Provocateurs:
Ken Malloy, CAEM CEO
Dr. Ronald Sutherland, CAEM Senior Scholar

The PJM market initially included the states of Pennsylvania, New Jersey, and Maryland. Later, the state of Delaware and the District of Columbia were added. Recent additions include parts of Virginia, West Virginia, and Ohio. Some service areas in Virginia and the Midwest states are considering entering the PJM region. Some utilities that had indicated a plan to be part of the Midwest Independent System Operator now are applying to become PJM members. At issue is the implication of expanding the PJM service area.

• Does expanding the PJM region by diversification over a large area improve reliability or reduce costs?
• Can reserve margins, and hence capital costs, be reduced by expanding the service territory?
• An important case occurs where a utility, along with its generating plants, enters the PJM service territory, where the entering utility has lower average costs than average PJM costs:
  (1) What is the effect of the new entrant on prices to existing PJM customers?
  (2) What is the effect of the new entrant on prices to customers of the new entrant?
  (3) What are short-run effects on prices in each region, where short run takes existing power plants as given?
  (4) What are the long run effects on electricity prices, where the long run permits the construction of new power plants?
  

Ken Malloy, founder and chief executive officer of CAEM, is widely regarded as a visionary on the role of markets in energy policy. He has appeared on CNN, MS-NBC and other broadcast media and has been widely quoted in the press, including Time magazine, The Washington Post and The New York Times. His 20 years of experience include service as the Department of Energy’s lead career official on policies relating to competition, regulatory reform, and industry restructuring. He has also been a law professor in the field of economic regulation and a staff official at the Illinois Commerce Commission and the Federal Energy Regulatory Commission, where he was largely responsible for developing the regulations that led to competition in natural gas markets. Prior to founding CAEM, he worked for PHB Hagler Bailly, one of the largest international energy consulting firms in the world.

Ron Sutherland, working with an active group representing over 20 organizations and top energy economists, was the principal author of the CAEM-sponsored study, Estimating the Benefits From Restructuring Electricity Markets: An Application to the PJM Region. Sutherland, a PhD economist and CAEM Senior Scholar, has more than 20 years experience analyzing energy issues. He focuses on electricity and natural gas regulatory and restructuring issues. Sutherland is an independent consulting economist and Adjunct Professor of Law at the George Mason University, School of Law. Much of his career was spent with two DOE national laboratories: Los Alamos National Laboratory and Argonne National Laboratory, where he assessed several regulatory and energy issues. He is a former senior economist for the American Petroleum Institute and economics professor with the University of Illinois