Markets and Reliability Committee
Stability Limits in Markets and Operations
PJM stakeholders at last week’s Markets and Reliability Committee meeting heard a first read of manual language advanced regarding a stability limits capacity constraint proposal that some members are still challenging.
PJM and the Independent Market Monitor put forward the capacity constraint proposal, which was endorsed at the Market Implementation Committee meeting on Dec. 2 with 64% support. The proposal addresses the allocation of limits to multiple units by stating that the limit will apply to the sum of the output of the affected units plus ancillary service megawatts. (See “Stability Limits Review,” PJM MIC Briefs: Dec. 2, 2020.)
Joseph Ciabattoni, manager of interregional market operations for PJM, reviewed the proposed capacity constraint solution package and corresponding Operating Agreement and Tariff revisions. Ciabattoni said the units would be dispatched in economic merit order up to the stated stability limitation.
The package was the result of several months of discussion at the MIC on potential changes to how PJM curtails generating output to maintain stability during maintenance outages. Generating units are sometimes reduced below their normal economic max limit if a planned or unplanned transmission outage presents stability problems that could damage the units. (See “Stability Limits in Markets and Operations,” PJM MIC Briefs: May 13, 2020.)
Current rules require the RTO to implement a thermal surrogate to reflect the stability constraint in the day-ahead and real-time markets and to bind the constraint, affecting the unit’s dispatch.
If a unit chooses not to remedy a stability limitation identified during the planning process, its operating restrictions — as documented in its interconnection service agreement — would be invoked prior to those for other units, Ciabattoni said.
Lost opportunity cost (LOC) credits would not be paid for any reduction required to honor the stability limit. Similarly, LOC is not paid for economic megawatts of a resource that cannot produce because of a ramp limitation.
Lisa Morelli, director of market design for PJM, provided an overview of the MIC’s work activities and related procedural history for the stability limits in markets and operations issue.
Paul Sotkiewicz of E-Cubed Policy Associates reviewed a proposed opportunity cost solution package. The proposal, presented by J-POWER and endorsed with 58% support at the December MIC meeting, was fundamentally the same as the PJM-Monitor package except for providing compensation for LOCs.
Sotkiewicz said if a generator is requested to take an outage when it can still run, the unit is in essence being asked to “misrepresent their true capabilities.” He said generation owners are very sensitive to the outage issue and that is why they’re seeking compensation for LOCs.
Carl Johnson of the PJM Public Power Coalition said he’s been “struggling” with how PJM can hold generators responsible when a contingency event is imposed. Johnson said he’s been ruminating on whether it’s never or always right to pay LOC.
Johnson said he’s also not certain that all contingencies can be identified at the time of generator interconnection because “the topology of the system changes.”
Consultant Roy Shanker said the stability limits issue seems more like a “contract matter” best dealt with when an interconnection agreement is signed.
“A better interconnection agreement would resolve all this going forward,” Shanker said.
Market Monitor Joseph Bowring said generators are “not held harmless” from all instances of being backed down because it’s not explicitly stated in the interconnection agreement. He said if there were no consequences in the agreement, the interconnection “would have cost a great deal more than it did.”
Bowring also noted that “there are no opportunity costs because the unit cannot run at a higher output and therefore there is no lost opportunity.”
Real-Time Values Market Rules
Laura Walter, senior lead economist for PJM, reviewed the solution package addressing real-time value (RTV) market rules endorsed at the November MIC meeting. Walter also reviewed proposed revisions to Manual 11 and the Tariff and Operating Agreement.
Stakeholders endorsed PJM’s package of updates to RTV that call for additional penalties for generation operators that abuse the rules. The MIC endorsed the RTO’s package with 73% support, and it received 55% support over maintaining the status quo in a nonbinding poll. (See “Real-time Value Market Rules Endorsed,” PJM MIC Briefs: Nov. 5, 2020.)
The issue charge and problem statement, originally endorsed last December at the MRC, said observations indicated RTVs were being used to consistently override unit-specific parameter limits or parameter-limited exceptions. (See “Real-time Values,” PJM MRC Briefs: Dec. 19, 2019.)
Walter said the original intent of RTVs was to provide a way for generation operators to communicate current operating capability to PJM if their resources could not meet their unit-specific parameter limits or exceptions. Generators opting to use RTVs forfeit operating reserve credits and make-whole payments.
The PJM package requires that market participants repeatedly failing to reflect actual operating conditions in their submitted operating parameters could be referred to FERC for enforcement. A market participant would be required to enter a forced outage ticket into PJM’s Generator Availability Data System (eGADS) for the period of increased notification, start-up time and/or minimum downtime.
For the timeline of an RTV submittal, Walter said, the package would require that the requested period not exceed one market day. She said that when an RTV is requested, it would be available for that one day, then the entire schedule would revert to the previous day’s values.
The package also calls for adding RTVs to the Tariff. Currently, RTVs are mentioned only in the manual, Walter said.
Siva Josyula of Monitoring Analytics said the Monitor is concerned that the changes proposed in the PJM package undermine the parameter-limited scheduling (PLS) rules used in RTVs. The PLS rules are part of the capacity performance rules requiring units to operate to defined parameters, he said.
“The proposal we see essentially allows generators to circumvent the requirements without any justification during most of the days,” Josyula said.
Calpine’s David “Scarp” Scarpignato said RTVs are important to have in place because PJM needs to know what the units can and can’t do in real-time.
Scarp said it seems like the Monitor wants to penalize units that get paid for capacity that provide more flexibility compared to intermittent resources. He said the generators that are flexible are being held to a higher standard than other capacity resources that are less flexible.
“We push for a level playing field,” Scarp said.
Capital Recovery Factors
Jeff Bastian, senior consultant of market operations for PJM, provided an informational update regarding the capital recovery factor (CRF) for avoidable project investment rate (APIR) determinations from a statement PJM issued to stakeholders on Dec. 7.
PJM’s statement came in response to the Monitor’s letter Dec. 4 saying CRF values used by PJM do not reflect current federal tax law. The CRF is used to calculate the APIR as a component of the net avoidable cost rate (ACR) of a resource.
Bastian said the net ACR of a given resource sets the market seller offer cap and the minimum offer price rule (MOPR) floor offer price depending on which is applicable. Attachment DD of the Tariff includes tables of CRF values for resources to calculate the market seller offer cap or the MOPR floor offer price.
The Monitor said in its letter that the tables should have been updated in 2018 and need to be updated before the next capacity market auction takes place early next year.
“Correct CRFs will ensure that offer caps and offer floors in the capacity market are correct,” the letter said. “The required changes are clear and unambiguous.”
Bastian said PJM is officially introducing the table update issue at the January Markets Implementation Committee meeting and addressing the issue in a “quick fix process” with a same-day vote.
“We understand the IMM’s concern, but we also appreciate the need for stakeholder input before making any changes to the Tariff,” he said.
Sotkiewicz said he can envision a scenario in which a market seller decides to take the issue to FERC because of the changes to the Tariff. He said a challenge could potentially delay the capacity auction, which stakeholders want to avoid.
He then suggested taking the table update issue away from the 2022/23 capacity auction so it could operate normally and not face any challenges.
“We’ve had enough delays to last a lifetime already,” Sotkiewicz said.
Bowring said he has opposed further delaying the capacity auction and wants it completed as quickly as possible. He said the issue remains that the tables need to be updated and PJM does not have the authority to take the issue “off the table.”
“Our view is the table should be changed quickly so there’s no confusion, no uncertainty and no risk of litigation,” Bowring said. “It’s the low-risk path forward, and I’m not sure why anyone would oppose that.”
Manual 14C Delayed
Stakeholders voted to delay an endorsement of proposed revisions to Manual 14C: Generation and Transmission Interconnection Facility Construction as part of the biennial cover-to-cover review.
Members endorsed the motion to defer the revisions for a month with a sector-weighted vote of 3.67 (73.4%). The revisions were originally unanimously endorsed at the November Planning Committee meeting. (See “Manual 14C Endorsed,” PJM PC/TEAC Briefs: Nov. 4, 2020.)
Mark Sims, PJM’s manager of infrastructure coordination, said the committee proposed minor changes to Manual 14C, including an update of the latest Tariff provisions clarifying the filing process for title transfers and associated title documentation in Section 5. New sections on cost-tracking for baseline projects and another for supplemental cost-tracking were also proposed.
Greg Poulos, executive director of the Consumer Advocates of the PJM States, made the request to delay the endorsement by one month to work with PJM on some language suggestions. Poulos expressed concern about some of the proposed manual language.
Poulos specifically referenced sections 6.1.2 and 6.2.1 dealing with tracking of supplemental projects. Both sections say, “PJM may request additional information regarding projects.”
“I know that I ‘may request’ things a lot, and it doesn’t mean I’m going to get it,” Poulos said. “I don’t necessarily understand where that fits into a manual. It feels like it’s weakening the standard.”
Jason Barker of Exelon said he was “a bit troubled” by the issue being brought to the MRC. Barker said the discussion over the language would have been more appropriate when it was first brought up at the PC.
Manual 28 Revisions Endorsed
Stakeholders unanimously endorsed proposed revisions to Manual 28: Operating Agreement Accounting to comply with FERC directives and address the allocation of real-time and day-ahead uplift to up-to-congestion (UTC) transactions. The revisions were originally endorsed at the December MIC meeting. (See “UTC Uplift Changes,” PJM MIC Briefs: Dec. 2, 2020.)
In its order issued in July, FERC determined that PJM’s current uplift allocation rules are unjust because they do not allocate uplift to UTCs (EL14-37). (See FERC Orders Uplift Charges on PJM UTCs.)
The commission directed PJM to submit a replacement rate that revises the RTO’s rules to allocate uplift to UTCs “in a manner that treats a UTC, for uplift allocation purposes, as if the UTC were equivalent to a [decrement bid] at the sink point of the UTC.”
PRD Credits Disposition
Pete Langbein of PJM reviewed a proposed solution package addressing the disposition of price-responsive demand (PRD) credits during a first read of the issue. Members unanimously approved an issue charge to address a disconnect in PJM’s settlement rules regarding payment for PRD at the July MIC meeting. (See “PRD Credits Disposition,” PJM MIC Briefs: July 8, 2020.)
PJM’s settlement rules call for revenues associated with PRD to be credited to the load-serving entity for an area and do not address the roles of electric distribution companies (EDCs) or curtailment service providers (CSPs), meaning some LSEs are paid for PRD service supplied by EDCs and CSPs. PRD providers represent retail customers that have the capability to reduce load in response to prices.
Langbein said PJM has an increasing share of load that is responsive to changing wholesale prices because of the implementation of dynamic and time-differentiated retail rates and utility investment in advanced metering infrastructure. Several EDCs cleared PRD as a capacity resource for the first time for the 2020/21 delivery year.
He presented revisions to Manual 11, Manual 18 and the Tariff. Stakeholders will vote on the revisions at the MRC meeting on Jan. 27.
Members Committee
Committee Elections
PJM stakeholders elected new members of the 2020/21 Finance Committee and the 2021 Sector Whips, with Erik Heinle of the D.C. Office of the People’s Counsel selected as the vice chair of the Members Committee.
The Finance Committee members elected include: Adrien Ford of Old Dominion Electric Cooperative (Electric Distributors); Poulos of the Consumer Advocates of the PJM States (End-Use Customers); George Kogut of the New York Power Authority (Other Suppliers); and Jim Benchek of FirstEnergy (Transmission Owners).
The sector whips elected include: Steve Lieberman of American Municipal Power (Electric Distributors); Susan Bruce of the PJM Industrial Customer Coalition (End-Use Customers); Michael Borgatti of Gabel Associates (Generation Owners); Brian Kauffman of Enel North America (Other Suppliers); and Sharon Midgley of Exelon (Transmission Owners).
Risk Management Committee Charter
Members unanimously endorsed the charter for the Risk Management Committee originally voted on at the MRC meeting in August.
Jennifer Tribulski, senior director of member services for PJM, presented the charter establishing the Risk Management Committee (RMC) as a new standing committee. Though stakeholders unanimously endorsed the charter, PJM later determined the charter needed the MC’s approval to establish a new standing committee. (See “Risk Management Committee Charter,” PJM MRC Briefs: Aug. 20, 2020.)
The Risk Management Committee is set to meet for the first time on Jan. 26, taking the place of the Credit Subcommittee by expanding its scope to incorporate risk and changing its reporting structure. Under the revised charter, the subcommittee will report to the MRC rather than the MIC.
In her presentation, Tribulski said the Credit Subcommittee last met in March 2019 with much of the work around the RTO’s credit and risk rules accomplished through the Financial Risk Management Senior Task Force in the wake of the GreenHat Energy default.
She said the task force was established for the specific purpose of overhauling PJM’s rules for managing the credit risks of market participants and was not tasked with reviewing credit and risk management issues outside of its limited purposes. (See PJM Members OK Tighter Credit Rules.) She said PJM felt it was important to have a committee available to review and work on issues beyond those contemplated by the task force.
Chairman Lieberman
Lieberman, assistant vice president of transmission and PJM affairs for American Municipal Power (AMP), finished his last meeting as chairman of the MC. Katie Guerry, the current MC vice chair and head of regulatory affairs for Enel North America, will serve as the MC chairwoman for 2021.
Lieberman thanked the PJM Board and stakeholders for helping guide him through a year that saw major changes in operations with the onset of the COVID-19 pandemic, forcing discussions into a virtual setting. He said he had some “personal disappointment” that he was unable to chair the meetings in person.
“I hope I was still able to serve you in this role in a successful and professional way,” Lieberman said.
PJM CEO Manu Asthana thanked Lieberman for his service as chairman of the MC. Asthana said in working with him he came to find his “incredibly generous spirit” and an “amazing knowledge of the industry.”
Asthana said Lieberman played an important role in helping PJM navigate a “very difficult year.”
“We have been lucky to have you in the chair at the Members Committee,” Asthana said. “I know you didn’t get to govern in the personal manner to which you’re accustomed, but I know you have found a way to adapt and to project your character and personality through these phone calls.”
