Constraints that can be quickly and cheaply resolved would be included in the Regional Transmission Expansion Plan (RTEP) under a proposal the MRC endorsed Thursday after a lengthy discussion. The proposal was approved over the objections of five members.
The new rules require PJM staff to identify — before posting the planning parameters for each Base Residual Auction — Locational Deliverability Areas in which the Capacity Emergency Transfer Limit is less than 1.15 times the Capacity Emergency Transfer Objective.
Upgrades that raise the ratio above 1.15 would be added to the RTEP if they cost less than $5 million and can be completed within 36 months or prior to June 1 of the Delivery Year. Projects that duplicate upgrades whose cost is already assigned to an interconnection customer would be excluded.
Roy Shanker, representing NextEra and LS Power, said the proposal could result in PJM spending millions on upgrades that produced inconsequential improvements to the system. Shanker said the 1.15 trigger could result in spending to relieve theoretical constraints that don’t actually result in price separation in the auction.
“Where else do we allow spending of $5 million with no evaluation of benefits, the potential for zero benefits, and guaranteed returns to [transmission owners]?” Shanker asked in a presentation analyzing the change.
Marji Philips, of Hess, said Shanker had identified a flaw in the proposal. “I don’t want to pay for something if there’s no benefit.” Philips later voted in favor of the change, however.
Walter Hall, of the Maryland Public Service Commission, said the issue should be sent to the Capacity Senior Task Force for further debate.
Others were not persuaded by Shanker’s argument. “We did not find it compelling and we don’t agree with the math,” said Ed Tatum, of Old Dominion Electric Cooperative.
Bill Schofield, representing the New Jersey Public Power Coalition, noted the volatility of CETL calculations. “We understand that the upgrade might have no immediate impact. But the probability is that it would provide value over its life,” he said. “We weighed the risk… We judged that this is a valid way to save load — consumers — a significant amount of dollars.”
Susan Bruce, representing the PJM industrial Customer Coalition, agreed with Schofield. “We think that the benefit certainly outweighs the cost.”
“This isn’t to block transmission from getting built” but to ensure it’s needed, Shanker responded. He suggested PJM first run the auction and if the results showed a constraint, it re-run the auction assuming a transmission upgrade.
Jason Barker, of Exelon, said his company was “agnostic” until seeing Shanker’s presentation. He suggested PJM conduct a risk-adjusted analysis before approving such upgrades.
PJM officials said those suggestions were not workable.
“We can’t do a cost benefit analysis,” said PJM Executive Vice President for Operations Mike Kormos. “That’s the problem.”
PJM Executive Vice President for Markets Andy Ott said adding the two-step process would extend the auction by at least a week. “It’s just the nature of the complexity of the auction.”
“$5 million is a very small number. [Shanker’s proposal is] so far from practical that we said, `Thanks for your comment. Let’s move on.’”
