PJM Outlines Role of Markets to Provide Least-Cost Solutions to Any Federal Greenhouse Gas Regulation


The country’s wholesale electricity markets offer a powerful tool to help implement federal energy policies and would be useful if Congress were to establish a federal carbon price, PJM Interconnection stated in response to a specific inquiry from the U.S. House of Representatives Committee on Energy and Commerce to the nation’s RTOs and ISOs.

PJM responded to a series of questions from the Committee. The Committee was seeking input on implementation challenges and approaches should it decide to proceed with legislation to regulate greenhouse gas emissions. Similar questions were sent to the nations’ utilities as well as RTOs and ISOs.

In its response, PJM underscored its commitment to serve as an independent, neutral and fact-based source of information for the Committee. PJM made clear in its response that it was not taking a position on the question of whetherCongress should direct the regulation of greenhouse gases.

PJM’s response stated: “If the Congress decides to regulate GHG emissions on a national level, today’s wholesale electricity markets are well situated to implement regulation of greenhouse gas emissions from the electricity sector.”

PJM’s markets have already facilitated a significant decline in emissions from generators, the letter points out. Since 2005, carbon dioxide emissions have decreased 28 percent, and PJM has seen an increase in demand response resources – in which customers are paid to reduce their electricity use when the system is stressed – and renewable generation.

Nevertheless, PJM in its response noted certain issues that would need to be addressed should such legislation be considered. These issues include:

  • The problem of “leakage,” which is when higher-emission generators from regions without a carbon price import cheaper energy into an area with a carbon price, putting lower-emission generators at a disadvantage and defeating the purpose of a carbon price
  • The necessary clarification from Congress as to the application of the nondiscrimination requirements of the Federal Power Act, to any preference for less-carbon-intensive resources as  mandated by Congress
  • The definition of FERC’s role in any such federal legislation

PJM has initiated a task force at the request of its stakeholders to discuss the potential ways a carbon price could be incorporated into its wholesale electricity markets. PJM is also studying the potential impacts of a carbon price on its markets and generator emissions.

The federal government has the ability to consolidate various climate policy efforts into a single comprehensive national program, the letter notes, and PJM is ready to assist the House Committee on Energy and Commerce in implementing their policy choices.

“Given PJM’s critical role in administering markets and ensuring reliability of the bulk power electric system, PJM wishes to ensure that any legislative program can be implemented reliably, effectively and at least cost to consumers,” the letter concluded. “PJM looks forward to working with the Committee on that important task.”

A copy of PJM’s response to the House Committee on Energy and Commerce can be found at pjm.com.