The Market Implementation Committee began work last week on an initiative to create more accurate capacity market price curves and a recommendation by the Market Monitor to eliminate adders for frequently mitigated units (FMU).
Load Curves
An issue charge proposed by Exelon in June calls for modifying the algorithm used for publishing supply curves from the annual capacity auction.
Exelon and other stakeholders are seeking improvements to the supply curve currently produced by the Market Monitor, which masks individual price-quantity offers. Exelon said the current curves — a compromise intended to balance transparency against disclosure of commercially sensitive data — aren’t accurate enough for use in analysis. (See Capacity Supply Curve Review Gets MIC OK.)
The current method is the result of a Federal Energy Regulatory Commission order in a dispute over PJM’s proposal to publish price-quantity pairs after the 2010 Base Residual Auction.
One generator representative noted that the capacity auction results have far-reaching implications for generators and other market participants. Because the curves are imprecise and not released until several days after the auctions, “we are sometimes at a disadvantage to explain certain outcomes” in the auction, he said.
Anachronistic
The committee also began work on a problem statement and issue statement to consider whether to end extra compensation for generators that frequently run on cost-based offers under market power mitigation rules. (See PJM Reconsiders Adders on Cost-Capped Generators.)
Market Monitor Joe Bowring called for the review, saying the adders are no longer needed because of the introduction of the capacity market in 2007 and changes to scarcity pricing rules in 2012. The adders are “anachronistic” Bowring told the committee Wednesday.
He softened his previous statements somewhat, saying that PJM might need to keep the adders for a few “outliers.”
Less than 1% of megawatts sold last year were offer capped. But because the affected units are concentrated in load pockets they can have more significant local impacts, Bowring said.
Next Meeting
Most of Wednesday’s session was taken up with introductory educational briefings from PJM’s Tom Zadlo on the two issues. The committee will hold its second meeting on the two issues December 4.
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