By Suzanne Herel

PJM stakeholders deadlocked for the third time Thursday on changes to the $1,000/MWh energy offer cap, leaving it to the Board of Managers to decide whether to seek Federal Energy Regulatory Commission approval of any changes.

Old Dominion Electric Cooperative’s Ed Tatum withdrew a compromise proposal to raise the cost-based offer cap to $1,800 in the face of opposition from load representatives following a lively Members Committee debate.

Members’ inability to reach consensus means the board would have to make a unilateral Section 206 filing to win FERC approval for any change.

PJM CEO Terry Boston expressed disappointment. “I was hopelessly optimistic that we could get to a [Section] 205 filing,” he said.

“There will be other times” when the cap is exceeded, Boston said. “I really don’t like the idea that we hold in abeyance until we have an emergency. … We don’t want to be in the position that we have to run to FERC and ask for a 24-hour decision.”

In January, FERC granted the RTO’s request for a waiver, allowing make-whole payments for generators with operating costs exceeding $1,000. PJM said the waiver was necessary to allow some gas-fired generators to cover costs above the cap, as spot gas prices spiked as high as $140/MMBtu.

Earlier this month, Calpine Energy Services requested that FERC allow it to recover about $3.3 million it said it spent on expensive gas for two generating units at PJM’s direction and was unable to burn when the RTO cancelled their plants’ dispatches (ER15-376). Calpine’s claim is similar to those filed earlier by Duke Energy, which is seeking $9.8 million for “stranded” gas (EL14-45) and Old Dominion, which is seeking $2.7 million (ER14-2242). (See PJM Backs Duke’s $9.8M ‘Stranded Gas’ Claim.)

In April, PJM members agreed to form a task force to consider changing the cap. The group was unable to reach consensus after nine meetings and has since disbanded.

The proposal presented Thursday resulted from negotiations led by Tatum and Mike Borgatti, of Gabel Associates, who represented generators. It would have allowed cost-based offers between $1,000/MWh and $1,800/MWh to set LMPs. Generation costs above that cap would be recovered through uplift.

Maximum market-based offers would be capped at $1,000 or the cost-based offer.

The majority of members who spoke Thursday strongly opposed the changes. Even those who encouraged the proposal’s passage conceded they supported it only as a better alternative to losing control over the matter to FERC. A 205 filing also would show a cohesiveness among the group, they said.

“This is not a proposal that Old Dominion would have come up with,” Tatum said in making his presentation. But, he said, “I think we’ve gone as far as we can go with this.”

Susan Bruce of the PJM Industrial Customer Coalition said her group opposed the proposal. “There is a lack of evidence of a systemic problem,” she said.

Market Monitor Joe Bowring said fewer than 25 offers breached $1,000 in January. While some of the proposed offers were in the $1,700/MWh range, Bowring said there were no legitimate offers greater than $1,400/ MWh.

Walter Hall, representing the Maryland Public Service Commission, said Tatum’s proposal represented not a “compromise” but a concession to generators’ attempts to profiteer.

“We fear this is a profit-making opportunity [for generators], not a cost-recovery opportunity,” he said. “Why should everyone profit from something of that nature?”

Jim Jablonski of the Public Power Association of New Jersey referred to the Market Monitor’s March 26 report to FERC, which concluded that only $9,118 of $583,774 in additional compensation sought by seven units in three PJM control zones when gas prices peaked in January was legitimate.

And, he said, “that was at the worst of times. I certainly don’t see the justification for above $1,000.”

Carl Johnson, representing the PJM Public Power Coalition, said approving the Tatum-Borgatti proposal would have been preferable to “throwing a jump ball at FERC.”

“It’s not perfect, but it is way better than that outcome,” he said.

J.P. Morgan Ventures Energy’s Bob O’Connell, who had debated Tatum over the issue at the October MC meeting, said he came into Thursday’s forum opposed to the newest proposal. (See Load, Supply Trade Blame over Offer Cap Impasse.)

But, he said, “the deal you see on the table is a deal that can get done. This is not about getting what you want — it’s about not getting what you don’t want.”