Members Wednesday gave preliminary approval to a new scheduling product intended to reduce uneconomic power flows between PJM and NYISO.

The Market Implementation Committee approved the Coordinated Transaction Scheduling product after amending it to address member concerns about the reliability of PJM’s price projection algorithm — on which CTS trades will be based. The Markets and Reliability Committee will vote on the measure in a sector-weighted vote as soon as Sept. 26.

The amendment was proposed by a representative of J.P. Morgan Ventures Energy Corp. [Editor’s Note: RTO Insider is prevented from quoting from this representative without his permission due to the Code of Conduct.]

The revised proposal would allow CTS to begin no sooner than September 2014 — later if MRC is not satisfied with the accuracy of the forecasts generated by PJM’s Intermediate Term Security Constrained Economic Dispatch (IT SCED) application.

Reducing Uneconomic Flows

The new product is intended to improve price convergence between PJM and NYISO by reducing uneconomic power flows. Traders would be able to submit “price differential” bids that would clear when the price difference between New York and PJM exceed a threshold set by the bidder. (See PJM, NYISO Tout New Option to Improve Power Scheduling.) This option would be in addition to two current options: hourly evaluations of traditional wheel-through transactions and intra-hour evaluations of traditional LMP bids and offers.

J.P. Morgan’s amendment commits PJM to provide members with the results of its IT SCED forecasts — previously used only by PJM operations — beginning December 15.

Although PJM will file required tariff changes with FERC in the interim, CTS could not be implemented until the MRC votes to approve the use of the algorithm — a vote that would not occur before the July 2014 meeting. “If [members] are uncomfortable with the forecast we could not move forward with CTS until we have an improved” forecast, endorsed by MRC, explained PJM’s Stan Williams. [See table, CTS Implementation Timeline]

A Natural Death

The vote came after a lengthy discussion.

One member asked whether PJM would make public the forecasting model. “We’re trying to understand how to IT SCED comes up with these prices,” he said.

Adam Keech, PJM director of wholesale market operations, said PJM could not disclose the algorithm, which was developed by Alstom Holdings, because of intellectual property concerns.

Another member noted that CTS trades are voluntary and will supplement – not replace – current scheduling options. “If people don’t have confidence in it this dies a natural death because nobody uses it.”

MIC chair Adrien Foley rejected several members’ suggestions that the proposal was being rushed, noting that the committee had been discussing it since July and held a special meeting on the topic Sept. 10.

During the lunch break, PJM officials negotiated with J.P. Morgan on changes to the proposal. (See redlines in the proposal.) After lunch, Foley announced that the RTO and the sponsor had reached a deal.

Notice of Changes

In addition to allowing members to validate the IT SCED forecasts before CTS takes effect, the agreement requires PJM to provide 90 minutes’ notice before making changes to IT SCED that “would have any effect on” forecasts.

Keech balked at J.P. Morgan’s original proposal, which would have required 30 days’ prior notice. Keech said it could prevent operators from making timely changes needed to ensure smooth operations. “You’re handcuffing our ability to fix things that may have nothing to do with this issue,” Keech said. “…If I see a problem, I need to act today.”

The agreement also requires PJM to consider “appropriate” balancing operating reserve charges for CTS transactions in the Energy Market Uplift Senior Task Force (EMUSTF), and to assess transmission service charges on CTS trades “in a manner that is consistent with the transmission service charges for all cross-border transactions.”

Vote Tally

The proposal was approved by acclimation with 43 abstentions and 17 votes in opposition. Edison Mission Marketing and Trading was among those voting no. Those abstaining included FirstEnergy, NRG Energy, Old Dominion Electric Cooperative, DC Energy, Noble Americas, the PJM Public Power Coalition and the PJM Industrial Customer Coalition.