By the OGJ Online Staff
HOUSTON, Dec. 6 -- PPL Corp. Thursday confirmed the Allentown, Pa., company is the subject of an investigation by Pennsylvania regulators into allegations of market manipulation.
But PPL denied any wrongdoing. "PPL's conduct was at all times in compliance with all applicable laws and regulations," the company said in a statement, and it did not "did not possess, exercise, or abuse market power in the PJM capacity markets."
The Pennsylvania Public Utility Commission said last week it was opening the investigation based on findings by the PJM Interconnection LLC's market monitor that an unnamed company unilaterally drove up prices during the first quarter of this year.
John Biggar, PPL executive vice-president and chief financial officer, said the monitor also acknowledged PJM's standards and rules did not prohibit PPL's conduct and his concern about possible exercise of "market power" addressed issues that were broader than the legal standard for antitrust enforcement.
Further, Biggar said PJM's market monitor also said that changes in market conditions and in PJM's rules for distributing capacity deficiency revenues were corrected in April.
"Our business plans for the remainder of 2001 and for all of 2002 reflect PJM's revised rules from the time that they became effective in June 2001," Biggar said. "Even with this development, we are reaffirming our earnings forecast in excess of $4/share for 2001." Biggar said the forecast would be the highest annual earnings in the company's history.
Biggar said PPL has a "long and public record" of disagreement with PJM and the PJM market monitor about the rules governing the PJM capacity markets. He said PPL does not agree with the report, and will be explaining its position in the future, including a formal response in accordance with the PUC's investigative order by a Jan. 15, 2002, deadline.
PPL acted on projections of tightening demand and supply in the wholesale capacity markets, Biggar said. Although PPL benefited from its market call on the direction of the prices in the capacity markets, Biggar said, additional capacity quickly came into the market to meet the demand, as the market monitor's report acknowledged. He said the price swings made little difference to consumers because of retail rate caps.
PPL favors capacity obligations that oblige electricity providers to obtain sufficient generation to meet demand at least 2 years in advance, Biggar said, the approximate lead time for new construction to be placed in service. He said PPL believes daily advance commitments are insufficient, and even seasonal advance commitments may be insufficient.
