By Suzanne Herel

PJM’s controversial Capacity Performance plan was turned back Tuesday by the Federal Energy Regulatory Commission, which deemed the filing deficient and gave the RTO 30 days to provide additional information (ER15-623).

FERC’s four-page order questioned 10 areas of the proposal, which was conceived to increase reliability expectations of capacity resources with a “no excuses” policy.

PJM said Wednesday it will respond to FERC’s questions “promptly and seek expedited review” to allow the new rules to be in effect for the Base Residual Auction scheduled for May 11-15.

“We recognize that process may require a delay to conduct an orderly auction process,” Dave Anders, director of stakeholder affairs, said in an email to members. “While PJM clearly would have welcomed approval, we appreciate the FERC’s thoughtful consideration of our proposal and the commission’s demonstrated commitment to reliability and enhanced generator performance.”

Anders said PJM has never delayed a BRA before.

The commission compared aspects of the PJM proposal with ISO-NE’s “pay-for-performance” design, which it approved last year and on which PJM’s proposal was in large part modeled.

PJM’s proposal was expected to result in both larger capacity payments for over-performing participants and higher penalties for non-performers.

FERC asked PJM to explain its derivation of an appropriate competitive clearing price when no new capacity is required in a locational deliverability area (LDA), and to provide more detail on a default offer cap and how it would apply in several situations.

It also requested any analyses the RTO had conducted on expected performance charges and bonus payments under the proposal. The commission asked if it made sense to phase in the penalties — as ISO-NE has — and for ideas of how to provide incentives for resource performance. In addition, it asked PJM how it plans to evaluate the performance of external resources not pseudo-tied to the RTO.

Moeller: Delay Creates Uncertainty

The commission’s order drew a rebuke from Commissioner Philip Moeller. The RTO’s filing “already contains sufficient information to permit the commission to issue an order on the merits of PJM’s proposal in advance of the May 2015 Base Residual Auction,” he said in a statement.

“Markets provide the best prices for both buyers and sellers when participants know the market rules. Regardless of whether the commission ultimately decides to accept or reject PJM’s Capacity Performance proposal, by failing to act, the commission is creating market uncertainty on issues that need clarity now,” he added.

Dynegy and NRG Energy shares fell sharply April 1 on the news of the ruling, with Dynegy down 2.1% and NRG falling 5.6%. Dynegy recaptured its losses April 2 while NRG only partially rebounded.

More than 60 entities filed comments and protests in response to the plan.

States and load-serving entities (LSEs) were skeptical about the need for a major overhaul, while generators split over elements they liked and others they said must be changed. (See States, LSEs Skeptical, Utilities Split Over Capacity Performance.) Many generators complained the penalties were too harsh; others, including Exelon, said the penalties were too lax.

LSEs feared the product redesign was overkill and would result in unnecessary price increases.

As proposed, the changes would have begun to take effect for the 2016/17 delivery year and be fully implemented in 2020/21.

The details are outlined in nearly 1,300 pages filed in two dockets:

• EL15-29 contains proposed changes to PJM’s Operating Agreement and Tariff “to correct present deficiencies in those agreements on matters of resource performance and excuses for resource performance.”
• ER15-623 proposes changes to the Reliability Pricing Model in the Tariff and Reliability Assurance Agreement.