A group of regulators from several states, including Virginia’s State Corporation Commission, are calling on the PJM Interconnection to move forward on a “circuit breaker” measure to protect against runaway electricity costs in grid emergencies.
PJM is the regional transmission organization — or RTO — that oversees long-distance electricity transmission and a regional wholesale electric market for its 13 member states and Washington, D.C.
Regulators want to avoid a repeat of what Texas saw in February 2021, when high demand for power and damage to the state’s electrical infrastructure caused by extreme winter weather led to ballooning electricity costs.
Wholesale prices reached Texas regulators’ ceiling of $9,000 per MWh, compared to less than $50 per MWh before the storm. But because grid damage prevented additional power sources from coming onto the market to meet cold-driven demand, prices stayed high. Some residents who didn’t lose power saw those numbers reflected in massive bills that month.
Electric grids need to balance supply and demand or the stability of the entire system is threatened; rising prices are meant to incentivize providers to increase production when demand is high.
“But when the price changes don’t necessarily have that effect, what’s the purpose?” said Marcus Harris, president of Old Dominion Electric Cooperative.
A circuit breaker would cap prices in cases where supply is unable to balance demand — so customers who want to heat their homes aren’t punished for a lack of supply they have no control over.
The Organization of PJM States Inc., which is made up of regulatory bodies from PJM’s 13 member states and Washington, D.C., sent a letter to the interconnection requesting urgent action on the matter. It said under emergency conditions, PJM grid participants could end up spending about $17 billion on electricity daily, compared to normal yearly revenues of about $15-$30 billion.
Though it didn’t provide a specific proposal, the organization did point to incremental measures from a stakeholder group of Old Dominion Electric Cooperative, Northern Virginia Electric Cooperative and Southern Maryland Electric Cooperative as a “not fully satisfactory” option.
“We want to do everything we can to have those market rules set ahead of time, so we can protect [our customers,]” ODEC’s Harris said.
PJM operates a capacity market where participating electricity providers are required to have reserve generation that’s typically not in use. The organization said the capacity market is itself a measure of protection against supply and demand mismatches.
According to PJM’s website, “capacity represents a commitment of resources to deliver when needed, particularly in case of a grid emergency.”
The circuit breaker measure would take effect when reserves aren’t available to bring down costs. ODEC representatives said the measure would be triggered by extended periods of high costs. So, if costs were above a certain dollar threshold for 24 hours or a week, the circuit breaker would take effect. Stakeholders are still discussing exactly where those triggers will be set.
But a circuit breaker would not be limited to winter storm-based grid emergencies. It could also be triggered in case of a particularly destructive summer storm or a large-scale cyberattack, for instance.
An ODEC representative said a circuit breaker measure would not be ready for adoption by PJM until March 2023 at the earliest, due to ongoing discussions among stakeholders and a potentially months-long regulatory approval process. The measure would need the go-ahead from PJM, as well as the Federal Energy Regulatory Commission.
