PP&L, Inc., said Thursday (9/24) that it supports new PJM Interconnection procedures that would create a capacity market much like the current market for energy. PP&L, Inc., said these procedures, which were approved Wednesday by the PJM, should provide further assurances to those who are concerned about how capacity is sold in the region.

PJM also moved to simplify the determination of alternative suppliers' capacity obligations to free up more capacity for the market. PP&L, Inc., also supports these changes.

"We believe that the PJM procedures, which were approved today, are an appropriate way to further ensure the fairness of this market while allowing the forces of supply and demand to set the price for capacity," said Frank Long, PP&L, Inc.'s executive vice president and chief operating officer.

Electric companies buy and sell electricity from each other on the PJM. In that wholesale market, there are two separate commodities: an energy commodity that is associated with the hour-to-hour costs to generate electricity; and a capacity commodity that reflects the longer-term, fixed costs associated with building and maintaining power plants.

Wednesday's PJM action is related to the capacity commodity.

Long said PP&L, Inc., strongly supported the new procedures, which would establish a confidential "bulletin board" system for the exchange of information about the price of available capacity in the Pennsylvania, New Jersey and Maryland region. Under these procedures, the PJM also would implement a monthly capacity credit market and a day-ahead capacity credit market in which bids would be confidential and a clearing price would be determined.

"While PP&L, Inc., believes that the party-to-party transactions that are now occurring in this market are resulting in prices that are fully competitive, these new PJM arrangements will provide further assurances to those who have concerns," said Long.

He said PP&L, Inc., hopes that the new PJM procedures will be a step toward resolving the state Public Utility Commission's concerns about the pricing of capacity. The PUC this week issued an order that would require Pennsylvania utilities to sell capacity at a set price.

When it was issued, PP&L, Inc., said the order presented the company with a legal dilemma because portions of it are in conflict with long-standing federal law. For that reason, the company has said that it intends to seek a federal court ruling on the order.

Long said that the PJM approach will provide a convenient way for potential sellers to match their available capacity resources with potential purchasers of these resources in a manner that would avoid antitrust concerns.