Pennsylvania Power & Light Co. has signed onto the Pennsylvania-New Jersey Maryland Power Pool's plan to restructure itself to enhance competition in the wholesale electricity market, but believes the proposal could be strengthened, a PP&L official said Wednesday (7/24).

PP&L joined eight other electric utilities Wednesday in filing agreements and transmission tariffs with the Federal Energy Regulatory Commission to put in place a new wholesale energy market by the end of this year.

"This proposal is a significant step in the right direction that we think can be further enhanced to create an even more competitive and efficient structure that gives equal opportunity to all entities in the wholesale electricity market," said John Sipics, PP&L's general manager of Power Systems Support, and the company's management representative to the PJM power pool.

The restructuring pertains directly to the wholesale electricity market, and PP&L sees it as a step toward retail customer choice, Sipics said.

The regional power pool, referred to as PJM, is the oldest such system in North America and has the largest electricity generating capacity of any power pool in the United States. The power pool consists of 10 electric utilities in Pennsylvania, New Jersey, Maryland, Delaware, Virginia and the District of Columbia. The member utilities have been the owners and operators of the "pool," sharing electricity generation and transmission lines to serve more than 22 million customers throughout the Mid-Atlantic region.

PJM's restructuring proposal changes much of the power pool's current structure.

PP&L believes the restructuring plan can be improved and will "intervene" with the FERC, filing comments that recommend different approaches in certain areas.

"We support the plan, but will ask the FERC to consider several changes that we believe will strengthen the plan," Sipics said.

There are two primary areas of the proposal that PP&L is seeking to improve:

• the operation of the wholesale electricity market, and
• the way prices are set and payments are made for transmission services.

"Our position in both areas is that the plan could be more open to all players in the market and a more efficient and a fairer wholesale market could be created," Sipics said.

Operation of the Wholesale Electricity Market: "PP&L would like to see the market operation be more competitive," Sipics said. "We think it's necessary to make some changes to the PJM proposal in order to create a more competitive wholesale market to benefit electricity customers."

In particular, improvements can be made to how the market for wholesale energy will function and how the PJM Independent System Operator will coordinate with other power pools or independent system operators.

The PJM proposal establishes a market for energy that is open to all buyers and sellers that wish to participate. Under the proposal, utility companies that have their own generators could bid an artificially high price, potentially setting a high market price. If the bid isn't accepted, the utility still can use the generating unit to serve its own customers. An independent seller of generation has no such option if its bid isn't accepted in the market.

"Different players are treated differently under the proposed market structure," Sipics said. "The proposed market creates an unfair advantage for utility companies that have their own generators."

The plan also can be improved by allowing for coordination between the PJM Independent System Operator and other power pools to find the lowest-priced energy in the region. PP&L believes it's necessary to allow the ISO to coordinate resource scheduling with other power pools to find the lowest-priced energy.

Pricing Mechanism for Transmission Services: The PJM plan calls for a standard rate for the use of transmission lines and a 10 percent additional charge if power comes from outside a designated geographical "zone." The plan establishes 10 such zones within the PJM territory, each with its own standard rate for transmission services. The extra charge for bringing in energy from outside a particular zone is based on the local zone's rate and is paid to the transmission owners within the zone.

PP&L believes this method doesn't accurately compensate the owners of the transmission lines used to make the deliveries. The additional charge should be rebated to transmission owners providing the service.

"A truly efficient and competitive market has to reflect all the costs in delivering a product and those providing a transmission service need to be accurately compensated," Sipics said. "Transmitting electricity should be no different than transporting any other product."

Pennsylvania Power & Light Co., which serves 1.2 million customers in central and eastern Pennsylvania, is the electric utility subsidiary of PP&L Resources, Inc. Other PP&L Resources subsidiaries are Power Markets Development Co., an international independent power company; and Spectrum Energy Services, which markets energy-related services and products.