By Christen Smith

VALLEY FORGE, Pa. — PJM generators urged fellow stakeholders to support a unified opportunity cost calculator capable of wiping out the compliance risks of the dual systems currently offered through the RTO and its Independent Market Monitor.

“PJM wants the status quo with respect to its calculator and the Monitor wants its calculator, and we are still in this situation where market participants can’t get one calculator to eliminate compliance risk,” said Bob O’Connell, director of regulatory affairs and compliance for Panda Power Funds, during a Market Implementation Committee meeting on Wednesday.

Under current procedure, market participants can either use PJM’s calculator in Markets Gateway or the Monitor’s modeling system to build energy cost offers with appropriate adders that help ensure a generator will recoup losses when its resources are scheduled outside of their most economic operating intervals. Some of these opportunity costs arise when regulatory agencies impose environmental run hour restrictions, physical equipment limitations trigger operational restrictions, and force majeure events constrain access to fuel.

“The objective is to make the generator whole,” said Glen Boyle, manager in PJM’s operations analysis and compliance. “Neither PJM nor the IMM will be presenting packages, because we are OK with the status quo.”

Clearly, stakeholders are not.

A New Path

O’Connell presented the MIC with three proposals — drafted in consultation with Dominion Energy — that streamline the calculators to varying degrees.

The first makes small changes that don’t force PJM to rewrite its calculator, O’Connell said. The second revises PJM’s modeling process to mimic the Monitor’s, which many stakeholders prefer for its reliability. The third consolidates the former package into one single calculator, “eliminating all compliance risk,” O’Connell said.

“When you use the Market Monitor’s calculator, the market participant’s only risk is taking the adder the Monitor provides and incorporating into its offer properly,” O’Connell said. “While there is some compliance risk, it’s very limited. As long as you know how to cut and paste, you’re usually in pretty good shape.”

The PJM calculator, however, gives the market seller more control over the modeling process, allowing more room for error and raising compliance risks — the source of O’Connell’s concern when he proposed a task force to revise the calculators in March 2017, he said.

“I’m concerned we won’t be able to get there [one consolidated calculator],” O’Connell said. “We basically decided to offer three packages so we could at least get to something that improves the situation a little more.”

Panda and Dominion will seek endorsement of one of the proposals at the August MIC meeting, O’Connell said.

The packages come five months after O’Connell made a motion at the February Members Committee meeting to table a vote on Operating Agreement language that would force PJM to accept the IMM’s calculator. (See “Calculator Vote Place in a ‘Parking Lot,’” PJM MRC/MC Briefs: Feb. 21, 2019.)

At the time, O’Connell said the unusual motion puts the issue in a “procedural parking lot,” giving members flexibility to bring up the issue on short notice in case PJM suddenly decides the Monitor’s calculator is no longer valid.

O’Connell drafted the language after PJM told members last August it would reject the Monitor’s opportunity cost calculator, the culmination of a yearlong dispute over the “increasingly” divergent results produced by the two organizations. (See Stakeholder Proposal Aimed at Ending PJM-IMM Dispute.) The PJM Board of Managers approved Manual 15 revisions in January that governed the use of the IMM calculator as an alternative, effectively reversing the RTO’s earlier decision.

Boyle said Wednesday that PJM must maintain a calculator as mandated by the Tariff and will make clarifying updates to Manual 15 regarding immature units, dual-fuel units and application functionality.