Market Monitor Continues Lobbing Shells at Defensive PJM Management

The recriminations between PJM management and its market monitor have reached a crescendo.  In a June 12 multi-volume response to FERC's investigation regarding PJM Interconnection's (PJM) alleged interference of its market monitoring unit (MMU), Dr. Joseph Bowring, PJM Market Monitor, supplemented allegations made in an April 5 statement that PJM management violated the MMU's independence and compromised other objectives of the PJM tariff.  Among the specific allegations, Dr. Bowring charges that PJM management: (1) refused to prosecute a unit's exercise of market power that resulted in costs to market participants to the tune of $20 million; (2) pressured the MMU to modify its position on mitigating market power in the new RPM capacity market; (3) authorized confidential procedures that gave PJM management preferential review authority over MMU reports effectively modifying Attachment M to PJM's tariff, which contains PJM's Market Monitoring Plan; (4) ordered the Market Monitor to remove a central conclusion from its 2005 State of the Market Report; (5) sought to change or delay the release of four MMU reports from 2004 to the present. (6) ordered the MMU in 2005 not to post minutes of a recent Market Monitoring Advisory Committee (MMAC) meeting and in 2006 ordered the MMU to remove the discussion of a recent FERC Order regarding market monitoring form the MMAC meeting agenda; (7) prevented the MMU from analyzing the BGS auction for the New Jersey Public Utilities Commission in December 2006; and (8) replaced the Market Monitor with the VP of Markets at PJM as the Chairperson of the Cost Development Task Force, a group responsible for developing, reviewing, and recommending standard procedures for calculating costs of products or services for cost-based rates analysis .

Concurrently PJM submitted its own two-volume response to the FERC, dismissing Bowring's criticisms.  Contrary to Dr. Bowring, PJM contends that "there is no factual basis for any claim that PJM has violated its tariff."  According to PJM, no one has alleged "that the MMU was ever prevented from performing any of its tariff-defined functions or reporting to the Commission any instances of market manipulation or other inappropriate conduct in the PJM markets."  Furthermore, PJM concluded that no evidence has been presented to demonstrate "that the market monitor was prevented from bringing to the Commission's attention matters of concern regarding the markets."  

Dr. Bowring also disclosed information he claimed points to PJM management's interference with MMU staffing, including targeting specific MMU employees for PJM Markets Division openings and threatening to eliminate MMU control over its data and data management.  According to PJM, however, it has provided the MMU with all appropriate staff to "carry out its tariff-defined functions," including maintaining its reliance on contract labor and adopting an especially aggressive and enhanced retention plan to encourage current MMU employees to remain with the MMU during the review period associated with the Complaint and this investigation.  

Regulators and market participants, particularly consumer groups, remain anxious about the MMU's independence and effectiveness pending resolution of the charges and counter charges.