Payments to black start generators could increase by 27% to more than 500% under proposals scheduled to go to a stakeholder vote today.

The System Restoration Strategy Task Force will vote through Nov. 20 on up to four alternatives to the current compensation method for black start units.

An analysis presented to the task force in October showed the annual operations and maintenance compensation for a 20 MW combustion turbine would increase from the current $51,000 to more than $312,000 under NRG Energy’s market based “Proxy” formula. The PJM-Market Monitor “Modified Incentive” would boost compensation to $65,000, while Dayton Power & Light Co.’s “Minimum Incentive” would set compensation at $71,000.

While the increases could be large compared to current compensation, the overall impact on prices would be limited. Black start charges were responsible for only $0.03 of the $35.23/MWh total price of wholesale electricity in 2012 (0.1%), according to Monitoring Analytics’ State of the Market Report.

The Proxy proposal was based on a review of practices in New York and New England as well as cost figures provided by more than 50 generators that responded to PJM’s recent solicitation for black start resources. It would increase capital compensation more than six-fold and payments for fuel storage more than eight-fold.

Old Dominion Electric Cooperative (ODEC) proposed a “cost allocation” alternative that would allow increased compensation but seek to spread the costs beyond load to external generators that clear in the annual capacity auction and internal generators that neither provide black start service nor offer to do so.

“We would be willing to consider increasing compensation, but without [broader] cost allocation we remain troubled by this,” ODEC representative Steve Lieberman said at the task force’s most recent meeting last Tuesday.

Generator representatives reacted coolly to Lieberman’s request to negotiate a consensus with load-serving entities, with one calling it “worse than a zero-sum game” for generators relative to the status quo.

Black start units must be capable of starting without an outside electrical supply, maintaining frequency and voltage under varying load, and maintaining rated output for a specified time, typically 16 hours.

Proposed Changes

The following changes are included in one or more packages to be considered by the task force:

• Increasing the incentive factor — currently 10% of black start costs for units using base formula rates to determine O&M cost recovery — to the greater of 10% or $25,000.
• Adding incentives based on unit availability, start times and fuel diversity.
• Reducing the frequency of reviews of cost components from annual to once every five years.
• Allowing compensation for NERC compliance insurance.
• Allowing automatic load rejection (ALR) units to recover NERC Compliance costs as part of their variable operations and maintenance costs, as currently allowed for other black start units. ALR units can remain operating after disconnecting themselves from the grid during a disturbance.

Black Start Pool Increased

On Sept. 6, the Federal Energy Regulatory Commission approved tariff revisions that PJM said will increase the pool of potential black start generators by 64,000 MW (ER13-1911).

PJM initiated the changes over concern that it will lose much of its existing capacity by 2015 due to coal plant retirements. The RTO told FERC in its tariff filing that about 42% of its current black start capacity “may be impacted by environmental regulations.”

The changes included a broadened definition of units eligible to provide black start service and a provision allowing units in one zone to help restart generation in neighboring zones.

Revised Charter

In April, stakeholders expanded the task force’s charter to allow consideration of changes to black start cost allocation and compensation.

The Maryland Public Service Commission expressed concern with the expanded charter, telling FERC that the cost of black start service had doubled in recent years. The commission said there was a “need for cost controls given that black start service has rarely, if ever, been used.”

The task force’s expanded charter also included consideration of “back stop” options if response to PJM’s voluntary request for resources leaves gaps in coverage. However, PJM officials said last month they were pleased with the response to their recent request for additional black start resources.

PJM Executive VP Mike Kormos said the response indicated “a large pool of viable units, both proposed and existing.” Officials said it will take months to select their fleet of black start resources from among current resources and the new bidders.