By Rich Heidorn Jr.

CAMBRIDGE, Md. — State consumer advocates last week pressed the PJM Board of Managers to change Capacity Performance rules to allow more participation by seasonal resources.

At the annual meeting between the board, consumer advocates and environmental groups, the advocates and environmentalists joined in calling for PJM to consider a seasonal capacity construct that would allow more participation by demand response, energy efficiency and solar resources.

The meeting filled a large ballroom at the PJM Annual Meeting. Increased funding for the Consumer Advocates of PJM States (CAPS) allowed more representatives to participate, with 11 of PJM’s 13 states and D.C. attending. (See FERC Approves PJM Funding of Consumer Advocates.) The meeting was also marked by an impassioned plea from Delaware officials for relief from the cost allocation for the Artificial Island transmission project.

The Capacity Performance rules include the option to aggregate summer and winter resources into a single capacity offer. But no aggregated offers were submitted in the first Base Residual Auction with CP last year, for delivery year 2018/19. Base capacity resources, which permitted summer-only DR, will be eliminated with next year’s auction for 2020/21.

Problems with Aggregation

“Aggregation can work for an owner that has both ends of the seasonal resource,” CAPS Executive Director Dan Griffiths said. “But when you have different owners, you have liability issues and allocation issues that are just frightening. So we have to admit that we do need seasonal resources.”

Brian Lipman, litigation manager for the New Jersey Division of Rate Counsel, said PJM must “find a way to work these resources into the mix so that we’re not paying for the next [generation] unit that’s not only higher in price but more likely more damaging to the environment.”

Speaking for the Public Interest and Environmental Organization User Group, Jennifer Chen, of the Sustainable FERC Project, praised PJM for its new load forecasting methodology but also called for capacity rule changes, noting that only 13% of cleared DR in last year’s auction qualified as CP.

The Seasonal Capacity Resources Senior Task Force has been meeting since early April to discuss the issues. (See “Seasonal Resources in the Capacity Market to be Studied,” MRC & Members Committee Briefs.)

The task force’s problem statement said the inquiry was necessary because of the elimination of base capacity and changes to measurement and verification for non-summer CP demand resources. “Through these two changes, demand resources, energy efficiency, solar and other resources that are either exclusively or primarily available in the summer season may no longer be able to meaningfully participate in PJM’s capacity market,” it said.

PJM CEO Andy Ott said creating separate summer and winter capacity products would require changes to how capacity costs are allocated, which is currently based on five coincident peaks. Changing the methodology, he said, would concern industrial customers and other loads.

But Ott said he has asked staff to consider “where the rules need to evolve for demand response. There has been at least a two-year period of significant uncertainty.” That ended with the Supreme Court’s ruling in January upholding FERC jurisdiction over DR in wholesale markets. (See Supreme Court Upholds FERC Jurisdiction over DR.)

Pairing up Resources

Ott said PJM also is considering modifying the aggregation rules in a way that would not force summer or winter resources to enter into contracts and share risks. “Some type of mechanism where we pair them up and assign their value,” he explained.

At a later “Year in Review” session, Independent Market Monitor Joe Bowring said PJM could consider a seasonal or even monthly capacity product. But, he cautioned, “if it’s going to be done it should be done comprehensively — not for a single product.”

At the same session, Stu Bresler, senior vice president for market operations expressed concern that a two-season construct could “undermine long-term price signals.”

That brought a retort from Marji Philips of Direct Energy: “Come on, New York is a month, guys!” — a reference to NYISO’s monthly capacity auctions.

MISO ‘Not Going Along’

At the earlier session, New Jersey’s Lipman also expressed concern over the handling of external capacity resources, saying that consumer representatives supported tightened rules knowing it would likely increase prices. “At this time, we now understand that MISO is not going along with the plan [the way] we thought they would,” he said. “We hope both regions will come together and find a way to resolve this issue.” (See “Ready for Pseudo-Tie Switchover,” MISO/PJM Joint and Common Market Meeting Briefs.)

Jackie Roberts, director of the West Virginia Public Service Commission’s Consumer Advocate Division, said PJM could help consensus-building efforts by appointing formal facilitators independent of the RTO and with no stake in the outcome of deliberations.

“The PJM folks who are trying to facilitate in the stakeholder process do have a stake in the outcome, so that makes it very difficult,” she said. “Traditionally what people do is those that like PJM’s proposal all line up with PJM to talk about options, and those that don’t don’t have anyone to talk to.”

‘Bankrupting’ Delaware

Delaware Public Advocate David Bonar and Deputy Advocate Ruth Ann Price called on PJM to provide their state — PJM’s smallest — relief from the more than $100 million bill it faces from the Artificial Island stability project. A PJM study found that the Delmarva Peninsula — Delaware and the eastern shores of Maryland and Virginia — would pay about 89% of the project’s costs while receiving little more than 10% of the annual load payment savings from the upgrade.

“It’s vitally important to our state that this project be as inexpensive as it possibly can,” Bonar said. “Some of my ratepayers are looking at 30% increases in their rates and that to me is unconscionable.”

The costs “are on the verge of devastating,” Price said.

“As I keep telling my CAPS members, there’s a transmission project coming to you and it may also affect you in the same way,” she said. “None of us want to see a headline that says ‘PJM Bankrupts Delaware.’”

PJM Chairman Howard Schneider responded that “we’re not trying to build a gold-plated grid. We’re trying to get a grid that is reliable and responsive at the least possible cost — and we are cognizant of those costs,” he said.

But Schneider said the cost allocation “is an issue which is really out of our hands.” In a 3-1 decision in April, FERC approved the use of the distribution factor cost allocation (DFAX) on the project. (See FERC Upholds Cost Allocation for Artificial Island, Bergen-Linden Projects.)

“It’s at FERC,” Schneider said. “That’s where the issue needs to be raised and re-raised.”