PJM will ask stakeholders to consider changing the historical allocation of Auction Revenue Rights, Executive Vice President for Markets Andy Ott told members last week.
Ott told the Members Committee webinar that the number of facilities resulting in ARR infeasibilities have increased steadily since 2012, largely due to transmission outages (see chart).
“We’ve seen constraints come up that we haven’t seen before,” Ott said. “… PJM can build its way out of it, but it’s going to take years.”
Ott said PJM will begin discussing Stage 1A ARR allocations at the end of May or early June in hopes of making changes before the next allocation in spring 2015.
ARRs are allocated annually to firm transmission service customers, entitling them to receive a share of the revenues from the annual auction of Financial Transmission Rights. The infeasibilities, in turn, contribute to shortfalls in FTR revenues.
Total ARRs are capped based on historical generation capability and zonal base load. For the 2014/15 allocation, the zonal base load was based on the minimum daily peaks for the year beginning Oct. 22, 2012.
Infeasibilities have increased due in part to uncompensated power flow (loop flow) and additional market-to-market flowgates, but increased transmission outages is the primary factor, Ott said.
Generation retirements — which were not anticipated when the Stage 1A process was designed — also have played a role. More than 15% of Stage 1 historical generation (25,544 MW) has retired or submitted deactivation notices.
The retirements require PJM to remap historical resources to an equivalent generator or create a “dummy” generator for ARR and pricing purposes. This can create additional Stage 1A infeasibilities, PJM says.
“The system seems to be able carry less and less of” the historic, “grandfathered” rights, Ott said. “We really need to take a fresh look at this. The solution is a high-level solution: Change the way things are allocated.”
In June, the Federal Energy Regulatory Commission rejected a complaint (EL13-47) by FirstEnergy Solutions Corp. that sought to bill all transmission users to make up FTR shortfalls. Since then, market participants say, the problem has only gotten worse with cumulative shortfalls exceeding $1.1 billion. (See FTR Holders Seek Shortfall Fix.)
