PJM and the Independent Market Monitor have reached an agreement on a rule change to reduce the number of Frequently Mitigated Units eligible for “adders,” but the proposal appears to face heavy opposition from generation owners.

Only units whose net revenues are not covering their avoidable cost rate (ACR) would be eligible for adders under the proposal presented to the Market Implementation Committee on first read last week.

The proposal represented a compromise by Market Monitor Joe Bowring, who had previously called for eliminating the adders altogether.

Had the proposal been in effect in 2013, it would have reduced the number of units receiving adders from 112 to only 28 — 23 of which are scheduled to retire. “Implementing the screen would result in a notable smaller number of FMUs” receiving the compensation, said PJM’s Tom Zadlo.

In polling among members of the generation-heavy MIC subgroup that has considered alternatives, however, 72% of voters said they opposed the proposal. A nearly identical percentage said they would favor either of two alternatives.

One of the proposals that received support in the poll would set the adders based on a plant’s run hours. The second would limit the compensation based on the gross Cost of New Entry for the unit’s Locational Deliverability Area.

FMUs were allowed adders in 2006 to ensure that they cover their avoidable, or going-forward, costs. The adders are graduated: Generators that are cost capped for 60% of their running hours receive an adder of either 10% of their cost-based offer or $20/MWh; those capped for 80% or more of their hours can receive $40/MWh. Similar rules apply to “associated units,” which share physical and economic characteristics to FMUs. The idea is to keep units in service that otherwise would not be economically available.

Bowring said the adders had become unnecessary for most units since the introduction of the capacity market in 2007 and changes to scarcity pricing rules in 2012. (See PJM Reconsiders Adders on Cost-Capped Generators.)

Despite the lack of support for the PJM-IMM proposal in the poll, PJM officials said they intend to bring their plan to an MIC vote next month.

“Although it was spun as a compromise proposal it’s only a compromise between PJM and the IMM, not other participants,” said Dave Pratzon, who represents generators. “I don’t think … that this is the best way to move forward.”

“This is a load-gen[eration] issue,” responded Dave Mabry, of the PJM Industrial Customer Coalition. “Nothing is going to get sector-weighted support.”