Federal regulators yesterday struck down market rules exempting certain Maryland power generators from price caps designed to limit windfall profits, potentially saving utility customers nearly $90 million a year, state regulators said.
The ruling is a partial victory for the state Public Service Commission, which complained to federal regulators that certain unnamed generators were taking advantage of their price cap exemptions to overcharge for electricity at times when no one was bidding against them. In its order, the Federal Energy Regulatory Commission ruled that price caps should be applied equally to all generators.
However, FERC denied the state commission's request that energy companies be forced to refund past overcharges, which it estimates at $87.5 million in 2006 alone.
Steven B. Larsen, PSC chairman, said the ruling is still important because it closes the door on future overcharges, potentially saving Maryland ratepayers hundreds of millions of dollars over a period of years.
"We didn't have numbers for any year other than 2006, but the cost to consumers of this exemption if you extrapolate from '06 was between $80 million and $90 million a year, every year," he said.
However, FERC said in its ruling that it wants to review regulations that determine when generators are subject to price caps in the future. Some generators want the rules loosened, arguing that price caps are imposed too often and are hurting the market. Regional power grid operator PJM Interconnection is evaluating those concerns, and FERC said it is willing to wait until that process is finished before launching its own review. The outcome could affect how much benefit ratepayers receive as a result of FERC's decision yesterday.
The PSC alleged in its Jan. 15 complaint that PJM allowed 17 Maryland electricity plants to avoid price caps despite objections from its market monitoring unit, which is charged with ensuring that the market is fair and competitive. The commission said it did not know the identity of the 17 plants, because that information wasn't disclosed by the market monitor for proprietary reasons. Constellation Energy Group, which is the largest power generator in Maryland, said none of its plants were among those in question.
PJM said it was not opposed to FERC reviewing the rules and making changes. However, PJM opposed Maryland's request for refunds, saying power generators shouldn't be punished retroactively for following rules FERC approved in its past orders. FERC sided with the grid operator.
