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Monkey business at PJM system

The Baltimore Sun

Two days ago, Illinois Attorney General Lisa Madigan said she had evidence a company called Edison Mission Energy continued a suspicious pattern of wholesale electricity trading long after it claimed to have stopped.

Why does this matter to Maryland?

Edison Mission sells electricity to the PJM grid, which stretches from the East Coast to Illinois. Potential price manipulation by Edison Mission or any other electricity producer in a deregulated marketplace can reap hundreds of millions in improper profits and raise prices for everybody who gets their power off the grid.

That includes you, Baltimore Gas and Electric customers.

Edison Mission denied Madigan's allegation yesterday, saying the troubling behavior she identified came from generation plants owned by other companies.

"These are not our units," said company spokesman Doug McFarlan.

Edison's or not, somebody appears to be gaming the system. The case joins the pile of evidence suggesting that the wholesale market - where we all get our juice, thanks to deregulation - is often still rigged in favor of generation companies years after Enron got caught at it.

Worse, that evidence has been all but ignored by the federal regulators who are supposed to be policing things.

"We do have an interest in making sure the prices that are being produced through this PJM process are not products of manipulation," says Maryland People's Counsel Paula Carmody, who joined numerous parties in pleading with the feds this week to get to the bottom of the Edison Mission case. "This company needs to be reined in" if it hasn't stopped the troubling behavior, she said.

The Edison Mission case surfaced last month when the Federal Energy Regulatory Commission revealed it had been investigating the company's suspect trading for years and that Edison officials had "misled" investigators with "protracted" evasions that amounted to "severe" conduct.

FERC fined Edison Mission, which owns big generation plants in Illinois and Pennsylvania, $9 million. But it closed the case without making any judgments about what Edison was hiding and was satisfied with Edison's promise that it stopped the troubling trading in 2006.

Attorney General Madigan says Edison seems to have continued the pattern at least into last year.

"They said they discontinued that practice in April 2006, but that's certainly not consistent with their quarterly reports to FERC or their reports to the SEC" - the Securities and Exchange Commission - said Susan Hedman, senior assistant attorney general in Madigan's office. "The evidence certainly seems to indicate that this conduct is continuing."

Part of the evidence is PJM bidding records. Three years ago FERC began checking a tip that Edison Mission frequently withheld power from PJM's "day ahead" market by demanding prices so exorbitant that nobody would buy it. By virtue of the company's dominant position in some areas, that allowed it to sell in the "real time" market the next day at prices potentially much higher than it would have gotten otherwise.

The day-ahead market lets buyers and sellers lock up deals a few hours before the kilowatts are burned. In the real-time bazaar, kilowatts are bought and dispatched on much shorter notice, and prices can be much more volatile.

Energy consultant Robert McCullough, working for Madigan, has identified plants he says are Edison's that have continued bidding behavior identical to what got the company in trouble before.

"It's hard to believe that Edison Mission would be so brazen, but the Illinois attorney general is saying that the company never stopped trying to game the wholesale power market," said Mark Crisson, chief executive of the American Public Power Association, whose municipal-utility members are concerned about wholesale cheating.

The plants' ownership is masked in the records, but there are no other companies in PJM that seem to have the same number and size of generators, McCullough said.

"We can't tell whose units they are, but we can tell you emphatically that they are not ours," said Edison Mission spokesman McFarlan.

Separate data show that Edison Mission's plants sell all or most of their megawatts in real time, according to McCullough. That indicates that, whatever the method, they are withholding power from the day-ahead market, Madigan said in a petition asking FERC to reopen the Edison Mission case.

The company was still analyzing that allegation late yesterday, McFarlan said, but the notion that the company sells everything in real time, he said, is "wrong."

Thanks to its misbehavior in the FERC inquiry, which included destroying e-mail it had been ordered to preserve, Edison Mission's credibility is not exactly 100 watts. But even if it is blameless in the latest irregularities, there are plenty of questions to throw at FERC, which declined to comment on petitions to reopen the case.

Whose plants did McCullough identify, if not Edison's? Why did FERC close the Edison Mission case without penalizing the company for the weird bids? Why did FERC close the case before anybody knew it existed?

And most of all: With these kinds of irregularities popping up almost every month, how much of our huge electricity bills can be attributed to generally higher energy costs and how much to cheating?

FERC, we're waiting.

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