VALLEY FORGE, Pa. — The PJM Markets and Reliability Committee on Thursday endorsed the first round of credit policy revisions to come out of a task force formed in the wake of GreenHat Energy’s default on its 890 million MWh financial transmission rights portfolio.

PJM said the recommendations, initially presented at the October MRC meeting, will improve its credit risk policies after the Financial Risk Mitigation Senior Task Force delegated a more holistic FTR market review and possible design changes to a separate Market Implementation Committee task force. (See “FTR Market Rule Changes,” PJM MRC Briefs: Oct. 31, 2019.)

One proposed change includes hosting five long-term FTR auctions a year, instead of three, in order to increase oversight and visibility into portfolio conditions so that more collateral can be collected if necessary. A second would alter the structure of Balancing of Planning Period auctions so that participants can buy and sell in any month of the year, rather than being limited to a specific quarter.

Stakeholders had voiced concerns about the auction restructuring crossing into market design territory, but they ultimately agreed to move forward with the option of revising the changes during the forthcoming MIC review. (See “FTR Vote Deferred,” PJM MRC/MC Briefs: Dec. 5, 2019.)

“I assure that no changes we are making here preclude us from making additional changes when we do the full FTR review,” said interim CEO Susan Riley, who had urged stakeholders to endorse the revisions as a “really big win.”

Competitive Transmission Proposal Fee

Stakeholders endorsed PJM’s new fee structure for its evaluation of competitive transmission proposals.

The new framework PJM wants to use will involve charging a $5,000 nonrefundable flat fee to all developers who submit competitive proposals. Itemized study costs will be added as necessary. Mark Sims, PJM’s manager of infrastructure coordination, said the intent is to bill projects that incur the extra expense. (See “PJM Unveils Flat Fee Cost-containment Plan” in PJM PC/TEAC Briefs: Aug. 8, 2019.)

Sims previously told the Planning Committee that PJM’s old tiered approach, approved in 2014, doesn’t account for the increased cost of the new comparison framework that involves an independent consultant’s review and legal and financial analyses. (See “New Fee Structure for Cost Containment Needed,” PJM PC/TEAC Briefs: June 13, 2019.)

Real-time Values

Stakeholders endorsed PJM’s issue charge that would address concerns over the misuse of real-time values (RTVs) in parameter-limited scheduling (PLS). (See “Real-time Values, Parameter-limited Schedules,” PJM MRC Briefs: Dec. 5, 2019.)

PJM said that some capacity generators use RTVs to override unit-specific parameters for inappropriate reasons, causing unnecessary confusion during dispatch.

The original intent of RTVs was to provide a way for generation operators to communicate current operating capability to PJM if their resources couldn’t meet their unit-specific parameter limits or approved exceptions. Generators opt to use RTVs and forfeit operating reserve credits and make-whole payments as a result.

Except, some generators consistently use RTVs to increase notification time on PLS “to reflect the decision not to staff the resource during hours they project the resource will not be economic,” PJM said. The operational impacts mean that resources called in real time based on their schedules cannot perform as expected.

The RTO will commence a special session of the MIC in 2020 to study the problem and recommend solutions.

Parameter-limited Scheduling Fix

The MRC endorsed revisions to the Operating Agreement and Tariff that align it with PJM’s actual implementation of PLS.

The revisions correct language errors introduced with the implementation of Capacity Performance that caused the RTO’s practice regarding PLS to contradict its own rules and conflict with other governing documents, PJM told the MIC and MRC earlier this month. The Monitor said, however, that PJM should simply follow the language set out in the Tariff instead of revising the document to fit its current practice. (See “Parameter-limited Schedules, PJM MIC Briefs: Dec. 11, 2019.)

Stakeholders approved PJM’s revisions in a sector-weighted vote of 4.67 to 0.33.

Modeling Generation Senior Task Force Recommendations

The MRC partially endorsed recommendations from the Modeling Generation Senior Task Force that can be implemented in the near term while PJM focuses on completion of its next generation energy market (nGEM).

The MGSTF, assembled in 2017, developed the solutions to improve resource modeling for “complex resources” in PJM’s market clearing engines, including combined cycle units, coal units with multiple mills and pumped hydro.

The endorsed recommendations include:

• adding additional segments to the energy offer curve beyond the 10 currently available to increase resource configuration modeling capabilities; and
• providing market participants with the ability to submit hourly differentiated segmented ramp rates for resources in both the day-ahead and real-time markets.

A third recommendation to implement “soak time” modeling of resources was deferred until next month at the request of stakeholders who were concerned about the time and energy it would require. “Soak time” refers to the minimum number of hours a unit must run, in real-time operations, from the generator breaker closure until the time the unit is dispatchable.

FTR Market Update

PJM Chief Risk Officer Nigeria Poole Bloczynski told the MRC that the RTO should do more to assess market participant risk profiles and enhance its collateral practices across all markets — not just FTRs.

“I think it’s best practices to evaluate risk profiles for all participants,” she said. “This is phase 1 of what I think should be a prudent practice of looking at our policies every year or every other year to make sure our policy isn’t static while the market continues to change.”

PJM hired Bloczynski in July after an independent probe of the GreenHat default found the RTO’s executive team lacked credit expertise. She said Thursday she’s hiring four additional staff in her department, including a manager of credit risk and trading risk, and challenging current employees to automate as many processes as possible.

As far as expanding the application of credit risk management beyond the FTR market, PJM will bring corresponding Tariff and OA changes to the MRC for a final vote in January.

Manuals Changes Endorsed

• Manual 13: Emergency Operations, incorporating event analysis updates.
• Manual 14D: Generator Operational Requirements, adding guidance associated with distributed energy resource ride-through.
• Manual 27: Open Access Transmission Tariff Accounting, addressing the implementation of the annual calculation of the border rate and the impact on firm point-to-point transmission service charges.

– Christen Smith