VALLEY FORGE, Pa. — Going into last week’s Market Implementation Committee meeting, it appeared that PJM and its Independent Market Monitor would not find common ground regarding several changes to Manual 11 in preparation for implementing intraday offers on Nov. 1. (See “Revision on Intraday Offers Postpones Vote,” PJM MIC Briefs: July 12, 2017.)

“I don’t believe we are going to come to agreement on [the differences], so even if we delay the vote until next month, there is still going to be a difference of opinion,” said PJM’s Lisa Morelli.

But stakeholders pressed the sides to coalesce around a proposal, which resulted in PJM and Monitor staff — along with Calpine’s David “Scarp” Scarpignato — huddling during a break to hash out their dispute. The outcome is expected to be available for the Markets and Reliability Committee meeting on Aug. 24.

The issues were twofold: first, whether or not generators’ ability to “opt in” to utilizing intraday offers must be enunciated in their fuel-cost policies; and second, how to apply offer caps when a unit decides to change its offer after it has already received a commitment and failed the three-pivotal-supplier test.

Later in the meeting, IMM staff member Joel Romero Luna detailed differences with PJM on the triggers for updating price- and cost-based offers. The Monitor argued that they need to be updated simultaneously, even if the generator only wishes to update one, and the fuel-cost policy must specify the events that will trigger an update. If both offers did not have to change at the same time, it would permit the exercise of market power, the Monitor said.

“The point of intraday offers is to ensure that the current market value of gas is reflected in power prices. If the cost of gas goes down during a day and the generation owner does not have to reduce the offer, then the result is the exercise of market power,” Monitor Joe Bowring said. “If the generation owner opts for flexibility, which we think is a good idea, flexibility must reflect both increases in gas costs and decreases in gas costs.”

The Monitor also argued that all market-power mitigation analysis and approval should keep up with offer updates, but PJM said those revisions would require additional Tariff changes that might not receive FERC approval by the necessary Nov. 1 implementation date. PJM’s revisions, staff argued, could be implemented immediately. The Monitor’s changes would also require additional software changes, Morelli said.

PJM hoped to have its revisions approved and then work with the Monitor on its revision requests, but stakeholders asked that the two staffs resolve their differences before taking a vote.

“You can get it together now, or let’s go straight for guns and lawyers,” said Ruth Ann Price of the Delaware Division of the Public Advocate office. She expressed worry that no process had been defined or agreed upon to address the Monitor’s concerns if the PJM revisions were endorsed, and about the costly and time-consuming process involved in filing an action at FERC that could impede the smooth implementation of intraday offers.

Scarp said it was important that any additional changes be discussed through the stakeholder process and not be a “grand bargain” between PJM and the Monitor. Morelli said any changes would be presented as an expedited problem statement and issue charge.

The Monitor’s position received some pushback from generation owners.

“I think that if [an offer is] not mitigated, I shouldn’t have to have people sitting around, making work for them, just to appease [the Monitor] just because we made a market decision,” American Electric Power’s Brock Ondayko said.

UGI’s Gil Crystle questioned why price- and cost-based offers should be linked in the fuel-cost policy for simultaneous updating, as price-based offers can be adjusted for little more reason than just trying to get dispatched. “My price-based offer, I can change that all day long for no apparent reason, right?” he asked. “There can be a scenario where I don’t even care. … I’ll take whatever the market bears.”

Following the conclave, the sides agreed to defer the MIC vote until September’s meeting but work together to have the single proposal prepared for the August MRC meeting. The MRC vote will be held at the September meeting. The proposal will include all revisions that both sides agree can be implemented by the Nov. 1 deadline. They will also present Tariff and manual changes that both sides agree on, but that PJM believes will require FERC approval for implementation. The Monitor will present a problem statement and issue charge in September or October for the “opt in/opt out” changes on which PJM does not agree.

In a related disagreement, PJM and the Monitor also outlined their differing Manual 11 revisions for energy market offer verification. PJM’s revisions would limit offers to a hard cap of $2,000/MWh for dispatch and setting LMPs. Only cost-based offers would be allowed to exceed $1,000, and all but those that set LMPs would require verification. The Monitor acknowledged verification is essential and raised a list of issues with PJM’s proposal focused on the inadequacies of PJM’s approach to verification.

PJM is also removing references to offer capping and market-power mitigation from Manual 28, as they are now in Manual 11.

Fuel-Cost Policy Update

As part of the preparation for implementing intraday offers on Nov. 1, PJM and IMM staff have been working with generators to get fuel-cost policies reapproved. Policies were submitted in May to conform with recently implemented analysis changes. (See PJM Monitor Rejects Fuel-Cost Policies for 11% of Units.)

Romero Luna said 56% of units passed Monitor evaluation for Nov. 1. Among the failed submissions, some only required minor changes such as formatting, while others required major changes to conform with the new rules regarding intraday offer updates. The policies requiring major changes are “all gas units, basically,” Romero Luna said.

PJM’s Jeff Schmitt also outlined changes that the RTO is requesting for fuel-cost policy submissions, such as indicating if the variable operations and maintenance, emissions or 10% adders are used in cost-based offers.

“You’ve got to think through how you’re going to create a $1,000 offer and above,” he said.

IMM Problem Statements Approved

Stakeholders endorsed by acclamation two problem statements and issue charges proposed by the Monitor. (See “IMM Presents Problem Statements on Transmission,” PJM MIC Briefs: July 12, 2017.)

The first set addresses what the Monitor believes is the need for clear rules governing the use of transmission penalty factors in setting prices in the PJM energy market when there is locational scarcity.

The second addresses market path/interface pricing point alignment, calling out situations that can arise when market participants submit transactions that are not consistent with actual physical power flow. Market manipulation results when scheduling is inconsistent with actual power flows, Bowring said. “There’s not an explicit rule” covering the issue, he said. “There needs to be a clear rule for the benefit of those entering transactions, for other market participants and to ensure that market power is not exercised.”

— Rory D. Sweeney