VALLEY FORGE, Pa. — The PJM Market Implementation Committee on Wednesday endorsed 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 by 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 satisfy Capacity Performance 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.)

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 MRC in December and from the Members Committee and Board of Managers in January.

Border Rates

PJM presented a first read of revisions to Manual 27: Open Access Transmission Tariff Accounting that will reflect FERC’s recent order on border rate calculations (ER19-2105).

In June, PJM transmission owners submitted a filing that updates the yearly border charge to prevent network integrated transmission service (NITS) customers — network load located outside the RTO’s boundaries but served from within — from subsidizing border and non-zone service rate customers who use transmission service through and out of PJM. (See Settlement Hearing Set for PJM Border Dispute.)

FERC accepted the TOs’ filing subject to refund, with an implementation date of Jan. 1, 2020, but also set a paper hearing and settlement procedures for involved parties to work out their differences over the proposed methodology behind the rates.

Ray Fernandez, of PJM’s market settlements development department, said the manual revisions will move forward but acknowledged that refunds will be issued if changes to the methodology are approved in a settlement.

Fuel-cost Policies

Stakeholders from the MIC special session for fuel-cost policies brought updated proposals to the committee on Thursday, five months after a first round of debates among stakeholders produced no further consensus. (See PJM Stakeholders Still Divided on Fuel-cost Policies.)

PJM moved off the status quo and offered an alternative package of rule changes that included a much desired “impact factor” when assessing penalties on market sellers for breaking their fuel-cost policies. A joint stakeholder plan and another sponsored by the Independent Market Monitor would also offer impact factors — though the specific calculations differ — and reduce penalties when market sellers self-identify violations.

Adrien Ford of Old Dominion Electric Cooperative said the joint plan aims to “encourage a culture of compliance” among market sellers.

“According to PJM, 75% of the penalties were assessed on generators that had no market impacts,” she said. “That’s why we want to introduce the impact factor. We are just trying to say, ‘Look, if there’s an impact, there should be a penalty. If there’s no impact, there should be a penalty, but it should be a traffic ticket approach.’”

While PJM’s plan would reduce penalties by 50% when market sellers self-identify, the RTO did not agree with stakeholders’ creation of a safe harbor provision that protects against situations “not contemplated by the fuel-cost policy.” Melissa Pilong, of PJM’s operations analysis and compliance department, said the provision would encourage market sellers to provide less detailed fuel-cost policies.

Then there’s the issue of temporary fuel-cost policies and PJM’s ability to revoke existing policies, potentially forcing market sellers to submit a zero cost-based offer. Current practice allows market sellers to provide temporary policies that include just heat rate and selling hub — a rule that PJM’s alternative package would eliminate.

“If a fuel-cost policy were to be revoked and mitigation would be offered at zero, the incentives for the generation owner would be, in many cases, submit a forced outage,” said E-Cubed Policy Associates President Paul Sotkiewicz, representing Elwood Energy. “From a reliability standpoint, I can’t imagine why PJM would want to do that.”

PJM staff bristled at the implication that they would revoke fuel-cost policies randomly and at will, noting that the RTO would act in good faith to discuss issues with a market seller first.

“We’ve never revoked a policy,” said Glen Boyle, a manager in PJM’s operations analysis and compliance department. “But we need to have the ability to do so.”

Ford said existing manual language about revocation “isn’t precise” and leaves too much undefined for market sellers.

“The market sellers are just looking to understand when and why something might be revoked and not be forced into a must-offer obligation or a must-offer of zero,” she said. “I don’t think it’s reasonable to have this unclear, looming threat that can really turn things completely upside down for a company. The more we talk about it, the more uncomfortable I am with the status quo.”

Boyle agreed that further consensus could be reached where the RTO allows temporary fuel-cost policies to be submitted alongside their permanent counterparts in the event that revocation occurred.