Market Monitor by having sole power to make the Monitor jump through hoops and report when they whistle.  The Board wants to know who gets reported to FERC for market manipulation, even though FERC regulation prohibits this disclosure to the Board.

Sort of sounds like the PJM cartel is reverting to its previous behavior that got them into trouble in 2007.  Not really surprising, since PJM thinks they answer to no one.  They really do answer to someone though, however FERC plays the part of the distracted and absent parent and never asserts its authority over it's regional transmission cartels.  And this is what happens.  What's next?  Couple more billion dollar transmission projects that the consumers don't want or need?

You're going to have to make up your own mind on whether you think this is a good idea or not.  There's a ream or two of comments about the RFP on PJM's website.  The Consumer Advocates of Maryland, Pennsylvania and West Virginia don't like it.  PJM's Industrial Customer Coalition doesn't like it.  Municipal and co-op electric service providers don't like it.  The PA-PUC doesn't like it.  The Organization of PJM States doesn't like it.  These are all entities focused on  consumer issues or are not-for-profit.  Funny not to see any comments from the gorillas, isn't it?

And of course, the Market Monitor has its own issues with its impending demise, however there are plenty of logical points and a couple of zingers buried in here.

So, what do you think, little consumers?  Should they stay or should they go?