The Markets and Reliability Committee Thursday approved changes to the way PJM determines beneficiaries of market efficiency transmission projects.
MRC also changed the way PJM planners add generation in market efficiency simulations and revised the definition of production costs to include cross border purchases and sales.
The changes, which were approved without opposition, were developed by the Regional Planning Process Task Force to align modeling and beneficiary determinations with the revised cost allocation formula approved by the Federal Energy Regulatory Commission in PJM’s Order 1000 compliance filing.
PJM uses an hourly unit commitment dispatch simulation to measure savings in production costs and load payments over 15 years.
Under the change approved by MRC (Package 10), benefits of regional projects will be calculated on a 50/50 ratio based on its impact on production costs and net load payments (energy benefits) or impact on capacity costs and net capacity payments (capacity benefits). (See chart)
Benefits of local, low-voltage projects will be determined entirely on the change in net load or capacity payments for zones that experience decreases.
Under the previous method for both regional and local projects, 70% of benefits were calculated based on production or capacity cost savings, with the remainder based on change in net load or capacity payments.
Generation Expansion
MRC also changed the way PJM adds generation in market efficiency simulations. Comparing forecasted load against forecasted generation typically results in a shortfall in the Installed Reserve Margin (IRM) in the later years of the 15-year horizon.
Under current procedures, PJM scales existing generation units to assume supply will grow to meet the forecasted IRM. Active generation queue projects that are not part of the unit specific plan — existing PJM units as well as units that have an executed Interconnection Service Agreement (ISA) — can impact the location and type of generation scaled.
Under the new procedure, PJM planners will include all generation projects with executed ISAs or Facility Study Agreements (FSA). Existing units will be scaled based on location and technology to meet the reserve requirement. Planners also will include transmission upgrades for congestion that arise from scaling assumptions.
Production Cost Definition
The current definition of production costs limits market efficiency simulations to purchases and sales within PJM, ignoring cross-border transactions.
Under the new definition, PJM will include costs for purchases from selected regions and lines outside PJM as well as sales outside PJM. Purchases will be valued at the load weighted LMP and sales will be valued at the generation weighted LMP.
If given final approval by the Members Committee, the changes will be effective in the 24-month market efficiency cycle beginning in January 2014.
PJM contact: Fran Barrett
