PJM members will be asked tomorrow to approve a new scheduling option for transactions into the New York ISO to reduce uneconomic power flows.
Under the current system, PJM’s Stan Williams told the Markets and Reliability Committee Thursday, power often flows from PJM into New York even when PJM’s prices are higher.
To improve the alignment of energy scheduling with interface prices, PJM and NYISO are proposing creation of an additional product that would allow participants to submit “price differential” bids that would clear when prices in New York exceed those in PJM above a threshold set by the bidder.
The Coordinated Transaction Scheduling (CTS) proposal will be brought to a vote at the next MRC meeting if it is approved at tomorrow’s Market Implementation Committee meeting.
PJM says the new product should increase forward price transparency and price convergence between PJM and NYISO.
A cost benefit analysis found that the change would have reduced total production costs in the two RTOs by as much as $26 million in 2012. PJM officials said they had not calculated how much the savings would have been reduced by generator make whole payments resulting from the change.
The biggest opportunities for savings will come when the price differential between the two RTOs is relatively low. Analysis showed prices could be reduced in about half the hours when the price difference is $5/MWh but only 13% of the hours when the difference is $15.
CTS Interface bids would be scheduled based on the projected price difference between PJM and NYISO at the interface. It would use PJM’s Intermediate Term Security Constrained Economic Dispatch (IT SCED) application, which has a two hour look-ahead capability.
The application correctly predicted prices about 60% of the time when the price differential is $5 or less. Williams acknowledged the tool was much less reliable when the price differential is higher. Williams said PJM plans to begin posting the forecasts publicly next spring and is attempting to improve its accuracy.
Bob O’Connell, vice president and compliance manager for J.P. Morgan Ventures Energy Corp., said members shouldn’t vote on the proposal until they have evaluated the risks of relying on the forecasting tool.
He also said the changes could increase balancing congestion, which would penalize Financial Transmission Rights holders. “FTR holders get no benefit from CTS,” he said.
Williams said the changes shouldn’t hurt FTR holders and should reduce price volatility.
CTS Interface Bids would have as many as four bid curves and up to 11 $/MW pairs. The option would be in addition to current hourly evaluations of traditional wheel-through transactions and intra-hour evaluations of traditional LMP bids and offers.
Credit requirements on the new scheduling option would be based on the higher of the 97th percentile historical (prior year) hourly price for the node or the 15-minute IT SCED price forecast for the node.
The issue has been under discussion with NYISO since November 2012. The new scheduling product would require approval of the Federal Energy Regulatory Commission.
