By David Jwanier and Rich Heidorn Jr.

Stakeholders reacted warily last week to a proposal that would allow PJM dispatchers to cut interchange ramp limits to reduce price volatility and uplift.

Dispatchers can limit ramp to protect reliability under current rules, but the action has been “very rarely, if ever,” taken, PJM’s Lisa Morelli told the Market Implementation Committee last week.

Short Term Solution

Morelli said that using ramp to control price volatility and uplift is one of the short-term solutions being considered by an MIC sub-group charged with finding ways to better capture operator actions in market clearing prices. The Energy and Reserve Pricing and Interchange Volatility Sub-Group has met four times since its creation by the Markets and Reliability Committee in November. (See MIC to Consider Real-Time Pricing Changes.)

The MRC asked for the implementation of initial changes in time for this summer, leaving too little time to consider any changes that require a FERC filing, lengthy stakeholder discussion or software changes, Morelli said.

The volume of interchange often increases when LMPs are high, but it is difficult to forecast. If generation or DR has already been called and cannot be cancelled, more interchange than expected creates excess reserves, which suppress energy and reserve prices and increase uplift.

During the Jan. 7 polar vortex, for example, operators forecast 5,665 MW of imports at 2 p.m. but received almost 3,000 more than that (see chart).

Scenarios

Morelli said the limits could be reduced when operators have dispatched demand response or additional internal generation in maximum generation emergency actions. Changes in ramp limits would be communicated to market participants through banner notifications in ExSchedule or other real-time communications tools, with monthly reports explaining the reasons for the adjustments.

To create “more transparency,” Morelli said the sub-group is developing guidelines for how and when operators might change the ramp limits.

Market Interference?

The proposal alarmed some members, who questioned the propriety of PJM taking actions that could impact market participants.

“It doesn’t seem that appropriate for PJM to be in the market,” said Bruce Bleiweis of DC Energy. “An RTO or ISO shouldn’t be making changes in the market that change the outcomes for participants.”

Jung Suh, of Noble Americas Energy Solutions, said he worried about “overeager use” of the tools by operators.

Another stakeholder said that although he supports efforts to reduce uplift, he is concerned that individual operators may react differently under similar situations, creating uncertainty for market participants. “Saying that the operator will figure it out is not very reassuring because we’re reformulating price formation,” he said. Such actions usually require a Tariff change, he noted.

Adam Keech, director of wholesale market operations, said PJM will draft manual changes to try to answer stakeholder concerns about how operators would exercise their discretion.

“But the expectations that we’re going to have some kind of written rule set when operating conditions are never the same … might be a little bit of a stretch,” he said. “If it’s too prescribed it’s useless … because whatever situation you’re trying to describe never shows up.”

Next Steps

PJM officials want to bring changes to a vote at the April MIC meeting to meet the summer target. “It is a fairly aggressive timeline,” Morelli said. “We do acknowledge that the best solution may be a longer term solution.”