By Christen Smith

VALLEY FORGE, Pa. — Stakeholders remain displeased with what they call the vagueness of PJM’s revised gas contingency filing, saying it will punish resources that deliver additional flexibility when the grid needs it most.

Thomas DeVita, PJM senior counsel, told the Markets and Reliability Committee that staff will file the revised version at FERC in October with implementation scheduled for December. In February, the commission rejected PJM’s stakeholder-endorsed gas contingency cost recovery formula, which generators would use to recover losses when forced to switch pipelines at PJM’s emergency instruction. The proposal included nine categories of defined switching costs, such as park-and-loan service charges and overrun charges, that FERC staff later told PJM should be dropped in favor of broader language. (See ‘‘Winter is Coming’ … Along with Gas Contingency Plan (Hopefully),” PJM MIC Briefs: Aug. 7, 2019.)

The commission also argued that the conditions for switching belong in the Tariff — not just manuals — and gave PJM a chance to revise the proposal over the spring and summer.

DeVita said Thursday the new filing replaces the defined costs with a direct “but for” test to “encompass all costs that would not have been incurred ‘but for’ the generator’s compliance with the switching instruction.”

“The ‘but for’ test is immensely broad. … There are a wide range of potential costs that are not recoverable but could be under that extremely broad language,” said Joe Bowring, PJM’s Independent Market Monitor.

Bob O’Connell, director of regulatory affairs and compliance for Panda Power Funds, argued that despite PJM’s assertion that it has the authority to direct pipeline switches, there’s no sufficient way to reward those that respond. He said the proposed Tariff language provides a “limited opportunity” to recover costs and may discourage resources from providing that extra flexibility in order to minimize their financial risk.

“The cost recovery PJM has proposed is fraught with holes that will result in resources being unable to recover the legitimate costs they incur in complying with PJM’s mandate,” he said. “But even if full cost recovery is attainable, the resource is left without any incentive for providing the flexibility.”

Stakeholders also questioned where PJM’s authority will end and worried that approving such broad cost recoveries could lead the RTO down a “slippery slope.”

“My concern is, tomorrow PJM might be directing a generator to give its spare parts to a neighbor,” O’Connell said. “There must be a bright line [in the sand] … and we must never cross that line.”

PJM argued that both FERC’s invitation to rewrite the proposal and existing manual language confirms that it has the authority to order pipeline switches.

“I think we are more than happy to go back and review the discussions on authority that were had when those provisions were put in place,” said Stu Bresler, senior vice president of markets and planning. “There was discussion on this when the manual language was developed. The fact of the matter is it could occur; our thought was, to get some certainty around what would happen regarding compensation is a good thing.”