PJM stakeholders deadlocked Thursday over changes to the $1,000 energy offer cap, leaving the RTO’s board considering yet another unilateral filing with the Federal Energy Regulatory Commission.

None of three proposals considered by the Markets and Reliability Committee won a two-thirds majority.

The primary proposal from the Cap Review Senior Task Force (proposal B), which would have eliminated the cap for cost-based offers and let them set LMPs, won only 42% support in a sector-weighted vote of the MRC, with unanimous opposition from the Electric Distributor and End Use Customer sectors.

The proposal would have limited cost-based offers to production cost plus a 10% adder for unquantifiable costs. Market-based offers would be limited to the cost-based offer or the cap on 30-minute demand response ($1,849/MWh for delivery year 2015-16), whichever is more.

A revised version of that proposal that would maintain the cap on market-based offers also failed with 42%.

An alternative by the Delaware Public Service Commission (proposal A), which would have allowed cost-based offers above $1,000/MWh but would not have allowed them to set LMPs, also fell short at 61%. The proposal won unanimous support from the ED and EUC sectors and almost 60% of Other Suppliers, but it received less than 30% of Transmission Owners and Generation Owners. (See voting report.)

In January, FERC granted the RTO’s request for a waiver allowing make-whole payments for generators with operating costs more than $1,000. PJM said the waiver was necessary to allow some gas-fired generators to cover marginal costs that hit $1,200/MWh in late January, as spot gas prices spiked as high as $140/mmBtu. The January order allowed PJM to fund the make-whole payments through uplift charges. In February, FERC granted a second waiver eliminating the cap through March 31, allowing high-cost generators to set LMPs.

One-Sided Debate

While generators’ representatives were curiously silent before the votes, load representatives were vocal in their opposition to eliminating the offer cap, which they said was necessary to counter market power and ensure generators operate efficiently.

“Our members have a strong desire to retain the cap as it is,” said Dan Griffiths, executive director of the Consumer Advocates of PJM States.

Walter Hall of the Maryland Public Service Commission said there were only a few generators — reliant on gas supplies from constrained pipelines — that claimed costs exceeding $1,000/MWh in January. “You’re really just importing market power from the natural gas industry into the electric industry,” Hall said. “We think that’s inappropriate.”

John Farber of the Delaware PSC said there was little evidence of the need to lift the offer cap. “It’s yet to be proven that there is a boogey man in the closet,” he said.

Farber said his proposal ensured that no generator would be forced to operate at a loss while preserving the “circuit breaker” of the current cap by ensuring generators with lower costs don’t receive a windfall from higher LMPs.

Susan Bruce, representing the PJM Industrial Customer Coalition, said her group was supporting the Delaware proposal “in the spirit of compromise and in the interest of having one less [disputed] issue before FERC.”

David “Scarp” Scarpignato of Direct Energy said offers exceeding $1,000 should set LMPs. “We don’t believe actual costs should go into uplift,” he said. “It’s unhedgeable. That’s a really bad deal for a load-serving entity.”

One More Try

When the last of the three votes failed, PJM’s Adrien Ford declared the task force’s work done. Andy Ott, executive vice president for markets, indicated that PJM’s Board of Managers would consider a unilateral Section 206 filing with FERC. “We do have to move forward if the group can’t reach consensus,” he said.

But Ed Tatum of Old Dominion Electric Cooperative said stakeholders should make a last-ditch effort to reach compromise before the next Members Committee meeting Oct. 30. “We need to have a Section 205 [consensus] filing,” he pleaded.

PJM CEO Terry Boston also urged members to reach consensus. “There is a limit on how many issues we can dump on FERC between now and Dec. 1,” he said. “I don’t think FERC is going to respond kindly if we keep bringing 206 disagreements.”

The task force, which had been slated for sunsetting, will instead meet at 1 p.m. Oct. 10 to consider its options.