By Rory D. Sweeney

VALLEY FORGE, Pa. — With nine proposals to compare and four months left in the year, stakeholders appear to be eyeing the finish line of PJM’s yearlong effort to consider reforming its capacity construct.

Last August, a coalition of public power organizations, concerned that conversations about potential modifications to the RTO’s Reliability Pricing Model regarding the impact of state policies were taking place out of the PJM stakeholder process, began a campaign to win stakeholder approval to re-examine the RPM.

The Capacity Construct/Public Policy Senior Task Force (CCPPSTF) started meeting in March with a goal of filing with FERC by the end of the year any changes to the capacity market stakeholders agree to make.

That ambitious timeline has led the CCPPSTF to meet about twice a month and schedule six meetings in August alone. At the group’s fifth meeting for the month, stakeholders began to show signs of restlessness.

The Skinny Model

PJM’s Murty Bhavaraju explained additions to a model developed by RTO staff to compare nine capacity revision proposals using fictional and simplified numbers. PJM’s Dave Anders called it a “skinny model” because it’s designed to be shaved down to just the essential pieces to understand the mechanics of the proposals.

Adrien Ford of Old Dominion Electric Cooperative pressed RTO staff to make the model more representative of real-world conditions so that stakeholders can determine whether any of the nine proposals would work better than the existing process.

“I’m just hopeful that this skinny model is Step 1 in the analysis,” she said. “This doesn’t get me to the point where I understand whether we have an issue. … People are going to look at the numbers and the numbers aren’t realistic.”

PJM has resisted using historical numbers in the models because they will require incorporating a lot of assumptions that could drastically skew results, which stakeholders might incorrectly view as price forecasts. (See PJM Stakeholders Begin Defining Capacity Design Needs.)

Greg Poulos, executive director of the Consumer Advocates of the PJM States, asked staff to develop some way to whittle down the options to compare.

“There’s still so many on the table, it makes it hard to think about where we’d go,” he said.

Panoply of Proposals

Another round of proposals received updates from their initial presentations based on feedback.

American Municipal Power filled in some blanks in its proposal, which would emphasize long-term bilateral contracts and reduce the significance of the forward-looking annual capacity auction to fill in whatever capacity obligations remain outstanding beyond the contracts.

AMP’s Steve Lieberman said the auction would be held between 12 and 18 months prior to the start of the delivery year, with a single Incremental Auction held 30 to 60 days ahead of the delivery year. Under the current construct, PJM holds Base Residual Auctions three years ahead of the delivery year, with IAs occurring annually after that until the delivery year.

AMP is also developing the idea of a secondary capacity exchange.

John Hyatt with Monitoring Analytics expanded on the Independent Market Monitor’s proposal to extend the existing minimum offer price rule (MOPR). Monitor Joe Bowring has long argued that competitive, pure markets are unable to accommodate subsidized bids; therefore such bids must not be allowed to influence auction results.

Jennifer Chen with the Natural Resource Defense Council provided additional context to the Sustainable FERC Project’s proposal, which would reduce the capacity requirement to the needs of the off-peak season and allow seasonal resources to account for the additional demand during the peak season.

Chen said her plan would use the BRA construct to procure always-ready Capacity Performance resources up to the needs of the off-peak season (i.e., winter needs for summer-peaking zones and vice versa), then allow the peak season to be addressed using what she termed a “seasonal CP product.” The plan would shift the variable resource requirement demand curve left, reducing the annual procurement to account for the reduced amount of CP resources procured.

The plan has no repricing mechanism to eliminate the influence of subsidized offers. Subsidies that only compensate for a desired attribute, such as carbon-free generation, would leave the generation unit free to offer into the BRA to be compensated for its contribution to resource adequacy. Units that receive a subsidy sufficient for full compensation would be treated like a contracted resource, and the load-serving entities contracting that source could opt out of a corresponding amount of its capacity obligation.

The proposal left stakeholders perplexed.

“I don’t get how it addresses [subsidized units’] impacts on the market,” said Carl Johnson, who represents the PJM Public Power Coalition. “I’m really confused about how mechanically this would do that.”

Chen said her reading of the task force’s charter was that the goal is to accommodate state actions to promote certain fuel types and that her proposal does that.

Johnson asked for Chen’s proposal to outline what it definitively commits to, but Lieberman defended the ability of the proposals to be flexible.

“To me that’s actually a positive that some of these proposals don’t seem so stuck to where they’re at” and are open to feedback and revisions, he said.

The task force is turning its focus to identifying appropriate polling questions and potential repricing triggers, but both efforts received stakeholder criticism.

ODEC’s Ford asked why staff wanted to develop polling questions rather than just determine the popularity of the nine proposals. PJM’s Anders, who is facilitating the group, said he believes the group’s final vote should be on the package’s relative popularity.

“I hear your point that it may not be ready to poll on the packages,” Ford said. A poll on various capacity construct components is “better than nothing,” she said, “but it would be better to poll the packages.”

Exelon’s Jason Barker asked why the task force was waiting to address the repricing triggers, as most proposals reference a trigger but fail to identify a specific mechanism. Anders said that since almost all of them are to be determined, the actual trigger can be determined later once the group has agreed on a plan.