If it’s the last Thursday of the month it’s meeting time for PJM’s two senior committees – and likely a vote on at least one problem statement directed at demand response resources.
At last week’s session, the Markets and Reliability Committee approved one problem statement and deferred a vote on a second that would change rules affecting DR. Meanwhile, the Members Committee approved a tariff change that increases DR providers’ documentation requirements.
The problem statement approved by MRC will explore changes to the way PJM calls on DR. The deferred issue would look at ways to ensure that DR and other resources offered into the capacity market show up in their delivery year.
“There’s been a freight train of changes for the DR market that have happened without evaluation of [the impact of] prior changes,” Dan Griffiths, of DR aggregator Comverge, said during a discussion on the first issue.
In a discussion on the second problem statement, Griffiths used a different metaphor, saying he was “disturbed by the sort of layer cake of similar issues that are being brought before us.” He cited the earlier problem statement as well as DR issues before the Capacity Senior Task Force. He urged PJM staff to review all pending inquiries affecting DR and seek a more coordinated approach.
DR as an Operational Capacity Resource
PJM told the MRC it wants to begin treating DR as “operational” capacity resource, subject to economic dispatch.
Andy Ott, PJM executive vice president for markets, said the change is needed because current rules treat DR as a “homogenous” block that cannot be tapped without declaring an emergency. “We simply can’t be declaring an emergency every time we need to access this capacity,” he said. “… What we want to do is get rid of the cliff and make it more gradual.”
The committee approved an amended version of the problem statement with four objections and 20 abstentions. The amendments were offered by Katie Guerry, representing curtailment service provider EnerNoc, who said the changes gives PJM the more flexible resources it desires “while preserving the flexibility that CSPs need.”
A motion by Bruce Campbell, of EnergyConnect, to add consideration of the impact on CSP’s operating costs was rejected. Campbell said he was “unconvinced” that the changes were needed for PJM operations rather than “an attack on DR.”
Potential outcomes of the inquiry include:
- Changes to DR obligations to move from administrative procedures to economic dispatch.
- Diversifying notification time requirements based on physical response capability, similar to current requirements for generators.
- Allowing DR to operate with a dispatchable range.
- Caps on the amount of Limited DR that can be cleared above the quantity specified in the reliability analysis. PJM says current rules allow Limited DR to fill all of the excess supply under the downward sloping demand curve, which hurts its effectiveness as an investment signal for long term resources.
- Changes in the way DR is modeled in PJM planning studies.
Griffiths expressed concern that changes ordered now would be effectively retroactive because of CSPs sell their resources into the future. “We sold capacity based on how we believed the market would work. If we knew the rules were going to change we would have sold differently,” Griffith said.
However, he said the increased flexibility being considered “is actually good for us” because it provides more options for sales.
Physical Delivery of Capacity
DR providers had more luck slowing down the “freight train” when the MRC rejected a request by Jason Barker of Exelon to immediately vote on his problem statement to modify the design of the Reliability Pricing Model to ensure physical delivery of resources that clear the capacity auction. The issue will be brought to a vote at the next MRC meeting.
Barker said the current design lacks sufficient penalties for those who offer capacity resources but fail to produce them in the delivery year.
He said the problem statement was needed to address reliability concerns caused by the increase in non-firm, planned resources clearing in the past three base residual auctions — including uncontracted demand response, planned internal generation, and existing and planned external generation that lacks firm transmission service.
A failure of more than 16% of these “prospective” resources would leave PJM below its target reserve margin, Barker said.
He noted that more than a third of generation imports clearing in May’s 2016/17 BRA lacked a complete firm transmission path. He also cited a report from the Market Monitor that found more than one-quarter of DR purchased replacement capacity in incremental auctions for the 2012/13 Delivery Year.
Increasing Concern
Andy Ott, PJM executive vice president for markets, acknowledged that PJM has “not historically seen high non-delivery rates.” But due to the increasing amount of new entry and imports, he said, “there has been increasing concern that the physical nature of the RPM needs to be emphasized.”
Barker said current rules encourage marketers to purchase replacement capacity in the interim auctions to lock in profits.
The market monitor’s report concluded that the current penalties for failing to deliver — the seller’s weighted average resource clearing price for the resource plus the higher of 0.20 times the clearing price or $20 per MW‐day — are not enough of a disincentive.
Barker also said PJM should develop milestones to track the progress of prospective or planned resources.
Susan Bruce, an attorney representing industrial consumers, said she was concerned “we’re looking at the tail of the dog, not the whole dog,” noting that PJM’s load forecasts have been higher than reality. Barker said although PJM’s load forecast has been 5% or more too high, it doesn’t eliminate the issue.
Aaron Briedenbaugh, of EnerNoc, said he supported the inquiry because it will look at generation in addition to DR.
Members Committee Action
Later Thursday, the Members Committee endorsed tariff changes in response to FERC’s April order that the RTO seek commission approval for new rules requiring demand response providers to provide officer certifications and additional information on their customers.
FERC said the changes required amendments to the PJM tariff and not just its manuals. Tariff changes require commission approval while manual changes don’t.
The rules require curtailment service providers seeking to participate in capacity auctions to file “Sell Offer Plans,” including information about the provider’s customers. CSPs also must have a company officer sign a certification attesting to the company’s intent to physically deliver MWs.
