By Rory D. Sweeney

Board’s GreenHat Investigation

VALLEY FORGE, Pa. — PJM Board of Managers member Susan Riley asked RTO members for continued patience with the board’s ongoing investigation into the historically large default of GreenHat Energy’s financial transmission rights portfolio. (See PJM Board Investigating GreenHat’s Record FTR Default.)

Speaking via phone to attendees at the RTO’s Markets and Reliability Committee meeting Thursday, Riley said the Special Board Committee is progressing — having completed 30 interviews — but has little to offer yet publicly. It anticipates preparing a draft for board members to review in early January.

The final report, targeted for publication in early February, is intended to provide “a great deal of confidence” about what happened and ensuring it doesn’t happen again, Riley said.

“If it takes a little longer, I hope that you’ll bear with us,” she said. “Our goal here is to be comprehensive … complete and unbiased.”

FTR Mark-to-Auction Credit Requirements Endorsed

Members approved without discussion a proposal endorsed by the Market Implementation Committee to increase FTR credit requirements with the addition of a “mark-to-auction” provision. (See “FTR Collateral,” PJM Market Implementation Committee Briefs: Dec. 12, 2018.)

The vote, taken by acclamation, included one objection.

Must-offer Exception Process Deferred

Members voted to defer consideration of a proposal endorsed by the MIC to revise the capacity market must-offer exception process. The changes would allow participants to specify multiple auctions when making exception requests. Resources that cannot be made Capacity Performance-capable by the start of the delivery year will be permitted to seek an exception. (See “Must-offer Exception Changes,” PJM Market Implementation Committee Briefs: Nov. 7, 2018.)

Susan Bruce, representing the PJM Industrial Customer Coalition, requested deferring the vote until the April 29 MRC meeting and remanding the issue back to MIC to discuss resources wanting to move between capacity- and energy-only status. Despite the request, Bruce said the issue “feels like something to get wrapped up before [capacity market] auctions start.”

Asked to specify which member company made the deferral motion among those she represents, Bruce named industrial gas producer Praxair. Old Dominion Electric Cooperative, via Carl Johnson as the representative of the PJM Public Power Coalition, seconded the motion. It was approved in a sector-weighted vote with 3.74 in favor.

Asked by Marji Phillips of Direct Energy whether the Independent Market Monitor could address any withholding issues if the proposed rule passed, Monitor Joe Bowring responded that strong and clear rules are needed in order to be enforceable and that the Monitor would not be able to prevent the exercise of market power through withholding if the proposed rule were implemented.

FTR Forfeiture Rule Deferred

A second long debate, on a proposed change to the FTR forfeiture rule, ended in another vote deferral after some stakeholders expressed fear it could unintentionally create exploitable market loopholes.

The proposal, endorsed by the MIC, would revise the trigger for forfeiture of FTRs from virtual trades that create a penny’s worth of impact on the value of an FTR to those whose impact exceed 10%. (See “FTR Forfeiture Proposal Endorsed,” PJM Market Implementation Committee Briefs: Nov. 7, 2018.) Bruce said certain physical suppliers have been very vocal about wishing to revise the trigger, but stakeholders haven’t heard from others about how “endemic” the issue is. Several financial-only traders responded.

“I think that there is a broader impact than just [on] companies like [proposal co-sponsors] Exelon and NextEra [Energy],” Appian Way Energy Partners’ Abram Klein said.

“We don’t think we’re striking the right balance today,” PJM’s Stu Bresler said in support of the proposal. As evidence of the revision’s necessity, proponents had provided an example of issues around taking positions at the RTO’s Western Hub.

“I think that the Western Hub is the most liquid location in the system,” Bresler said. “If there isn’t enough liquidity there, we should probably all pack our bags.”

The Monitor continued its longstanding defense of the current rule, including the so-called “penny test,” pointing out that the existing rule has a 10% test for the impact of a company’s portfolio on a constraint and that the penny test is simply a test for a positive impact on the value of an FTR. That test could reasonably have been zero, but a penny was implemented.

In response to assertions by Exelon and NextEra that the proposal would improve market efficiency, Bowring pointed out that “there is no evidence that the rule would improve the efficiency of the market. … The proposed rule would substantially weaken the FTR forfeiture rule and permit the exercise of market power.”

Exelon’s Jason Barker said such logic suggests it would also be more efficient to send people directly to jail when arrested, but that such a bypassing of due process ignores important nuances like intent and tenet of being “innocent until proven guilty.”

“We don’t have those things in our system because we have to judge the reasonableness of those actions,” Barker said. “[The penny test] is efficient, I’m sure, for Joe to monitor and for PJM to apply, but it’s not fair.”

“I didn’t quite get that, but it sounded pretty dramatic, pretty draconian. That’s not what we’re doing here,” Bowring said. He questioned why “10% is a good threshold for guilty but a penny is not?”

Gabel Associates’ Mike Borgatti, representing NextEra, motioned for deferral to the MRC’s Feb. 21 meeting to discuss a compromise of a 5% threshold for triggering forfeiture. The motion passed without objection or abstention.

PFR Task Force on Hiatus

Members agreed to a PJM proposal to put the Primary Frequency Response Senior Task Force on hiatus for one year to gather data and subsequently determine whether to reconvene. The hiatus was suggested after stakeholders in the task force failed to come to consensus on any proposals to require existing units to provide primary frequency response. (See PJM SHs Seek End to Frequency Response Debate.)

Many generators already provide the service such that there is no additional need for it in PJM, and those that don’t argue that being forced to install the necessary equipment would be a financial hardship that isn’t supported by reliability needs. PJM staff anticipate that outreach to unit owners will result in performance improvements over the next year and that NERC might issue enhanced standards.

The motion was endorsed by acclamation.

Transmission Replacement

Transmission owners remain at philosophical odds with load interests and merchant transmission operators about end-of-life (EOL) and replacement procedures for aging infrastructure.

American Municipal Power’s Ed Tatum and Lisa McAlister presented proposed revisions, developed in concert with ODEC to Manual 14B in a package that retains the position as the first option to receive a vote on the topic. The proposal would add language in section 1.5.4 of the manual to provide sufficient information to enable stakeholders to replicate transmission owners’ results on the need for proposed supplemental projects, as well as strike the word “useful” throughout in manual references to “end of useful life.”

“We don’t need folks replacing well-maintained assets simply because they are at the end of their depreciable life,” Tatum said.

PJM’s Aaron Berner, who presented the RTO’s alternative proposal endorsed by TOs, worried the slight wording difference could lead to reliability issues.

“Getting rid of ‘useful’ is going to leave us with ‘end of life.’ It means something failed,” he said.

The PJM proposal was moved for consideration by FirstEnergy and seconded by Public Service Electric and Gas.

LS Power’s Sharon Segner proposed a friendly amendment to either proposal that would limit the ability for supplemental projects — which are developed by TOs based on their own internal needs criteria — to supplant competitively bid projects accepted by PJM to address regional reliability violations or other criteria. She said LS is concerned about an apparent “blur” of the lines between such projects.

“We accept that some supplemental projects are needed. We accept that FERC has made the decisions that they have made,” Segner said. “But supplemental projects cannot be displacing regional projects.”

Stakeholders will vote on the issue at the Jan. 24 MRC meeting.

Resilience and Fuel Security

PJM’s Jonathon Monken presented an update on the RTO’s efforts to increase system resilience, noting several initiatives planned for 2019. Among them are an infrastructure interdependency analysis, a pilot to test distributed energy resources for resilience and identification of resilience attributes for fuel-secure generation resources.

The latter was the topic of a special session of the MRC that followed the normal committee meeting, in which PJM’s Dave Souder reviewed the fuel security report the RTO released earlier this week. (See Full PJM Study Makes Case for Fuel Security Payments.)

Responding to stakeholder questions, Souder acknowledged that the units included in the report’s retirement scenarios were just the least-profitable units rather than “underwater” facilities. He said scenario templates for each of the 324 analyzed scenarios are expected to be published in mid-January. Staff also plan to introduce a problem statement and issue charge on the issue for stakeholder consideration in the first quarter.

That would precipitate creating a senior task force to examine the topic with any potential market rule changes targeted to be filed with FERC in early 2020. A third phase of the initiative is occurring in parallel to consider further scenarios based on classified information about credible risks to fuel security that could impact the grid.

Manual Approvals

Stakeholders endorsed two manual revisions by acclamation:

• Manual 14D: Generator Operational Requirements. Revisions developed to revise information input deadlines for the Resource Tracker application. (See “Resource Tracker,” PJM Operating Committee Briefs: Nov. 6, 2018.)
• Manual 14E: Upgrade and Transmission Interconnection Requests. Revisions developed as part of a triennial cover-to-cover review. The revisions include changing the manual name to align it with the structure of Manuals 14A and 14G and explaining how to apply to the interconnection queue via Queue Point.
• Clarifications of market participation rules for DERs in Manuals 11 and 14D and the Open Access Transmission Tariff. Among the changes are a consistent definition of on-site generators.