An investigation into whether the market monitor of the PJM Interconnection is being permitted to operate independently from the regional transmission organization (RTO) should be conducted by an outside party, which could be designated by FERC, said a major industrial consumer power group last Tuesday.

“The market monitoring function is crucial in any of the so-called organized wholesale electricity markets. That is why it is especially important that any investigation of PJM be conducted by a truly independent entity,” said John Anderson, president of the Electricity Consumers Resource Council (ELCON).

ELCON filed a brief at the Federal Energy Regulatory Commission last Monday on the need for PJM to maintain an independent market monitoring function. The group’s comments came in the wake of the PJM market monitor’s allegations last month that he faced extensive interference from PJM management. PJM coordinates the transmission of wholesale electricity in 13 eastern states and the District of Columbia.

At PJM, “we [market monitors] have not been permitted to be independent” from the RTO, said Joseph E. Bowring, market monitor for PJM, during a technical conference at FERC last month (see NGI, April 9). “We’ve seen significant issues with conflicts with PJM, and where there were conflicts,” the independence of market monitors from PJM was “compromised,” he noted.

“PJM views us primarily as employees that are responsible to management rather than being responsible to provide our independent views” to the Commission, Bowring said then.

ELCON said it takes no position on the merits of the allegations. However, it noted that a joint petition filed by several state consumer advocates and other parties have attributed “exorbitant rate hikes” in PJM to “the PJM experiment.”

The independence of the market monitor “is key to pointing out market failures and illegal behavior, and recommending changes that can correct these problems and make organized markets more competitive,” Anderson said.

“When we look at markets like PJM we don’t find competition. What we find instead is reregulation resulting in failed markets. If these markets are to have any credibility with consumers, the market monitoring function is crucial. And for the market monitoring function to be effective, it must be truly independent,” he noted.

At the FERC technical conference, market monitors stressed the need for them to be independent of RTOs and market participants in order to be effective and provide FERC with information about potential market abuses. But this can be difficult for those market monitors, such as PJM’s Bowring, who are employed by an RTO.

The role of the market monitors is to ensure that RTO participants are complying with market rules, prevent anticompetitive behavior, mitigate conduct that could distort markets and to work closely with the Commission’s Office of Enforcement. They do not take enforcement action against market violators.

Currently, there are more than a dozen market monitoring positions overseeing the operations of RTOs and independent system operators (ISO) across the U.S., according to FERC Chairman Joseph Kelliher. The types of market monitors vary from organization to organization. For example, PJM historically has had employees who acted as internal monitors; the Midwest ISO has a contract employee as market monitor; and the California ISO has an employee-internal monitor and an external surveillance committee.

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