Utilities Want to Regain the Ability to Build Power Plants in PJM. Consumer

The debate that took place in a Washington, D.C., hearing room in June was so filled with energy-industry jargon that most people would not realize they were witnessing a battle over who could own and profit from power plants.

The same fight between utility companies and independent power producers is now happening in statehouses.

Utility companies see the current crisis in the electricity system, driven by rising demand from data centers and high pressure to curb rate increases, as an opportunity. But consumer advocates caution that utilities’ efforts are more a cash grab than a solution.

“We need to plan for contingencies, we need flexibility, we need to plan for redundancies and have all the tools available to us to make sure that when customers turn the lights on, those lights come on,” said Wendy Stark, executive vice president for utilities and chief legal officer for the utility PPL Corp. of Pennsylvania, at the June 4 hearing before the Federal Energy Regulatory Commission.

Stark was talking about changing the law in states that decided decades ago to shift to competitive markets for power plants.

Let’s take a step back, because the concepts discussed at the hearing and in cases before state regulatory commissions are well-understood by the companies involved, but might as well be in a foreign language to most observers.

The first thing to grasp is that more than a dozen states—California and Texas were the largest—decided in the 1990s and 2000s to change the rules for who can own power plants. The states said that utilities would focus on the basics of delivering power and billing, and continue to receive a guaranteed profit for this, while non-utility companies would compete on an open market to see who can produce and sell electricity at the lowest price.

Lawmakers and energy analysts often used the word “deregulation” to describe what was happening, but it would be more accurate to call it a restructuring, since power plants were still subject to federal regulations. The process varied by state, but it often involved the utilities selling their power plants, or spinning off those assets into an affiliated company that no longer had a guaranteed profit.

Meanwhile, most states didn’t move away from traditional regulation, and utilities there continue to have local monopolies over power plants and the electricity delivery system. So now the country has several different regulatory systems existing side by side.

But utilities have long argued that competitive markets are ill-suited to making sure a large region has a reliable supply of electricity at affordable prices. They would like to regain the ability to build power plants in restructured states.

Much of this discussion is happening in the territory served by PJM…