Offer Capping Resources with Advance Commitments

VALLEY FORGE, Pa. — The PJM Market Implementation Committee endorsed by acclamation an RTO-sponsored issue charge to consider changes to how resources committed in advance of the day-ahead market are offer capped. 

Out-of-market commitments have taken on extra significance in recent months as PJM acted ahead of winter storms to schedule additional resources it believed would be necessary to maintain transmission security but had been identified as being at risk of not being able to perform on short notice. That often took the form of resources with limited ramping capability and gas generators that could have difficulty procuring fuel. (See PJM: ‘Conservative Operations’ Maintained Reliability During Jan. 2024 Storm.)  

The first phase of the issue charge envisions governing document revisions on the scheduling practices of resources committed before the day-ahead market is run and how they may be offer capped; market power mitigation for those resources is also included. The second phase focuses on adding language fuel expenses in the cost-based offers for units with advance commitments. 

The issue charge was revised during the meeting to consider how advanced commitments can impact uplift payments, spell out the timeline for the two phases and designate the Reserve Certainty Senior Task Force (RCSTF) as the forum to coordinate the discussions. 

Responding to stakeholder questions regarding whether the issue charge seeks to formalize a practice of making out-of-market commitments on holiday weekends, PJM’s Phil D’Antonio said staff plan to discuss the approach operators will take in greater depth at the RCSTF. The next task force meeting is March 12 and is set to include discussion of how winter storms impacted “operations and market outcomes.” 

Adrien Ford, director of wholesale market development for Constellation Energy, said the company would be abstaining from the vote because it does not support PJM taking out-of-market actions. Instead, she said stakeholders’ focus should be on getting the markets right so these actions don’t have to be taken. Constellation did not vote in opposition because she said it believes that if PJM is going to continue the practice, there should be rules in place governing how operators act. 

Paul Sotkiewicz, president of E-Cubed Policy Associates, said PJM should hold a special session to discuss the intersection of all the issues related to how the gas and electric markets interact. Otherwise, he said, this proposal and the other disparate stakeholder efforts will not yield comprehensive results. “These are really crucial issues from an operational and markets standpoint.” 

PJM Director of Stakeholder Affairs Dave Anders said the RTO has a desire to move forward on phase 1 quickly and that he believes the issues Sotkiewicz raised pertain to phase 2. He suggested the RCSTF could provide a venue to discuss those issues. 

“I think that is directly in the wheelhouse of the RCSTF,” Anders said. “I get this idea of wanting a holistic review of everything in one spot and trying to figure out where that is in the manuals. A senior task force is the best place for that to happen.” 

Periodic Review of Manual 11 Deferred

Stakeholders delayed voting on revisions to Manual 11: Energy & Ancillary Services Market Operations following uncertainty around the implications of designating data centers as “plug load.” 

The language was drafted through the periodic review of the manual, which resulted in changes that PJM’s Joseph Tutino said were mainly typographical. 

Independent Market Monitor Joe Bowring questioned why data centers should be sorted alongside household appliances like washing machines. 

“Data centers are obviously a key issue, and considering them as a regular plug-in load doesn’t seem like the answer,” he said. 

PJM’s Maria Belenky said data centers are considered plug load for the purpose of curtailment service providers (CSPs) reporting load enrolled in demand response. The manual does not contain specific guidance for how that load should be categorized, and while it may not be the perfect approach, she said it reflects ongoing practice. 

“It is something that is currently done, and it’s to provide appropriate guidance for CSPs,” she said. 

First Read on Proposal to Overhaul Uplift

PJM and the Monitor presented a joint proposal to rework how the RTO determines when a unit is following dispatch and the process for assigning corresponding uplift payments or deviation charges. (See PJM Stakeholders Mixed on Uplift Proposal.) 

PJM’s Lisa Morelli said the changes seek to resolve an issue where resources instructed to ramp down could instead keep their output flat and nonetheless receive uplift payments. That is because the dispatch signals are ramp-limited and the balancing operating reserve (BOR) credit structure only considers whether a market seller followed dispatch for individual five-minute intervals. She gave an example of a unit operating at 100 MW being dispatched down to 95 MW in accordance with its ramp rate. If that unit ignored the signal and stayed at 100 MW, it would not exceed the 10% margin that defines when a unit is deviating from dispatch. Additionally, because dispatch is limited by ramp rates in the next interval, PJM could only bring it down to 95 MW again.   

The proposal would establish a Tracking Ramp Limited Desired MW (TRLD) metric that follows what a unit’s output would have been if it had followed dispatch over time. In Morelli’s example, the TRLD would continue to fall by an additional 5 MW for every interval that dispatchers sought less energy from the resource. 

The TRLD would replace the ramp-limited desired, dispatch and LMP-desired metrics currently used in the BOR credit and deviation formulas, which would seek to make resources whole to the costs they incurred with uplift limited by the output they were instructed to produce based on the TRLD metric. 

Morelli said the status quo formula is overly complex and would be simplified by calculating the BOR credits a resource would receive under the lesser of the TRLD and its actual real-time output. This would also remove punitive impacts that market sellers could experience when asymmetric inputs are used in the current formula. 

The proposal would also revise the start and end points for uplift eligibility to correspond with when a resource’s commitment began and the end of its commitment or minimum run time. 

Joel Romero Luna, a market analyst with the Monitor, said eligibility for BOR credits is currently defined according to the subjective phrase “operating as requested by PJM,” which has been interpreted differently by the Monitor and RTO. The Monitor’s position is that one is either eligible to receive uplift when it follows dispatch or not eligible if it does not follow instructions. 

Tom Hyzinski, of GT Power Group, questioned whether a market seller that changes its parameters to reflect changes in a resource’s flexibility would be held to the original or updated values. 

Romero Luna said the proposal changes how a resource that changes the flexibility of its parameters by more than 5% is treated to be dispatched according to its ramp-limited signal, instead of the LMP-desired signal that is not ramp limited. The economic minimum and maximum parameters would remain based on the original parameters at the time of commitment, while the ramp rate and offer parameters would be based on any updates the market seller makes. If a unit submits flexible parameters, but becomes inflexible and does not update, it would be penalized for not following dispatch. 

Implementation of the proposal would be phased to start with simulated settlement results being provided to market participants in late 2025 so they can become familiar with how the changes function, with rollout affected actual settlements around a year later. 

The MIC is scheduled to vote on the changes April 2, followed by the Markets and Reliability Committee on June 18 and the Members Committee on July 23. Morelli said the proposal would require tariff revisions, which might take long enough to draft to not be finalized by the time the MRC is asked to endorse the package. In that case, a special meeting for a page turn or a second vote may be sought.