In April 2012, the Maryland Public Service Commission (“PSC”) issued Order No. 84815 (the “PSC Order”). In general terms, the PSC Order requires electric distribution companies that supply electricity to Maryland retail customers to enter into long-term contracts with CPV Maryland, LLC (“CPV Maryland”), a Maryland electric power generation company. The contracts required local electric utilities—often referred to as “electric distribution companies” (or “EDCs”) and which maintain a regulated monopoly over the delivery of electricity to retail customers—to make payments in connection with CPV Maryland’s sales of energy and capacity that would eliminate any difference (whether in CPV Maryland's favor or not) between predetermined contractual prices and the actual clearing prices for capacity and energy in PJM Interconnection, LLC's (“PJM’s”) wholesale markets.
The purpose of this brief is to provide the Court with an economic analysis of the PSC Order’s impacts on the PJM capacity and energy markets. To that end, the brief focuses on three central themes. First, that the pre-determined prices specified in the contracts mandated by the PSC Order alter and replace the PJM auction-determined prices for CPV Maryland sales of both capacity and energy. Second, that modification and displacement of the PJM auction prices affect the allocation decisions effected by the PJM markets and the bidding behavior of PJM market participants. And third, that the PSC Order's interference with the operation of the PJM auctions likely harms the economic cost efficiency of the PJM capacity and energy markets.