PJM has dropped a proposal to create a new real-time reserve market, bowing to stakeholder concerns over the cost and complexity of a solution that would be implemented only a few times a year.

Instead, PJM is finalizing a proposal that it says is a more flexible version of the short-term fix approved by stakeholders in May to limit uplift and capture reserve costs in energy prices. (See PJM Reserve Proposal Gets OK for Trial Run.)

The new proposal would not add new reserve products, require changes in settlement or cost-allocation procedures or increase the energy price cap ($2,700 effective June 2015).

Instead, it would add a second, lower step to the existing operating reserve demand curve for synchronized and primary reserves.

It would increase synchronized and primary reserve requirements under emergency conditions (Hot and Cold Weather alerts, Maximum Emergency Generation Alerts) when additional intraday resources are scheduled.

The volume added to reserves would be based on the Eco Max rating of the resources committed as opposed to the static 1,300-MW adder included in the short-term fix.

If PJM is short of the extended requirement, the lower penalty factor ($300) would set the clearing price; if it is short of the reliability requirement, the higher penalty factor ($850) would set the clearing price.

Interchange Limits

PJM also is considering limits on interchange during emergency conditions to prevent markets and operations from being whipsawed.

The limit would be used when operators have made firm resource commitments and anticipated interchange schedules are sufficient to meet projected load for the hour.

Spot imports and hourly non-firm point-to-point transactions submitted after the cap is implemented would be blocked once net interchange reaches the limit. Schedules with firm or network-designated transmission service would not be curtailed.

Notification

PJM said it will notify market participants of the potential for increased reserve requirements or the interchange cap the day before implementing them. Notification that the procedures have been implemented would be made one to two hours before the operating hour, PJM’s Lisa Morelli said.

PJM will notify the market of its actions via eData, eMKT, ExSchedule and the Emergency Procedures web portal.

The Energy and Reserve Pricing & Interchange Volatility Sub-Group will meet Sept. 16 and 29 to refine the proposals. PJM hopes to bring the issue to a stakeholder vote beginning in October.