VALLEY FORGE, Pa. — Exelon succeeded Wednesday in its attempt to defer a vote on a quick fix to the synchronous reserve operations and maintenance cost adder in PJM Manual 15.
Some 77% of the Market Implementation Committee agreed with the transmission owner’s motion to delay voting on the Independent Market Monitor’s problem statement and issue charge until the first meeting that occurs seven days after FERC rules on PJM’s energy price formation proposal (EL19-58).
“It doesn’t make sense to approve one portion of the reserve proposal sitting before FERC and not the others,” said Sharon Midgley, Exelon’s director of wholesale market development. “We think it’s better not to leverage the quick fix option to cherry-pick certain items pending before FERC.”
At last month’s MIC meeting, the Monitor said that recently approved maintenance adders to the synchronized reserve calculation allow resources to withhold from the reserve market and increase offers above competitive levels. (See “Synchronized Reserve Calculation Error,” PJM MIC Briefs: Jan. 8. 2020.)
To remedy this, the Monitor’s Catherine Tyler told the committee to set the synchronized reserve operations and maintenance cost included in Manual 15 to zero. Market sellers could still submit alternate O&M cost calculations to PJM and the Monitor for review using an exception procedure outlined in Section 1.8 of the manual.
“We are certainly not cherry-picking items here,” Tyler said Wednesday. “It is something that we see as a cleanup that we identified and that’s why it was rolled in with the other parts of the [energy price formation] proposal. It needs to be cleaned up and it’s a simple change and not any attempt to break up the larger package.”
Adrien Ford of Old Dominion Electric Cooperative and Steve Lieberman of American Municipal Power both pressed Exelon on their hesitance.
“There’s no timeline on which FERC has to act,” Ford said. “If they never act, then we never fix the duplicative nature of this? It seems like if we’ve got duplicative cost recovery, I’m not sure why we would let that sit another year.”
Midgley said that pushing through the change “is not an appropriate use” of PJM’s quick-fix process.
“Our broader concern is that reserves are drastically undervalued in the PJM marketplace,” she said. “We could support what the IMM has put on the table today if it were combined with other comprehensive reserve pricing reforms, but it’s not.”
Pseudo-tie Eligibility Requirements
In an unusual move, PJM dropped its plan to advance revisions to Manual 12 Attachment F that attempted to clarify pseudo-tie eligibility after stakeholders argued some of the revisions conflicted with pending litigation.
PJM’s Tim Horger said that the revisions follow FERC’s approval of the RTO’s external capacity filing in November 2017 and “enhance transparency into the process of what’s currently being done.”
“FERC rules don’t prevent PJM from making any changes to manuals that are subject to complaint proceedings,” he said. “There’s no deadline by which FERC has to act. Should FERC issue an order that disagrees with how we are implementing the rules, we will go back and make the change. Otherwise, it’s business as usual for PJM.”
Jeff Whitehead of GT Power Group challenged PJM’s logic, the first in a wave of complaints that the revisions were premature.
“Do we really want to make these kind of changes until we hear back from FERC in these proceedings?” he said. “The meaning of the words ‘eligible coordinated flowgate’ are the subject of litigation.”
“There’s quite a bit of complaints before FERC on this very topic,” Lieberman said. “There are words that may not seem all that important but have quite a bit of significance. The words ‘eligible’ and ‘actually’ in terms of market to market flowgate tests, those have some real significance.”
“We agree 100%; we think these changes are premature,” said Steve Kelly of Brookfield Energy Marketing.
States, Advocates Unsure of Black Start Fuel Assurance
States and consumer advocates expressed concern about the cost of requiring black start resources to become 100% fuel assured under proposed new guidelines pending before both the MIC and the Operating Committee.
“We are not convinced that PJM has demonstrated there’s a level of benefits associated with this level of costs customers are being asked to bear,” said Greg Carmean, executive director of the Organization of PJM States Inc. “These are new incremental expenditures to provide fuel assurance for black start.”
Carmean’s comments came in response to the three packages that PJM presented from the OC/MIC special session that would create black start requirements RTO-wide. In plans authored by PJM and the Monitor — which earned 58% and 15% support, respectively, in a nonbinding poll — resources would be required to become 100% fuel assured. The mandate would cost approximately $513 million, with increases in annual revenue requirement ranging between $67 million and $81 million.
PJM said it’s “confident” in its estimates because it collected the data during a 2018 request for proposals window that asked units to extrapolate the costs of becoming black-start eligible. The Monitor said the costs will vary greatly zone to zone, however, while Calpine pointed out that PJM’s estimates are a cap and would likely come in much lower.
A third plan, offered by the D.C. Office of the People’s Counsel that garnered 34% support, would cut the fuel assurance requirement in half for an estimated cost of $13 million with a $2.3 million ARR.
Exelon offered to meet the D.C. OPC “in the middle” with a proposed amendment that would determine the level of fuel assurance after coordination with the TO and PJM.
“We just really felt that the 50% was limiting, particularly if a level of 55% would result in drastically improved restoration times,” Exelon’s Midgley said. “Why would we limit ourselves?”
Erik Heinle of the D.C. OPC said he was open to considering the idea.
“I’d like to look at it and see how it works with our package,” he said. “We certainly want additional feedback and if there are things we can do to make the package work for a broader group of stakeholders, we certainly want that.”
PJM scheduled a live voting session for members on the MIC and OC roster to commence prior to the start of the March 11 MIC meeting.
PJM to Retire Opportunity Cost Calculator
After months of debate, PJM said it will retire its opportunity cost calculator as of June 1, leaving stakeholders to use the Monitor’s calculator.
The decision comes two months after the Markets and Reliability Committee deferred voting on a joint package from Panda Power Funds and Dominion Energy that would streamline PJM’s calculator to more closely resemble the Monitor’s tool. (See “Comparative Cost Framework, Opportunity Cost Calculator in Flux,” PJM MRC/MC Briefs: Dec. 5, 2019 and “Opportunity Cost Calculator,” PJM MIC Briefs: Sept. 11, 2019.)
In the end, PJM decided the low usage rate for its calculator was reason enough to retire it and eliminate any compliance concerns raised by stakeholders.
Stakeholders Wary of PJM’s Interpretation of MOPR ‘Death Penalty’
PJM’s legal department told the committee that it believes the “death penalty” provision contained within FERC’s Dec. 19 minimum offer price rule (MOPR) decision applies on a yearly basis, allowing resources with an approved competitive exemption to claim subsidies in subsequent delivery years.
The phrase refers to the provision in the ruling that penalizes a resource for taking the competitive exemption but then also taking a subsidy, even though it promised it wouldn’t in order to obtain the exemption.
The issue came up during PJM’s explanation of how its upcoming compliance filing would handle voluntary renewable energy credit (REC) transactions. Resources with these sorts of deals could theoretically apply for the competitive exemption under the expanded MOPR, which requires those resources to forgo all subsidies.
The Monitor, along with other stakeholders, believe the ruling intended that should a resource qualify for a competitive exemption in one year and then claim subsidies in subsequent years, that market participant could face a lifetime ban from the capacity market.
“It’s not obviously correct,” Monitor Joe Bowring said. “In our view, it applies if you take a subsidy in any year of the life of the asset. You entered under false pretenses and the rule applies. I don’t think it’s unambiguously obvious.”
PJM argues the ambiguity in the ruling gives the organization leeway to interpret it differently and base its compliance filing on the more lenient reading.
The RTO has scheduled more special MIC sessions to discuss the MOPR, on Feb. 19 and 28. The Demand Response Subcommittee will devote the entirety of its March 9 meeting to the new rules, and PJM will again discuss elements of its compliance filing at the March 11 MIC meeting.
PJM Floats Alternatives to 10-Hour Energy Storage Rule
PJM presented alternative minimum requirements for energy storage resources as part of its upcoming brief due in a paper hearing that challenges its proposed 10-hour minimum runtime for energy storage resources.
FERC accepted most of PJM’s storage rules in October but set the 10-hour proposal for a paper hearing to determine whether it was just and reasonable. PJM requested a 90-day extension for its brief on Nov. 26.
PJM’s 10-hour rule remains the highest requirement proposed among RTOs/ISOs (ER19-469). ISO-NE sought only a two-hour minimum, while NYISO proposed four. PJM says the runtime corresponds with existing reliability standards, noting that it must “remain impartial in administering the markets.”
PJM’s Andrew Levitt said that after a special session on the issue hosted last month, stakeholders brought forward two other proposals that could serve as a reasonable alternative to the 10-hour rule.
The first would cut the rule down to power output measured for four continuous hours. The second would use effective load-carrying capability (ELCC) to determine the runtime. ELCC evaluates reliability in each hour of a simulated year and compares a resource mix scenario with limited resources against one with unlimited resources.
The options will be discussed further in Feb. 24 special session of the MIC, with PJM scheduled to file its brief on March 11.
— Christen Smith