By Rich Heidorn Jr.

PJM CEO Terry Boston opened 2015’s first Markets and Reliability Committee meeting last week with a plea for compromise.

Boston lamented that PJM took unilateral action on several contentious proposals sent to federal regulators in 2014 after stakeholders were unable to reach consensus, including the increase in the price-based energy offer cap. He said the year ahead presented more challenges, including “the fastest fuel change in industry history” as coal-fired plants are replaced by natural gas due to environmental rules.

“We have to reach consensus on some of the issues that are before us,” Boston said. “It’s a new year. We have a new opportunity in front of us to build these relations [among stakeholders] and build consensus.”

There was no evidence of rifts Thursday, thanks to an unusually light agenda that saw the MRC and Members Committee complete their work before noon, with only manual changes brought to votes. “This may be the first time I try to stretch out an MRC meeting,” MRC Chairman Mike Kormos joked.

Update on Winter 2015/16 Plans                                                                                                                                              

PJM officials provided the MRC an update on the status of efforts to postpone generation retirements or accelerate new generation to help the RTO overcome potential shortages next winter. (See PJM Seeks to Postpone Some Generation Retirements through 2015/16.) PJM’s Scott Baker said initial feedback from generation owners and developers indicates that there are less than 2,500 MW available.

Because of retirements expected as a result of the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) and New Jersey’s High Energy Demand Day (HEDD) regulations, Kormos said PJM will have less generation available in 2015/16 than it did last winter. PJM also is concerned about its ability to meet summer loads if it loses the ability to call on demand response resources. (See FERC Files EPSA DR Appeal with Supreme Court.)

“Under normal weather conditions we are fine,” Kormos said. But under a repeat of last year’s polar vortex, “we will be close to the line and we will be relying on the outside for help,” he said.

Kormos added that generator performance this winter has improved over last January, when as much as 21% of generators were unable to produce.

On Dec. 24, PJM asked the Federal Energy Regulatory Commission to allow it to enter into capacity agreements made outside the Reliability Pricing Model auctions (ER15-739). PJM also asked for a one-time waiver on rules that would otherwise require it to release 2,000 MW of capacity in the Feb. 23 Third Incremental Auction for 2015/16 (ER15-738).

Kormos said PJM would limit operation of generators subject to HEDD regulations to emergencies to keep them under the emission threshold in the New Jersey rules. “That seems to be the path of least resistance,” he said.

Manual Changes on $1,800 Offer Cap OK’d

The MRC approved conforming changes to two manuals in response to FERC’s approval of a temporary increase in the cost-based energy offer cap to $1,800/MWh from $1,000.

The increased offer cap — one of the issues on which stakeholders were unable to reach consensus last year — became effective with the Jan. 16 order and will expire on March 21. (See FERC OKs $1,800 Offer Cap in PJM.)

The order requires changes to Manual 11: Energy and Ancillary Services Market Operations and Manual 28: Operating Agreement Accounting.

Manual 11 was changed to read that generators’ incremental energy offers “may not exceed $1,000/MWh or a market seller’s lowest available and applicable cost-based offer provided such cost-based offer is greater than $1,000/MWh (and in no instance may be greater than $1,800/MWh).” (New text in italics.)

LMPs will be limited to the $1,800/MWh offer cap, plus primary- and synchronized-reserve penalty factors and the impacts of congestion and marginal losses. Costs above $1,800/MWh can be compensated via make-whole payments with an after-the-fact review, but they would not set clearing prices.

Cost-based adders under such offers will be limited to the lessor of 10% or $100/MWh. Price-based energy offers can rise above $1,000 simultaneously with cost-based offers “to avoid inappropriate market signals,” PJM said.

Other Manual Changes Approved

The MRC also approved the following manual changes with little discussion or debate:

• Manual 03A: Energy Management System (EMS) Model Updates and Quality Assurance (QA) — Includes updates and formatting changes to improve consistency and readability; new table added for important links.
• Manual 14A — Updates related to MISO-PJM queue coordination. MISO will evaluate the impact of new PJM interconnections at the impact study phase. The previous procedure, in which MISO’s review occurred during the facility study phase, caused delays in studies and final agreements, PJM’s Aaron Berner said.
• Manual 18: PJM Capacity Market — Updated to reflect revisions recently approved by FERC to the shape of the Variable Resource Requirement Curve, gross cost of new entry values, and the Net Energy & Ancillary Services Revenue Offset methodology. (See PJM Board Orders Filing on Capacity Parameter Changes.)
• Regional Transmission and Energy Scheduling Practices document — Changes made to comply with FERC Order 676H and North American Energy Standards Board standards. PJM is primarily impacted by FERC requirements for “Service Across Multiple Transmission Systems” (SAMTS). (See FERC Proposes Revised Communication, Business Rules.)

Members Committee

The Members Committee also approved several changes with no debate:

• Tariff and Operating Agreement (OA) revisions developed by the Demand Response Subcommittee to change the way PJM measures and verifies residential demand response. The revisions allow statistical sampling and clarify rules for all residential customers. (See “Sampling to be used for Measuring Residential DR” in MRC/MC Briefs, Nov. 25.)
• Tariff revisions to remove seller credit, a form of unsecured credit, from the credit policy, which RTO officials say is no longer necessary.
• Tariff and OA revisions related to data availability for the bus distribution factors for zonal and residual metered load aggregates. When technical limitations restrict PJM’s ability to obtain the load distribution factors from the 0800 snapshot one week prior to the operating day, or if the data is unavailable, the load distribution factors from the most recently available day of the week that the operating day falls on will be used in the day-ahead energy market. (See “Tariff Revisions to Metered Load Aggregates” in Markets and Reliability Committee Briefs, Dec. 22.)
• Tariff revisions related to enhanced inverter capability. (See “Standards for Enhanced Inverters” in Markets and Reliability Committee Briefs, Dec. 22.)
• Manual 34: Stakeholder Process — Revisions regarding periodic review of PJM Manuals and a Robert’s Rules Guide.