PJM, Monitor Come to Agreement on Opportunity Cost Calculator

VALLEY FORGE, Pa. — Stu Bresler, PJM senior vice president of operations and markets, announced at the Members Committee that he and Independent Market Monitor Joe Bowring had signed an agreement regarding the use of the Monitor’s opportunity cost calculator.

Under the agreement, Monitoring Analytics will continue to use its calculator to calculate the opportunity costs for market participants and will explain its inputs and logic to PJM to demonstrate that the unit-specific opportunity costs are compliant with the OA.

In return, PJM acknowledged that the calculator is the Monitor’s intellectual property, that the agreement is not a license for PJM to use the calculator and that the RTO will not attempt to reverse engineer it.

In response to stakeholder questions, Bresler said he was not sure how long it would take for PJM to get the Monitor’s data, but he estimated it would take two weeks.

The agreement is the culmination of a yearlong dispute between PJM and the Monitor over opportunity cost calculations, which came to a head in August when the Markets and Reliability Committee approved Tariff revisions, proposed by Bob O’Connell of Panda Power Funds, allowing participants to use the Monitor’s calculator. The RTO said it would be willing to allow its use but needed to understand the details of how it worked, something at which the Monitor balked. (See PJM Monitor Holding Firm on Opportunity Cost Calculator.)

The Monitor has repeatedly criticized PJM’s calculator as inaccurate and the RTO’s process for verifying inputs as flawed.

Calpine’s David “Scarp” Scarpignato asked what would happen to a generator if the calculators gave different results, and the generator used the one that gave it a higher price. Bowring answered: “It is still our responsibility to calculate opportunity costs, and if you propose to use an opportunity cost that is too high, we will let you know and refer you to FERC as necessary.”

O’Connell, who had originally been scheduled to speak before Bresler on the topic and had deferred, moved to postpone the vote on his proposed revisions to the next meeting to give PJM and the Monitor time to put the new process in effect. The motion was approved by acclimation with no objections or abstentions.

Quadrennial Review

The MRC voted on four packages of revisions as part of PJM’s quadrennial review of the variable resource requirement (VRR) curve, but none of the proposals received majority support.

The committee’s sector-weighted votes were advisory to the Board of Managers, which has ultimate approval of what is filed with FERC.

The MRC voted on proposals by PJM, the Monitor, Calpine and the D.C. Office of the People’s Counsel. Several stakeholders noted that their support hinged on the reference unit used in the calculations. PJM and the Monitor have proposed changing it from General Electric’s 7FA combustion turbine to the new 7HA, while the OPC proposed using an F- and H-class combined cycle. Calpine’s proposal maintains use of the 7FA.

Exelon’s Jason Barker said his company was against the HA being used, noting that GE has had trouble with its newest turbine class.

Reports of problems with the H-class began coming in last year, and Exelon recently had to shut down two power plants in Texas after GE identified a flaw in the design.

PJM’s proposal came in first with 2.32 in favor, followed by Calpine’s with 2.14, the Monitor’s with 1.96 and the OPC’s with 1.42.

At the MC, Carl Johnson, representing the PJM Public Power Coalition, moved to adopt the MRC’s votes for the sake of efficiency. This was quickly approved by acclimation, with only one objection.

VOM Proposal Rejected by MC

A revised proposal by PJM to include certain variable operations and maintenance (VOM) costs in cost-based energy offers failed to win supermajority endorsement from the MC, garnering only 2.92 of a sector-weighted vote.

At last week’s MRC, PJM’s Melissa Pilong presented several revisions to an RTO proposal that had been rejected, along with four others, by the MRC in July. (See PJM Ponders Advancing VOM Effort over Objections.) The changes included removing the ability for resources that did not clear the capacity auction to recover their fixed costs in their energy offers.

Originally, the proposal included only changes in Manual 15, which would only require MC endorsement and approval by the Board of Managers. As part of the new proposal, PJM would also add clarifying language to the Tariff and OA, meaning it would have to be approved by FERC.

Greg Poulos, executive director of the Consumer Advocates of the PJM States, said that while he appreciated the additional FERC provision, he was frustrated that the VOM proposal kept coming up with little change. In a sector-weighted vote motioned for by Poulos, the MRC advanced PJM’s new proposal, with 3.4 in favor.

Later at the MC, Poulos motioned to delay a vote on the proposal, which Chairman Borgatti set for a sector-weighted vote. Before members voted on whether to vote, however, Bresler noted that because of the Oct. 12 deadline for filing changes stemming from the quadrennial review, PJM had set both matters for that day. CEO Andy Ott also urged members to vote, saying “it would be helpful to the board if you resolved this today.”

PJM’s proposal would allow major maintenance costs to be included in the VOM costs in energy offers. That would mean that they would be not included in the cost of new entry, which is set as part of the quadrennial review. Without the vote, Deputy General Counsel Chris O’Hara said that it would be difficult for PJM to justify the quadrennial review. “We would have to tell FERC we lack sufficient information to ensure the quadrennial review is just and reasonable,” he said.

With only a simple majority needed, members resolved to vote that day, with 3.1 in favor, before the actual proposal failed in a subsequent vote. Bresler later told RTO Insider that PJM will discuss with the board whether it should file the proposal under Federal Power Act Section 206, which is done when a proposal lacks member support. The RTO would have to show that its existing OA language regarding VOM costs is unjust and unreasonable, rather than just show that its proposal is just and reasonable.

Liaison Committee Meeting to be Closed to Nonmembers

Near the end of the MC meeting, a motion by Poulos for a temporary waiver to the Liaison Committee’s charter to allow some nonmembers to attend its upcoming Oct. 3 meeting as listening-only participants failed in a sector-weighted vote, with only 2.43 in favor.

According to PJM’s Dave Anders, it has been accepted practice to allow nonmembers — such as state regulators and their staff, FERC staff, PJM management and staff, and the Monitor — to attend since an LC meeting in D.C. one year coincided with a meeting of the National Association of Utility Regulatory Commissioners several years ago. State regulators and FERC staff had asked to be allowed to attend the LC, and “how could we say ‘no’ to that?” Anders said.

In an email to RTO Insider after the meeting, Poulos said his motion was prompted by a member’s request to enforce the charter during a “prep call” for the upcoming meeting. Poulos declined to name the individual who made the request.

“It was not the first time I’ve heard this request, but this time the request was gathering support from the others on the call,” he said. “I thought the decision was important enough to be heard by the entire stakeholder body.”

At Thursday’s meeting, Barker said he was disappointed that PJM had been lax in its enforcement of the charter. “This is our private discussion with the board,” he said. “This is our one opportunity.”

Alex Stern of Public Service Electric and Gas, who participated in the formation of the Liaison Committee and its charter several years ago, echoed the statements of other stakeholders. He said the charter should be respected and that it had been thoroughly developed to allow members direct and unfettered access to the board.

Before voting on Poulos’ motion, O’Connell moved to keep individual members’ votes private, only allowing the board to view them. This passed with 3.42 in favor.

Ott said PJM would notify members of the charter’s stricter enforcement going forward.

“Member actions at PJM’s September Members Committee reduced transparency in PJM governance,” said Illinois Commerce Commissioner John Rosales, president of the Organization of PJM States Inc., in a statement provided to RTO Insider. “This is an issue which needs examination going forward.”

PJM Debuts Web-based Governing Documents

PJM has converted its OA, Tariff and Reliability Assurance Agreement into user-friendly webpages.

On the left side of each page is a sidebar with links to each section in a document, and each page contains hyperlinks to referenced sections and attachments. Every term on a page has a clickable pop-up containing its definition.

There’s even a search bar.

The web versions are technically unofficial versions, as PJM changed the formatting and removed redundancies from the official, FERC-approved PDFs to make them more readable.

PJM staff presenting the new pages at the MRC were enthusiastic, and stakeholders expressed gratitude.

The Tariff PDF is a 3,554-page, 58-MB file. Its Table of Contents alone runs for 29 pages.

The PDFs for the OA and RAA are a bit more manageable at 630 and 251 pages, respectively.

— Michael Brooks