By Rory D. Sweeney

PJM stakeholders have lingering questions about the RTO’s plan to implement a fuel-cost policy review process — despite a three-hour discussion intended to help sort out the issue.

Those questions focused on how the review will unfold in light of an ongoing debate between PJM and its Independent Market Monitor about who has the final word on policy approval.

Responses from PJM and the Monitor only added to the confusion.

The issue provoked tension between the two during PJM’s submission of a compliance filing with FERC on hourly generation offers. While that filing was supposed to focus on improving flexibility for such offers, PJM also initiated a petition under Section 206 of the Federal Power Act to implement changes to its policy-approval rules and penalties.

During that proceeding, Monitor Joe Bowring argued that the RTO was attempting to usurp his authority to review fuel-cost policies. PJM requires generation units that use fuels with volatile prices to explain their methodology for purchasing fuel so the RTO and Monitor can confirm it was secured through a competitive process.

PJM argued that approval of the policies was wholly under its authority, and FERC accepted the RTO’s proposal earlier this month, including its delineation of review responsibilities. (See FERC Seeks More Details on PJM Fuel-Cost Policy Proposal.)

The debate extended into a Feb. 21 special session of the Market Implementation Committee, where PJM was emphatic that generators can’t hold separate discussions with the Monitor on such policies.

“PJM needs to be involved in those discussions,” said Jeff Schmitt, manager of market analysis. “There is only one process.”

Bowring responded that his role remains separate from that of PJM.

“Just to be clear: We have our own separate standard of review that we’ve had for some time,” he said. “If we ultimately disagree with PJM’s decision, we’ll make that clear [to PJM]. Our role remains our role.”

“You review for market power, but what you do not do is approve the fuel-cost policy,” PJM attorney Steve Shparber responded.

Shparber said that generators must follow PJM’s policy on the matter — not a Monitor “shadow” policy.

“There’s only one fuel-cost policy, and that’s approved by PJM,” he said.

Bowring countered that he wasn’t suggesting that there is a “parallel process.”

“We understand the process, but it’s not definitive about market power,” Bowring said.

The Monitor added that FERC’s ruling isn’t going to change how his team reviews policies, and that he didn’t think the ruling was intended to have that effect.

That exchange occurred near the middle of the meeting, but it colored many subsequent questions from stakeholders, who asked what shape the process would take and how generators would be notified about whether their policies need approval.

“In the last 18 months, we’ve been in touch with every single owner in PJM, so no one should be oblivious,” Bowring said.

Schmitt clarified that generators currently only require a policy that covers any fuel type the unit might use, but PJM plans to enhance that in the future.

“Ideally, we’d like to have a one-for-one where every unit has its own policy [for each fuel type], but we’re not there yet,” he said.

Bowring has repeatedly called for policies to be systematic, algorithmic and verifiable, but PJM has hesitated to require algorithmic accounting. That didn’t sit well with stakeholders.

“I guess my concern is you’re asking us to be comfortable with a standard that is: They comply with a document that the public cannot see,” said Gregory Carmean, the executive director of the Organization of PJM States Inc.

Catherine Mooney, who works for Bowring’s firm Monitoring Analytics, suggested developing sample-approved language that’s verifiable but not algorithmic, but Schmitt declined to commit to that.

Schmitt said PJM’s long-term plan is to get all policy information into a database rather than an approved document. Until then, RTO staff stressed that stakeholders need to follow the guidelines in the manuals.

During the meeting, PJM also displayed a slide that compared maintenance costs for units that run — which can recover for variable operations and maintenance (VOM) — versus units that don’t run, which recover avoidable cost rates. Dave Pratzon of GT Power Group questioned PJM’s grouping of combustion turbine hot gas path inspections under VOM when 2015 rule changes excluded major overhauls and inspections of CTs and combined cycle units in VOM.

Schmitt said revisions to the CT and CC rules might be necessary but will likely need to be handled with a problem statement after the fuel-cost policy issue is resolved to figure out the best way to “unwind” them, given the complexities of three-year forward-looking energy auctions.