Below is a summary of the issues scheduled for votes at the Markets and Reliability and Members committees Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.

RTO Insider will be in Wilmington for all the action and will bring you a complete recap in next week’s newsletter.

Markets and Reliability Committee

2. PJM MANUALS (9:10-9:50)

See details in posted materials on PJM’s calendar.

3. DEMAND RESPONSE AS AN OPERATIONAL CAPACITY RESOURCE (9:50-10:20)

The committee will be asked to endorse PJM’s proposal to change the design and dispatch of DR. PJM called for the changes after heat waves in July and September, which they said illustrated the need to make quicker and more targeted use of the resources. The changes under consideration would reduce DR’s minimum lead and run times as well as expanding use of subzonal dispatch and eliminating the need to declare an emergency before dispatch.

The PJM proposal (Package A) won 81% support in a vote by the Capacity Senior Task Force Nov. 5-12. Five other proposals won only 7% to 35%. All but 5% of voters said they favored a change to the status quo.

During a First Read at last week’s MRC, Bruce Campbell, of demand response aggregator EnergyConnect, said the changes proposed by PJM in this and MRC agenda item #4 amount to a “bait and switch” that will reduce customer participation in load reduction programs while increasing administrative costs.

David “Scarp” Scarpignato, of Direct Energy, said his company might back PJM’s proposal if the RTO agreed to a longer transition period on the provision allowing 30-minute dispatch.

Without such a change, Scarp said, support for the PJM proposal could prove thinner than was apparent in the task force vote. “I think we saw when issues proceed to a sector-weighted vote things don’t pass quite so easily,” he said, referring to the MRC’s rejection of PJM’s proposal on the treatment of limited DR in capacity auctions (see MC agenda item 4 below).

PJM Executive Director for System Operations Mike Bryson said he would be reluctant to accept a slower transition. PJM’s original plan called for a quicker transition than its current proposal, Bryson said.

The PJM proposal would make the following changes to the status quo:

• Trigger used to initiate Emergency DR load reduction: PJM would be able to dispatch “Pre-Emergency DR” prior to emergency conditions but continue to dispatch “Emergency DR” under emergency conditions.
• Notification lead time: DR could be dispatched as quickly as 30 minutes, down from the currently 1-hour or 2-hour lead time. Resources that are physically incapable of 30-minute dispatch would be remain at a 60- or 120-minute lead time. The change will be phased in, with Curtailment Service Providers choosing their lead times for delivery year 2014/15.
• Maximum number of events: Unchanged (10/year or unlimited, based on product type).
• Minimum event duration: Reduced from 2 hours to 1 hour.
• Performance Metrics (Measurement & Verification): PJM currently measures compliance for full wall-clock hours. Going forward, PJM would measure compliance for all hours when DR is dispatched for more than ½ of the hour.
• Maximum event duration: Unchanged (6 hours or 10 hours, depending on product type).
• Locational Designation: Current rules allowing PJM to dispatch on a subzonal (zip code) basis if created prior to the operating day will remain unchanged for 2014/15. Beginning in 2015/16, PJM will be able to create and dispatch subzones on the operating day.
• Strike Price: Currently $1,000 + 2x reserve penalty factors (effectively $1,800/MWh) for all DR, will differ based on lead time flexibility starting in DY 2014/15.
  • 30 min = $1,000 + penalty factor – $1.00
  • 60 min = $1,000 + (penalty factor/2)
  • 120 min = $1,100
  • Energy market participation remains voluntary, but the maximum economic offer price would be reduced from the current maximum ($1,000 + 2x reserve penalty factor) to $1,000 + penalty factor – $1.00.

More information:

• All six proposals compared
• Issue Summary Report
• Previous coverage: Too Many Choices: DR, Auction Changes Go To Vote

4. REPLACEMENT CAPACITY / PROSPECTIVE CAPACITY RESOURCE INCENTIVES (10:20-10:50)

The committee will be asked to endorse a proposal intended to eliminate arbitrage opportunities in capacity auctions. Because clearing prices in Incremental Auctions (IAs) are usually lower than those in the Base Residual Auction (BRA), participants can profit by over-committing in the BRA and buying out their commitments in the IAs.

The CSTF voted on 11 proposals with PJM’s proposal (A1) winning 60% support and the others ranging from 0% to 33%. Two-thirds backed a change in the status quo.

The PJM proposals would make the following changes to the status quo. Changes would be applicable to all future incremental auctions upon FERC approval:

• Capacity Resource Deficiency Charge: Would increase to 2 times the Base Residual Auction clearing price (BRA CP) from the current penalty (weighted average clearing price + higher of 20% of clearing price or $20).
• PJM release of committed capacity: PJM currently can release capacity in all three Incremental Auctions due to decreases in the reliability requirement. The reliability requirement reduction must be greater than 500 MW or 1% to be considered in 1st and 2nd IA; no threshold in 3rd IA. Under the proposed change, PJM may consider increasing early auction threshold quantities in order to avoid potential for release in one auction and buyback in subsequent auction.
• PJM procurement of capacity due: PJM currently can procure capacity due to increases in reliability requirement in all 3 IAs. The reliability requirement increase must be greater than 500 MW or 1% to be considered in 1st and 2nd IA; no threshold in 3rd IA. Going forward PJM would consider increasing early auction threshold quantities in order to avoid potential for buyback in one auction and release in subsequent auction.
• PJM Sell Offer Price: PJM currently uses an upward sloping offer curve with the starting price based on the intersection of the updated Variable Resource Requirement (VRR) curve and vertical line at current commitment level. The same procedure would be used in the future but the price would be floored at the BRA resource clearing price.
• PJM Buy Bid Price: No change. The procedure would continue to be based on a downward sloping bid curve with the starting bid price based on the intersection of the updated VRR curve and vertical line at current commitment level.
• Mitigation: Existing generation capacity is currently subject to same IA mitigation as in BRA; may elect Market Seller Offer Cap (MSOC) of 1.1 times BRA CP for 3rd IA. Under the new rules, existing generation capacity may elect MSOC of greater of 1 times BRA CP or their MSOC in first and second IAs; may elect MSOC of 1.1 times BRA CP for Final IA. Planned generation capacity resources are not subject to offer capping.

• 

  Number of Incremental Auctions: The current three IAs would be reduced to two. The first would be conducted between the time of current 1st IA and current 2nd IA; the second IA would occur at the same time as current 3rd IA (after EFORd lock-down).

• Allocation of 2.5% Short-term Resource Procurement Target (STRPT) to IAs: Current rules allocate   0.5% each to the first and second IAs and 1.5% to the third. This would change to 1% in the first IA and 1.5% in the last IA.
• Incremental Auction Settlement Calculation: Cleared sell offers and buy bids currently settle against IA CP. The PJM proposal would clear sell offers against the IA CP. Cleared buy bids from resources committed in a previous RPM auction will settle against IA CP plus pay the difference between the auction clearing price in which the resource first cleared and the IA CP for cleared buy bid quantity. PJM buy bids will pay the IA CP. If the IA clearing price is greater than the relevant IA or BRA price at which a resource was first committed, there is no settlement adjustment.
• Incremental Auction Settlement Timing: Unchanged (paid on daily basis throughout delivery year).
• Incremental Auction Settlement Allocation: Not specified under current rules. PJM proposal would be based on cleared buy bid quantity x IA CP fund cleared IA supply.  Cleared buy bid quantity x (applicable BRA or IA CP – IA CP) allocated to zones proportional to daily share of total reliability charges.

More information:

• All 11 proposals compared
• Issue Summary Report
• Previous coverage: Too Many Choices: DR, Auction Changes Go To Vote; FERC Staff Skeptical on PJM Demand Response Changes

5. PRICE FORMATION AND RESERVE REQUIREMENTS DURING HOT WEATHER OPERATIONS (10:50-11:20)

The committee will be asked to endorse PJM’s proposed problem statement and  issue charge to consider changing the real-time pricing mechanism.

PJM said the current methodology is depressing energy and reserve prices. The initiative would allow system operators to increase reserve requirements under certain circumstances, such as when operators are carrying additional resources to cover units at risk of being shut down because of environmental limitations or mechanical problems. Requirements also could be boosted when operators have data quality concerns or are uncertain about load or interchange.

The revised methodology could increase reserve and real-time energy prices while reducing uplift.

Previous coverage: PJM: Change Real-Time Pricing

6. REGULATION PERFORMANCE SENIOR TASK FORCE (RPSTF) (11:20-11:30)

The committee will be asked to sunset the Regulation Performance Senior Task Force, which has completed the tasks assigned to it in its charter.

More information: Kermit Study Report – To determine the effectiveness of the AGC in controlling fast and conventional resources in the PJM frequency regulation market

Members Committee

3. MAXIMUM IMPORT LEVEL (1:25-2:10)

The committee will be asked to give final approval to proposed Tariff and Reliability Assurance Agreement (RAA) revisions limiting the volume of capacity that can clear in future capacity auctions. PJM’s proposal was overwhelmingly approved by the MRC last week.

Previous coverage: Members OK Capacity Import Limit; Prices May Rise

4. CLEARING OF LIMITED DEMAND RESPONSE (DR) RESOURCES (2:10-2:55)

The committee will be asked to approve a proposal by Old Dominion Electric Cooperative (ODEC) to change the way limited DR clears in capacity auctions. ODEC’s Steve Lieberman said it is a compromise between a PJM proposal and one by state consumer advocates and the Southern Maryland Electric Cooperative (SMECO).

The PJM proposal was rejected by the MRC last week, winning only 37% support in the sector-weighted vote, while the SMECO/Advocates alternative won 64%, just short of the two-thirds threshold needed to send it to the MC.

Under current rules, 4.8% of PJM’s reliability requirement can be filled with limited demand response, with higher levels possible if excess capacity clears against the sloped Variable Resource Requirement (VRR) demand curve. PJM wants to reduce the 4.8% by all of the 2.5% Short-term Resource Procurement Target (STRPT) for a net of 2.3%.

The SMECO/Advocates proposal would reduce the 4.8% by only a portion — to be determined — of the 2.5% holdback.

The maximum amount of Limited DR that can clear the BRA would be based on saturation analysis (to be revisited post-summer 2014. There would be no limit on the amount of Annual DR that can clear the BRA. Extended DR can compete with Annual resources between the Installed Reserve Margin (aka Reliability Requirement) and VRR Curve.

The Short Term Resource Procurement Target (STRPT) would be allocated to both Limited DR (LDR) and Extended DR (XDR) under allocation ratios:

• Allocation of STRPT to LDR: “LDR Ratio” = Max Limited DR Constraint / Max Extended Summer Constraint.

• Allocation of STRPT to XDR: “XDR Ratio” = STRPT less the STRPT allocated to allocated to Limited DR.

Lieberman said his proposal would allow more LDR to clear in the BRA than PJM’s proposal but less than in the SMECO/Advocates package. That would allow PJM to meet its reliability requirements at a lower cost to load than the PJM proposal, he said.

Previous coverage: PJM Wins One, Loses One on Capacity Market Changes