I’m thrilled to sit down with Christopher Hailstone, a seasoned expert in energy management and renewable energy, who also serves as our go-to authority on utilities. With his deep knowledge of electricity delivery, grid reliability, and security, Christopher offers a unique perspective on the complex dynamics within the electric industry, particularly in the PJM area. Today, we’ll explore the ongoing tensions between distribution utilities and competitive generators, the impact of market forces and past policies on power shortages, and the broader implications for customers and the future of energy reliability.
Can you start by giving us a clear picture of what the PJM area is and why it holds such significance for the electric industry in states like Pennsylvania?
Absolutely, Ava. PJM, or PJM Interconnection, is a regional transmission organization that coordinates the movement of wholesale electricity across a large part of the eastern United States, including Pennsylvania. It covers all or parts of 13 states and serves over 65 million people. Its importance lies in managing the grid and operating the largest competitive wholesale electricity market in the country. For states like Pennsylvania, which underwent restructuring in the late ’90s to separate generation from distribution, PJM ensures that power flows reliably from generators to utilities and ultimately to customers. It’s essentially the backbone of the region’s energy system, balancing supply and demand every minute of the day.
What’s at the heart of the current conflict between distribution utilities and competitive generators in the PJM area?
The core issue right now is a potential generation shortage and the resulting spike in wholesale capacity prices, which are starting to hit customers’ bills. Distribution utilities—those responsible for the wires and delivery—are claiming that PJM’s capacity market, which is supposed to ensure there’s enough power generation available, has failed. They argue customers are paying more without getting reliability in return. On the other side, competitive generators, who produce the power, say the market is working as intended, just with a lag. They point to low prices in recent years as a signal that new plants weren’t needed until now, and they’re seeing market responses like new plant proposals. It’s a classic clash between regulated and competitive mindsets.
Distribution utilities are pushing to build their own power plants and pass those costs onto customers. What’s your perspective on this proposal?
I think it’s a risky move. On one hand, I understand their frustration with perceived market failures and their desire to secure reliable power for their customers. But allowing utilities to reenter the generation business would be a major reversal of the restructuring principles established in Pennsylvania’s 1996 law, which aimed to foster competition in generation. It could stifle the competitive market by discouraging private investment in new plants. Plus, passing those costs to captive customers raises fairness concerns—why should ratepayers bear the burden of what could be seen as a business decision?
Why do you think utilities have struggled to gain broader support for this idea outside their own industry?
Frankly, they haven’t made a strong enough case that this drastic shift is necessary. Many stakeholders, including regulators and consumer advocates, worry about returning to a model where utilities control both generation and distribution, which could lead to higher costs and less innovation. There’s also skepticism about whether utilities can build and operate plants as efficiently as competitive generators. Without clear evidence that the market can’t address the shortage, this proposal feels like a step backward to a lot of folks.
Generators argue that the market is already responding to higher capacity prices with new plants and delayed retirements. Can you walk us through how this market response actually plays out?
Sure. In a competitive market like PJM’s, capacity prices act as a signal to generators. When prices are low, as they were for years, it tells developers there’s no urgent need for new plants. But when prices rise, as they have recently, it’s a green light for investment. Developers start planning new facilities, and existing plants might delay retirement to cash in on higher revenues. This isn’t an overnight process, though—it takes years to site, permit, and build a power plant. So, while the response is happening, there’s a natural delay before new capacity comes online.
How have government policies over the past decade, especially those promoting renewable energy, influenced the generation landscape in PJM?
Over the last ten years, policies at both federal and state levels have heavily favored renewables like wind and solar while creating hurdles for fossil fuel plants, especially coal and even natural gas in some cases. Subsidies, tax credits, and mandates for clean energy have shifted investment toward renewables, which is great for environmental goals. But many of these sources are intermittent—they don’t produce power 24/7. At the same time, policies discouraged dispatchable plants that can run on demand, which has led to a tighter supply of reliable capacity. I think this has definitely contributed to the current shortage concerns in PJM.
Generators have pointed fingers at distribution utilities for raising customer bills through higher distribution and transmission charges. Do you think there’s merit to this criticism?
There’s some truth to it, but it’s not the whole story. Distribution utilities have indeed increased spending on infrastructure—think wires, poles, and substations—over recent years, and those costs get passed to customers through rates. However, much of this investment was driven by real needs, like replacing aging equipment and improving grid resilience against storms or cyberattacks. During times of low generation prices, it made sense to focus on these upgrades to keep overall bill impacts manageable. So, while the criticism isn’t baseless, it overlooks the broader context of why those investments were made.
Having worked on both the generation and distribution sides, how does that dual experience shape your view of this conflict?
My time in both camps gives me a balanced perspective. I’ve seen firsthand how generators thrive on market dynamics and risk, while utilities prioritize stability and long-term planning under regulation. Both sides have valid points—generators are right that markets need time to respond, and utilities are correct to worry about reliability for their customers. But I’m concerned that this public feud distracts from the bigger picture. If they keep fighting, we risk policy gridlock or rash decisions that could hurt reliability and affordability for everyone.
Looking ahead, what’s your forecast for the future of grid reliability in the PJM area if these tensions persist?
If the conflict between generators and utilities continues without resolution, I’m worried we could see a patchwork of short-term fixes that don’t address the root issues. Grid reliability could suffer if investment in new capacity stalls or if utilities push for regulated generation without proper oversight. On the flip side, if they can collaborate—maybe through joint efforts on permitting reforms or balanced energy policies—I think PJM could emerge stronger, with a grid that supports both renewables and reliable backup power. The next few years will be critical in determining whether cooperation or conflict wins out.
