VALLEY FORGE, Pa. — PJM’s concerns over financial transmission right (FTR) underfunding on projects with incremental auction revenue rights (IARRs) won’t be addressed through any Operating Agreement revisions after all.
The Market Implementation Committee on Wednesday unanimously voted to close an issue charge examining how to manage the risk associated with customer-funded IARR projects at coordinated market-to-market flow gates. The decision means PJM will retain the status quo, with the option for stakeholders to revisit the issue in the future.
IARRs are created by the addition of required transmission enhancements, merchant transmission or customer-funded upgrades and are granted to the customer only if the improvement provides additional capacity that makes the request feasible. PJM guarantees that awarded IARRs are at least 80% of studied IARR megawatts.
Brian Chmielewski, PJM’s manager of market simulation, said underfunding of interregional IARRs could occur because MISO’s rules cannot guarantee future firm flow entitlements (FFEs) to PJM for upgrades built for IARR requests. Any portion of the FFEs for an affected coordinated flowgate that is less than 80% of the IARR megawatt total will result in inadequate FTR revenues, the RTO has found.
Chmielewski said staff and stakeholders considered amending the OA to remove the guarantee of 80% of originally awarded IARRs if MISO facilities are impacted and future FFEs cannot support the request once the project is in service. Another option — to no longer allocate IARRs that would impact market-to-market facilities — was also considered.
In the end, staff recommended that PJM maintain the status quo and instead enhance coordination with MISO on preliminary upgrade determinations to better reduce risk.
New ARR/FTR Task Force
Stakeholders approved a new task force that will evaluate the risks and rewards structural changes to the FTR market after rejecting Monitoring Analytics’ narrower proposal to review the mismatched allocation of congestion rights.
The endorsed plan — sponsored by Dominion Energy, Exelon, NextEra Power Marketing, PSEG Energy Resources & Trade, Dynegy Marketing & Trade, and Vitol, and the Financial Marketers Coalition — creates a task force that will explore both technical and policy issues in the FTR market in the wake of the GreenHat Energy default. The MIC voted 213-1 in favor of the issue charge, with 33 abstaining. (See related story, No Fireworks at Conference on PJM FTR Settlement.)
Mike Borgatti of Gabel Associates said the issue charge ensures a broader scope for discussion and doesn’t presuppose any specific solution — something its sponsors felt was lacking in the plan Monitoring Analytics presented last month. (See “Monitor: Review ARR/FTRs to Improve the Allocation of Congestion Rights,” PJM MIC Briefs: Sept. 11, 2019.)
“There is some fundamental language that the Market Monitor used that we can’t get consensus on,” Borgatti said. “We wanted to ensure that we weren’t writing this in a way that it was conclusive to a certain solution.”
Joe Bowring, PJM’s Independent Market Monitor, defended the specificity of his issue charge and argued the alternative is too vaguely worded.
“Being specific is apparently now a pejorative,” he said. “Our concern is [if] there is no issue defined it’s not clear how we get to solving” it.
Last month, the Monitor told the MIC that the existing constructs for auction revenue rights and FTRs leaves some load zones unable to completely offset their congestion costs.
Stakeholders agreed the issue should be addressed, but through a broader review of FTR/ARR design, as suggested in the independent GreenHat report released in March. Monitoring Analytics maintained that the key work activities in their issue charge allowed for a broader review of the market. It would require stakeholders to identify the causes of congestion misalignment and decide whether changes to the market design could fix the problem, the Monitor said.
Stakeholders weren’t convinced. The approved issue charge will explore the history and evolution of the ARR/FTR market design, including its FERC-approved objectives, how it compares to other regions and its value proposition for members. The new task force will assemble in January and meet once a month over the course of a year.
Winter Extended Tx Outages
PPL’s Breinigsville-Alburtis 500-kV line will experience extended outages this winter while undergoing a second round of upgrades to address aging infrastructure and operational inflexibility.
The TO submitted an outage ticket from Nov. 18 until June 12, 2020, while it works to rebuild the existing 500-kV line and add a second. The work was scheduled for the winter months when peak loads are lower. PJM said the outages may require generation redispatch to address voltage or stability issues.
The company said it would be able to recall the line within 72 hours between Jan. 1 and March 1 if needed for reliability.
Must-offer Exception Manual Revisions
PJM presented a first read of Manual 18 revisions that implement the new must-offer exception process approved by FERC last month. (See FERC to PJM Gens: Use or Lose Capacity Rights.)
The changes, endorsed at the Markets and Reliability Committee in April, require existing capacity resources not offered in three consecutive auctions to change to energy-only status. A resource receiving a must-offer exception must also file a plan showing how it will become able to satisfy CP requirements or forfeit its capacity interconnection rights. Resources would be granted exceptions for no more than two auctions. (See Load Interests Endorse PJM-IMM Must-offer Proposal.)
PJM will update Sections 5.2, 5.4.1, 5.4.7 and 8.8 in Manual 18 to reflect these changes. MIC and MRC endorsement is scheduled for November.
Manual 15 Clarifications on VOM Costs
PJM offered a first read of Manual 15 revisions that clarify that market sellers can only change the format of maintenance adders — such as $/MMBtu, $/MWh or $/start — during the annual review period for energy offer components.
Staff will add Section 2.6: Variable Maintenance Costs to reflect this after promising to do so in the proceedings for ER19-210, PJM’s filing to include variable operations and maintenance costs in energy offers. FERC partially accepted the RTO’s Tariff revisions in April but asked for more clarity on what maintenance costs sellers can include in their energy market offers. (See FERC to PJM: Clarify Allowable Costs for Energy Offers.) FERC accepted that compliance filing in August.
PJM will seek endorsement from the MIC next month, the MRC in December and from the Members Committee and Board of Managers in January.
– Christen Smith
