R Street Institute
Testimony

R Street Testimony on FERC Technical Conference Regarding PJM Governance and Stakeholder Reforms

by Kent Chandler
July 14, 2026
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issues: Electricity Policy, Energy and Environment

STATEMENT SUBMITTED OF
KENT CHANDLER
SENIOR FELLOW, Energy and Environmental Policy
R Street Institute

Before the
Federal Energy Regulatory Commission

Commissioner-Led Technical Conference Regarding PJM
Governance And Stakeholder Reforms

JULY 14, 2026

Ferc Technical Conference Regarding Pjm Governance And Stakeholder Reforms

Chairman Swett and Commissioners Rosner, See, Chang, and LaCerte,

Thank you for holding this Commissioner-led technical conference, and for inviting me to participate in it. My name is Kent Chandler, and I am a Non-Resident Senior Fellow at the R Street Institute, a nonprofit, nonpartisan think tank in Washington, D.C. Immediately before joining R Street, I was a Commissioner and Chairman of the Kentucky Public Service Commission (Kentucky PSC), President of the Organization of PJM States, Inc. (OPSI), President of the MidAtlantic Conference of Regulatory Utilities Commissioners, and a member of the National Association of Regulatory Utility Commissioners’ Board of Directors and Executive Committee. During my time as a commissioner with the Kentucky PSC, I also served as a member of the board of the Organization of MISO States (OMS). Before being appointed to the Kentucky PSC, I served as a wholesale market advisor to the Kentucky commissioners, which included staffing the Kentucky representative on the OMS and OPSI boards, including then-OPSI President, Kentucky commissioner Talina Mathews. Prior to my time at the Kentucky PSC, I served as an assistant attorney general in the Kentucky Office of the Attorney General, which included representing Kentucky consumers in the PJM stakeholder process as a Member.[1] 

PJM’s governance process is broken, but not irreparably so.[2] As opposed to other RTO regions, states are on the outside-looking-in in PJM when it comes to major issues that ultimately affect retail electric rates and states’ economies. States have long sought a meaningful seat at the table in the decision-making process at PJM, particularly on issues that jointly fall within the ambit of federal and state jurisdiction, like wholesale transmission costs and resource adequacy.[3] While most states do not have an interest in becoming Members of PJM[4], there is broad agreement amongst states in the region that their current “soft” power is insufficient to represent their interests and to benefit their constituents. Merely conveying the positions of the states via letters to or discussions with the PJM Board of Managers is insufficient to effectuate outcomes sought by the states, and serves to frustrate the states in a way that undermines PJM’s prime objectives. For instance, if PJM is determined to file a capacity market proposal without state support, or the Transmission Owners are seeking a cost allocation opposed by OPSI, if either are approved by FERC, the states possess the ability to affect siting of generation or transmission through use of their police powers in response. This eye-for-an-eye process undermines the interests of PJM, its Members and the states. PJM and the states need each other to succeed in order for them to succeed themselves.

Damage aside, what ails PJM can be fixed without the need for the Commission’s intervention. In fact, many of PJM’s substantive issues over the years stem from overly-intrusive FERC engagement.[5] Furthermore, the Commission’s ability to dictate many specific governance reforms is limited given current legal precedent.[6] Instead, the PJM Board of Managers, Members and the states should get serious about ensuring the region’s electricity market works for its consumers. While there is certainly a role for the Commission, particularly as a convenor like it is in this proceeding, there is no legal impediment to the region’s stakeholders from agreeing on a changed framework that sets a new, more sustainable course. For instance, there is nothing keeping utilities from giving state commissions a formal role in proposing regional cost allocation methodologies to the Commission (beyond that limited role required in Order 1920-A) other than the utilities’ own preferences.[7] The PJM Board of Managers could choose to share their FPA Section 205 filing rights over resource adequacy with the states. A few years ago state commissions supported the concept of the PJM Board of Managers, not the Members Committee, having FPA Section 205 filing rights over the regional’s transmission planning protocols. While the Members refused to give up those rights because of the method employed by PJM and the regions’ utilities, and FERC rejected PJM and the utilities’ proposals to transfer those rights to the Board of Managers because additional superfluous changes to governing documents would have undermined the RTO’s independence, there has since been no effort to effectuate that change via a different path. I mention these examples, not to relitigate issues from the past, but instead to note that a number of positive changes – changes that would improve reliability, ensure just and reasonable rates, and reduce complaints to the commission, both oral and those filed under Section 206 of the FPA – can and should be instituted by agreement from the PJM stakeholders. Many of the types of agreements I mentioned above might need to come back to the Commission, but only for its stamp of approval. 

The following are considerations for any governance change in PJM:

• Transparency

Members, states and other stakeholders often gripe about not understanding the basis or rationale for the Board of Managers’ decisions. The decisions I’ve heard these complaints regarding range from contract matters with the region’s independent market monitor to the eventual contents of a FPA Section 206 complaint after Members failed to advance a proposal through the stakeholder process. The Board of Managers should consider material changes to its own decision-making process that improve the transparency and messaging of its determinations. Some changes the Board of Managers should consider are: open board meetings, where the public can observe; better meeting minutes that convey the discussion of board members and a roll-call vote on each voting item; or decisional orders that indicate the reasons for decisions, including what evidence or arguments the Board of Managers considered in making its decision. Giving Members and the public more information regarding the Board’s decision-making improves the durability of those decisions. In a 2019 analysis of RTO governance, Travis Kavulla noted the following:

Simply put, members of the public—both financially interested parties and other stakeholders alike—should have a right to understand clearly what information the RTO’s decision-makers are relying on and the reasons they have for making important decisions. Either holding open, deliberative meetings can accomplish this, or the RTO may accomplish it by documenting its reasoning. These hallmarks of good decision-making on matters of intense public concern echo the familiar requirement to which utility commissions are subject, which is to make decisions that are not “arbitrary and capricious.”[8] 

If Members and states understand the “why” of PJM Board decision-making, development of proposals prior to PJM Board engagement is likely to improve. Although the engagement that Members and states have with the PJM Board at Member Committee, Liaison Committee, and Board-to-Board meetings is helpful in understanding perspectives, those opportunities are limited. Understanding how and why the Board of Managers made specific decisions in written form is helpful to stakeholders for the same reason Commission orders are helpful to understand where regulators stand on issues: so that proposals improve going forward. 

• Durability

While the Commission maintains jurisdiction over PJM and its governing documents, it must ensure it balances hearing out entities affected by the PJM processes and giving the stakeholder process the deference its rules provide. FERC, and to a certain extent, the PJM Board of Managers, has too often been responsive to the loudest and most aggressive detractors to a particular outcome. This often results in a “squeaky wheel gets the grease” paradigm. Market rules shouldn’t be dictated by which actors can be the squeakiest wheel. FERC and the PJM Board must ensure that when hearing out the concerns of disaffected stakeholders they don’t unduly or unreasonably undermine the rules created by current processes. Where the outcome of a process, or the process itself, is unjust and unreasonable as understood under the Federal Power Act, then the Commission should of course find as much. However, Members that merely didn’t get their way in stakeholder processes shouldn’t be able to undermine the success and durability of rules and concepts that otherwise successfully moved through that process. Allowing “sore losers” to undermine the process after-the-fact, especially stakeholder outcomes that contribute to market efficiency, limits engagement in that same process going forward, and sends a signal to Members to lobby decisionmakers rather than participate in votes and seek consensus. 

Furthermore, while the PJM capacity market drives a minority of costs in PJM[9], it has been the primary point of contention in the region for the last decade. Given the overlapping nature of the capacity market’s focus on resource adequacy and the role and jurisdiction of states in siting, permitting, and in some instances authorizing or certificating generation, state skepticism and disagreement on market rules runs the risk of undermining the purpose of the capacity auctions.

As such, the region must involve the states in the formulation of rules that ensure resource adequacy. In furtherance of that objective, the PJM Board of Managers should consider amending their pre-filing process for capacity auction rule changes anticipated to be made under Section 205 of the Federal Power Act in a way that drives state participation early in the process and gives them a meaningful role over proposed rule changes. One suggestion for how this reform could look would be for the PJM Board of Managers, after informing stakeholders on the content of their to-be-filed Section 205 proposal, to commit to filing an alternative state proposal alongside theirs at the Commission as a “jump ball.” Assuming the PJM Board of Managers requires the states’ filing to be holistic and complete, and cover the issues addressed by the Board’s own filing, I find it likely that a competing state proposal will be rare. However, in order for 1) the Board of Managers to ensure they don’t have a competing state proposal, and 2) the states to have their ideas incorporated in PJM’s submission, rather than create and submit their own, this governance reform will likely drive greater engagement early on in the policy formation process between states, PJM and the Members. Having state buy-in on market reforms and reducing litigation risk for ultimate filings is a material benefit to the durability and effectiveness of the region’s rule set. I’ve seen firsthand in MISO that having real opportunities for state engagement in the stakeholder process (and a role in formulating a FERC proposal, if it comes to that) drives more serious engagement from the states. 

• Prioritization 

Over the past few years, PJM has struggled to sufficiently prioritize pressing issues, or when the RTO does prioritize something, they myopically focus on that issue to the detriment of other important considerations. PJM and its Members must reform the stakeholder process to ensure appropriate prioritization and work flows that accommodate pressing issues while ensuring other important problems are not ignored. This could include an annual publication by PJM of their priorities, either by the PJM Board of Managers, or jointly between the Board and PJM’s Members and states. While any prioritization will need to be inherently flexible to accommodate imminent and unforeseeable issues, publicly noting or agreement to policy issues to be addressed and on what timeline, gives Members and the public confidence in the direction of policy formation and market rules. This type of prioritization also allows stakeholders, particularly those without captive customers and retail rate recovery of the costs of RTO membership, to identify and prioritize resources for engagement at PJM.[10] Allowing Members and states to understand what issues, in what order and at what speed are to be expected will allow them to prioritize internal and external resources and more meaningfully contribute to the stakeholder process. This would also allow Members to seek out their own education and ideas on issues that are in the queue to be discussed, reducing the need to spend as much time and effort in the formal stakeholder process for education. Finally, publication of priorities will inform state and federal stakeholders so that they can hold the RTO accountable for whether it is meeting its own expectations. 

• Independence 

FERC, through its more expansive jurisdiction over RTOs than other utilities, must ensure its engagement, regulation and intervention in market and governance issues doesn’t further add to the chasm between utility experiences within and outside of RTOs. Today, the reality is that utilities outside of RTOs have it much easier than those within. I’ve seen firsthand non-RTO utilities fight to stay out of an RTO, and I’ve seen utilities inside RTOs use their voluntary membership, and the purported headache dealing with FERC and market issues that comes with it, as leverage to get what they want from PJM. This tactic increased with the creation of SEEM, and was most recently floated by the country’s largest wires company, AEP, ostensibly to effectuate the governance changes it would like to see and will advocate for in forums like this.[11] Previous analysis by R Street on the impact on governance and outcomes of voluntary RTO membership is instructive on this point.

RTOs are beholden to transmission owners as a practical matter, respondents suggested, because the consent of these utilities gave rise to RTOs in the first place. As long as transmission owners’ membership in RTOs is voluntary, as FERC has long agreed it to be, the transmission owners always have the threat of withdrawal at their disposal. The matter is not merely theoretical. Transmission owners have previously decided to leave one RTO and join another for reasons that presumably concern their bottom line. (In certain RTOs, large exit fees or the requirements of state policy for transmission owners to belong to an RTO may reduce the importance of this dynamic.) This dynamic leads to a “built-in conflict of interest” where RTO management is always looking over its shoulder to appease transmission owners at the expense of other parties, including consumers.[12]

FERC should be cognizant of creating a bifurcated regulatory regime for utilities within and outside of RTOs. Further, PJM should be empowered, both by Board of Managers and FERC action, to bolster its independence from Members. This could include raising the bar for FERC consideration of a utility request to leave an RTO, the process by which PJM staff engages Members, or by amendment to PJM governing documents. 

Conclusion

Over the years, Commission actions have served to make the PJM Board of Managers’ task more difficult, often times unintentionally.[13] The Commission should take efforts to ensure any governance amendments, formal or suggestive, that arise from this technical conference serve to enhance RTO decision-making and market efficiency, rather than diminish them. Consumers deserve as much.  

Recommendations for PJM Governance and Stakeholder Reforms

Kent Chandler, Non-Resident Senior Fellow, R Street Institute; Former Chairman, Kentucky Public Service Commission. 

PJM’s governance process is broken, but not irreparably so. As opposed to other RTO regions, states are on the outside-looking-in in PJM when it comes to major issues that ultimately affect retail electric rates and states’ economies. States have long sought a meaningful seat at the table in the decision-making process at PJM, particularly on issues that jointly fall within the ambit of federal and state jurisdiction, like wholesale transmission costs and resource adequacy. PJM and the states need each other to succeed in order for them to succeed themselves.

Reforms and considerations for the PJM region:

[1] “Member” refers to the definition of “Member” as found in the PJM Operating Agreement.

[2] Ethan Howland, “PJM may be ‘too big to function’: FERC Chairman Swett,” Utility Dive, May 13, 2026. https://www.utilitydive.com/news/pjm-ferc-swett-capacity-governance-data-center/820085/.

[3] Ethan Howland, “States threaten to leave PJM without expanded role in grid operator,” Utility Dive, Sept. 25, 2025. https://www.utilitydive.com/news/governors-states-pjm-governance-conference-capacity/760842/; Ann McCabe, David A. Svanda, Betty Ann Kane, “Making Markets Work for PJM States, State Engagement Possibilities with PJM.” https://opsi.us/wp-content/uploads/2019/10/Making-Markets-Work-for-PJM-States-10-14-19-1.pdf, Oct. 2019.

[4] Ethan Howland, “FERC reject West Virginia PSC, market monitor complaints seeking access to PJM committee,” Utility Dive, Mar. 4, 2024. https://www.utilitydive.com/news/ferc-west-virginia-psc-market-monitor-complaints-pjm-liaison-committee/709144/.

[5] See Robert Walton, “FERC rejects PJM capacity market reform proposals, seeks quick resolution,” Utility Dive, June 30, 2018. https://www.utilitydive.com/news/ferc-rejects-pjm-capacity-market-reform-proposals-seeks-quick-resolution/526903/; Ethan Howland, “FERC orders PJM to change reserve market rules, delay capacity auctions,” Utility Dive, Dec. 23, 2021. https://www.utilitydive.com/news/ferc-orders-pjm-to-change-reserve-market-rules-delay-capacity-auctions/616556/; Iulia Gheorghiu, “FERC orders PJM to postpone capacity auction,” Utility Dive, July 26, 2019. https://www.utilitydive.com/news/ferc-orders-pjm-to-postpone-capacity-auction/559610/.

[6] See CAISO v. FERC, 372 F.3d 395 (D.C. Cir. 2004), and Atlantic City Elec. Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002).

[7] Similar to the OMS’s and SPP RSC’s FPA Section 205 filing rights.

[8] Travis Kavulla, “Problems in Electricity Market Governance: An Assessment,” R Street Policy Study No. 180, Aug. 30, 2019. https://www.rstreet.org/research/problems-in-electricity-market-governance-an-assessment/.

[9] In 2025, the PJM capacity market drove 15.8% of total costs in the market. In 2024, capacity represented 6.5% of total costs in the PJM. Monitoring Analytics, LLC, Independent Market Monitor for PJM, “2025 State of the Market Report for PJM, Volume I,” Mar. 12, 2026, at 17. https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2025/2025-som-pjm-vol1.pdf.

[10] Travis Kavulla, “Problems in Electricity Market Governance: An Assessment,” R Street Policy Study No. 180, Aug. 30, 2019. https://www.rstreet.org/research/problems-in-electricity-market-governance-an-assessment/.

[11] Ethan Howland, “AEP eyes exit from PJM, SPP over slow generation interconnection,” Utility Dive, May 6, 2026. https://www.utilitydive.com/news/aep-pjm-spp-data-centers-earnings/819419/.

[12] Travis Kavulla, “Problems in Electricity Market Governance: An Assessment,” R Street Policy Study No. 180, Aug. 30, 2019. https://www.rstreet.org/research/problems-in-electricity-market-governance-an-assessment/, (internal citations omitted).

[13] See Robert Walton, “FERC rejects PJM capacity market reform proposals, seeks quick resolution,” Utility Dive, June 30, 2018. https://www.utilitydive.com/news/ferc-rejects-pjm-capacity-market-reform-proposals-seeks-quick-resolution/526903/; Ethan Howland, “FERC orders PJM to change reserve market rules, delay capacity auctions,” Utility Dive, Dec. 23, 2021. https://www.utilitydive.com/news/ferc-orders-pjm-to-change-reserve-market-rules-delay-capacity-auctions/616556/; Iulia Gheorghiu, “FERC orders PJM to postpone capacity auction,” Utility Dive, July 26, 2019. https://www.utilitydive.com/news/ferc-orders-pjm-to-postpone-capacity-auction/559610/.