By Rich Heidorn Jr.
PJM officials are seeking to postpone generation retirements — or accelerate planned new generation — to help the RTO ride through potential shortages next winter.
Officials told the Markets and Reliability Committee Thursday that they will file proposed cost allocation language with the Federal Energy Regulatory Commission before the end of the year to forestall some of the estimated 9,500 MW of retirements expected next year as a result of the Environmental Protection Agency’s mercury and air toxics (MATS) rule and more than 2,000 MW being shut down by New Jersey’s High Energy Demand Day regulations.
In addition to offering reliability-must-run (RMR) compensation to delay retirements, officials said they are considering incentives to encourage some generation slated to come on line in delivery year 2016/17 to accelerate construction and launch earlier.
In total, officials said they will attempt to secure as much as 2,500 MW of generation through April 2016.
PJM Vice President for Operations Mike Kormos said the RTO is acting in light of the 22% forced outage rate from last January and uncertainty over the role of demand response in the wholesale markets.
The final amount procured will be dependent on load estimates and the projected forced outage rate for winter 2015/16 and the volume of capacity procured at the third incremental auction for the year. No demand response will be permitted to clear in that auction, officials said, because of the appellate court ruling threatening DR’s role in the wholesale markets. (See Verrilli to Seek Supreme Court Review of EPSA Ruling.)
Without such actions, Kormos said PJM estimates it would have about 2% less capacity than it had last winter, when it narrowly avoided voltage reductions or other severe actions.
“There is a cost effectiveness [consideration],” he said. “This isn’t 2,500 MW at all cost. This is an insurance policy.”
The FERC filing will seek authority to negotiate contracts with generation owners. Contracts with individual generators would be filed for FERC approval later. “We have no authority to negotiate this” currently, Kormos said.
PJM has negotiated RMR contracts when past retirements have prompted the need for transmission upgrades. The costs of those contracts were allocated over the relatively small areas benefiting from the new infrastructure.
This filing will likely seek RTO-wide cost allocation because of the broader reliability issues involved, Kormos said.
Market Monitor Joe Bowring said the costs should be limited to incremental costs of “speeding up a [new] unit or keeping [an old one] around.”
