Markets and Reliability Committee
Give me a B…
VALLEY FORGE, Pa. — PJM is attempting to calculate the market seller offer cap (MSOC) for Capacity Performance units for the 2021/22 delivery year, but it’s come across a hitch in the process, stakeholders learned at last week’s Markets and Reliability Committee meeting.
The MSOC is calculated using the balancing ratios, often represented as “B,” from the three calendar years prior to the Base Residual Auction. The BRA for 2021/22 will happen next May.
B is calculated when emergencies, or performance assessment hours (PAHs), are called. It is used to determine each generation capacity resource’s obligation to deliver energy during the PAH.
However, no PAHs happened in 2015 or 2016, and none has happened so far in 2017. Even if one did, the resulting B might not be known in time for the MSOC values to be posted mid-December, PJM’s Adam Keech explained. That timing is important because market sellers will need to determine in early January whether they want to use the default MSOC values or pursue unit-specific valuations, he said.
PJM has proposed revising the Tariff to carry over the B used in the 2020/21 BRA of 78.5%, along with a problem statement and issue charge to explore a long-term solution that would be filed with FERC by October 2018, in time for the 2022/23 BRA. The focus of the investigation would be to determine if B should remain based on historic performance or something more prospective. Keech gave a presentation on the issue at September’s Market Implementation Committee meeting.
Joe Bowring, PJM’s Independent Market Monitor, disagreed with the proposal, saying the current Tariff language addresses such a situation. The math, he said, implies that B goes to zero and the MSOC values revert to each unit’s avoidable cost rate (ACR). Keech disagreed with that interpretation.
“In the absence of data, we don’t just assume that it is zero. And that’s the case that we don’t have balancing ratios to use,” he said. “PJM is not comfortable assuming that it’s just zero because that’s not the way the Tariff reads.”
“I’m not assuming anything,” Bowring responded. “It is a fact that there is zero performance assessment hours. It is a fact that the average of the last three years is zero.”
Calpine’s David “Scarp” Scarpignato asked how PJM planned to address other formulas that use B, such as the CP penalty calculations.
“If you’re changing your assumptions or calculations related to performance assessment hours [and how B is calculated], you should change it elsewhere in CP also because it’s all tied together,” he said.
Stakeholders raised additional concerns, such as the use of 30 expected PAHs in the formula. Borgatti suggested adopting ISO-NE’s flat fee for the penalty instead of being formula-based. Following the discussion, PJM agreed to review the proposed Tariff revisions, problem statement and issue charge and bring the revised versions for a vote at next month’s meeting.
Amendment on DER Charter Sparks Debate
PJM proposed a draft charter to transfer all of its work on distributed energy resources into a subcommittee, but a friendly amendment by FirstEnergy sparked debate on how stakeholders should defer to local and state governments.
FirstEnergy proposed that the charter include a statement that “market rules must respect the distribution system and state/local jurisdictional agency standards and protocols to ensure safety and reliability. Rules should adhere to all pertinent jurisdictions and respect the Relevant Electric Retail Regulatory Authority (RERRA).”
Under FERC Order 719-A, demand response resources served by large electric distribution companies (>4 million MWh) are permitted to participate in wholesale markets unless their RERRA — such as a state regulatory commission — prohibits it. DR resources served by small EDCs (<4 million MWh) are prohibited from participation without RERRA approval.
PJM’s Chantal Hendrzak presented the proposed charter, saying the current problem statement and issue charge on DER is “very narrow” and should be broadened to incorporate issues such as microgrids, coordination with EDCs, the visibility of non-wholesale resources and the pending FERC Notice of Proposed Rulemaking on DER and energy storage RM16-23, AD16-20). (See FERC Rule Would Boost Energy Storage, DER.)
Hendrzak said special sessions of the Market Implementation Committee are not the right forum for the issues, which affect markets, operations and planning.
FirstEnergy’s Jon Schneider said the additional language was necessary to ensure the involvement of EDCs. “We think it’s important to have the right folks at the table, specifically distribution operators,” he said. “We don’t think it’s appropriate to assume that transmission operators will fully represent the interests of distribution utilities.”
“There is nothing that PJM does that would violate a reliability rule at the distribution company,” responded Direct Energy’s Marji Philips. “My concern is this is a very evolving industry. … To flatly say … that we’re not going to even talk about something because it violates an existing rule today doesn’t do anyone any good. The purpose of PJM is to provide a platform for discussion.”
Several stakeholders were concerned with another addition to the charter, which would require the subcommittee “proactively collaborate with states.” American Municipal Power’s Steve Lieberman said that commitment could lead to conflict about favoritism or prioritization.
“With 13 states [in PJM], if two of them feel you weren’t as proactive with them as you were with the other 11, then things could start to snowball unnecessarily,” he said.
Susan Bruce, who represents the PJM Industrial Customer Coalition, objected to the charter’s definition of DER including any generation or storage resource “behind a load meter.”
“Visibility into an industrial customer’s behind-the-meter generation that becomes visible to the world gives them a competitive disadvantage, and that’s a sensitivity that we would hope that PJM would respect for retail customers that are looking to just mind their own business, support their own operations,” she said. “The principle of what goes on behind a customer’s meter really is not anyone else’s business. It’s their economic decision from that perspective.”
Scarp found security in FirstEnergy’s amendment.
“If we’re going to delete that friendly amendment, I’m not sure I can still support the [proposed charter] because I don’t want to guarantee DER participation in the wholesale market. I think that’s a little bit strong when there’s lots of other things going on,” he said.
Hendrzak said staff will consider the comments in revising the charter before seeking an approval vote next month.
MTSL ‘Not Going Away’
The Monitor sought to resume a debate on calculating the minimum tank suction level (MTSL) for black-start units, arguing that the vote at September’s MIC meeting to forego changes was “clearly wrong.” However, Ruth Ann Price of the Delaware Division of the Public Advocate, who intends to sponsor the Monitor’s proposal, asked Bowring to delay his comments until the issue can be brought back to the committee after further consideration. (See “MTSL Revisions Kaput,” PJM Market Implementation Committee Briefs: Sept. 13, 2017.)
Greg Poulos, the executive direction of the Consumer Advocates of the PJM States, explained that he had advised his membership “that this might not be the best time” to bring up the issue, which represents a relatively small amount of money, when there are many larger topics being debated.
Still, proponents warned that the issue wasn’t dead.
“There is a bit of heartburn if this comes off the table,” Bruce said. “To the extent that this is a vehicle being used for resilience, we would hope that there would be explicit recognition of that fact, that we are paying for this as a service.”
“As far as we’re concerned, this issue is not going away,” Bowring said. “It’s being postponed for a meeting or two. If you want to get it over with quickly and not waste any more time, just vote.”
‘Jump Ball’ on IA Changes Indicates Compromise Possible
None of six proposals considered by the Incremental Auction Senior Task Force won support of more than 39% of those taking part in a recent poll, but half the respondents called for some change to the status quo, giving some stakeholders hope that the issue is not dead. (See Consensus Fades on PJM Incremental Auction Solution.)
PJM’s Brian Chmielewski, who administers the task force, said the “jump ball” suggests that compromise is possible.
“Ending up with the status quo from a customer standpoint is not the right result,” Bruce said. “In the interest of not ending up with status quo, we are willing to negotiate, so I hope we get a chance to do so.”
“In the old days, we all gave blood,” said Philips, whose company proposed the problem statement that founded the group. “It looks like nobody wants to give blood anymore. The art of compromise is part of this process, and I hope we haven’t lost it.”
The group’s next meeting is Oct. 17.
Stakeholders Endorse Manual Revisions
Stakeholders endorsed several manual revisions and other operational changes:
- The charter for the Primary Frequency Response Senior Task Force. (See “Primary FR Task Force Begins July 25,” PJM OC briefs: July 11, 2017.)
- Tariff and Operating Agreement revisions to clarify definitions developed through the Governing Documents Enhancement & Clarification Subcommittee.
- Manual 3A: EMS Model Updates and Quality Assurance. Revisions developed in response to a periodic review of the manual were endorsed by acclamation.
- Manual 6: Financial Transmission Rights. Revisions developed to comply with FERC’s January order on financial transmission right forfeitures were endorsed in a sector-weighted vote with 4.26 in favor. (See “FTR Forfeiture Rebilling to Start,” PJM Market Implementation Committee Briefs: Sept. 13, 2017.)
- Manual 11: Energy & Ancillary Services. Updated language to implement intraday generation offers were endorsed by acclamation. (See “PJM, IMM Agreement on Intraday Offers Seen as ‘Massive Change,’” PJM Market Implementation Committee Briefs: Sept. 13, 2017.)
- Manual 14A: Generation and Transmission Interconnection Process. Revisions developed in response to a periodic review of the manual were endorsed by acclamation.
- Manual 14B: Regional Transmission Planning Process. Revisions change the method for calculating capacity export transfer limits. (See Post-‘Wheel’ Changes Spark PJM Member Concerns.)
- Manual 28: Operating Agreement Accounting. Changes eliminating redundant language and clarifying procedures associated with the implementation of intraday offers were endorsed by acclamation.
Members Committee
Stakeholders Approve Proposals
The Members Committee approved all proposals presented to them, including Tariff and Operating Agreement changes associated with PJM’s dynamic schedule pro forma agreements. (See Critics Protest PJM Dynamic Transfers Plan.)
Members also approved Tariff and OA revisions on limitations of billing claims and changes extending the proposal window for short-term transmission projects from 30 days to 60 days. (See “RTEP Cycle Revisions Approved,” PJM PC/TEAC Briefs: July 13, 2017.)
Nominating Committee Nominations Approved
Stakeholders appointed a representative from each of the five stakeholder sectors to a one-year term on the committee. The committee will be tasked with considering whether to nominate Neel Foster, Howard Schneider and Sarah Rogers, whose terms expire next May, for re-election to the Board of Managers.
DC Energy’s Bruce Bleiweis asked whether term limits could be waived “since we only have one original board member and we would not want him to leave” — a reference to Schneider, who has served on the board since its inception in 1997.
In 2015, PJM instituted term limits making board members ineligible for re-election once they either turn 75 or have served five three-year terms. (See New PJM Board Member Elected, Re-election Eligibility Changed.)
“I think waivers can be done through the board,” PJM CEO Andy Ott said. “I think I’ll just leave it at that.”
Reducing the Workload
MC Vice Chair Mike Borgatti of Gabel Associates announced that the MRC, MIC, Operating Committee and Planning Committee will be directed to determine if any timelines can be relaxed to “free up a little room in the schedule.” The directive came at the request of stakeholders, who have been complaining about the roughly 500 stakeholder meetings PJM conducts each year.
The workload concern is nothing new. In 2013, one member likened the stakeholders to ponies who will eat themselves to death if given unlimited access to food. (See PJM Faces Resource Limits.)
— Rory D. Sweeney