WILMINGTON, Del. — PJM’s initiative to internalize all generator payments moved forward at last week’s Markets and Reliability Committee meeting when stakeholders endorsed the RTO’s proposed problem statement and issue charge to examine price formation procedures for its energy markets.

Adam Keech, PJM’s executive director of market operations, faced scrutiny during an initial presentation Thursday, but returned later in the meeting with a significantly revised version that was endorsed by acclamation with 12 objections and 14 abstentions.

James Wilson, who consults with consumer advocates for several states within the RTO’s footprint, took issue with PJM defining the “price formation goal” as “maximizing the social welfare objective.”

“It sounds like the problem statement is trying to narrow what the stakeholder process can focus on,” he said.

Keech assured that wasn’t the intention. Caveats were added to the endorsed version to explain the objective and indicate that it was “in addition to” other goals.

He also said he was unsure if FERC’s order that day for the RTO to clarify or modify its fast-start resource pricing would be part of that evaluation. (See related story, FERC Drops Fast-Start NOPR; Orders PJM, SPP, NYISO Changes.)

Stakeholders sought assurances for a variety of tangential evaluations that Keech said PJM would undertake, though the endorsed proposal does consider as out of scope any discussions about impacts on and changes to capacity markets, among other things.

“I don’t think we have any intention of skipping out on the analysis here,” he said, but acknowledged “there may be other changes we’d like to make, but they’re not necessarily needed … for this group to move forward.”

Calling it a “dramatic change,” Independent Market Monitor Joe Bowring proposed an alternative analysis that called for individual examination of energy market components.

“If we’re going to do this review, let’s do it comprehensively so we come to the right conclusion,” he said.

“It’s a lot cleaner than PJM’s in terms of identifying the problem and what needs to be worked on,” Wilson said of Bowring’s proposal.

“I think there are some things in here that maybe give us a little bit of concern,” Keech said, but “the concept of including operator actions in LMP certainly [does] not.”

Because PJM’s proposal was endorsed, the Monitor’s was never considered for a vote.

Fuel-Switch Clarifications Endorsed

A debate that escalated at the Dec. 12 Operating Committee meeting was resolved after stakeholders endorsed clarifying text along with manual changes addressing gas pipeline contingency plans. The text box indicates that PJM “may need to direct” switching to an alternate pipeline or fuel on a pre-contingency basis and that it “will use best operator efforts” to move interruptible users off before firm service users. The revisions were endorsed by acclamation with seven objections and four abstentions.

Earlier in the meeting, stakeholders endorsed revisions to Manual 3: Transmission Operations and Manual 13: Emergency Operations, which include processes for addressing gas pipeline disruptions that affect generator reliability.

PJM’s Dave Souder announced that his staff are developing a problem statement and issue charge on the topic to be unveiled at the Jan. 10 Market Implementation Committee meeting.

Dave Pratzon of GT Power Group expressed concern that PJM “doesn’t have authority to tell a generator which” fuel source to use.

“This is a major expansion of PJM’s authority,” he said. “We need to think about it in terms of Tariff changes.”

O’Connell, who proposed the clarifying text, acknowledged the concern but said it will need to be addressed later.

“There needs to be some kind of bright line. How far inside the fence can PJM go?” he said. “We were in general agreement that trying to address those issues was more than we could bite off in the time frame we had.”

Incremental Auction Revisions Endorsed

Despite some stakeholder frustrations, proposed Incremental Auction (IA) revisions received endorsement with a sector-weighted vote of 3.55, surpassing the 3.33 threshold. They next go for endorsement at the Jan. 25 Members Committee.

The revisions — which would change in what IAs and for how much PJM can offer excess capacity commitments — received criticism at the Dec. 7 MRC for being presented as if the Incremental Auction Senior Task Force (IASTF) had endorsed them. In fact, the task force vote fell seven votes short of endorsement. Exelon’s Sharon Midgley moved for the vote.

Bowring criticized the proposal for making it “too easy to get out of your capacity commitment” and voiced support for PJM’s original proposal. The endorsed version was a variation of that proposal.

Marji Philips with Direct Energy reiterated previous criticism that “the process was subverted into a lot of other interests” away from the company’s original goal when it proposed initiating the IASTF.

“In this case, we believe this is actually worse than the status quo at this point,” she said. “This addresses a lot of other problems, but not the ones that it was initially designed to.”

“We support this package as a compromise,” said Susan Bruce, who represents the PJM Industrial Customers Coalition. “It is not perfect, but in this case, we do not want perfect to be the enemy of good enough. … We look at this as PJM taking on a commitment on behalf of load.”

“It’s not a benefit for load. It’s a benefit for suppliers because those suppliers with excess will be able to undercut” PJM’s mandated BRA price offer, CPower’s Bruce Campbell said. He offered to support anyone who motioned Package D, a competing proposal, but received no takers.

Customers, Competitors Battle TOs on Project Cost Caps

The fight over whether PJM should consider cost cap guarantees on more than construction costs in transmission-development proposals rages on.

PJM’s Sue Glatz presented proposed changes to the Operating Agreement that would include caps on construction costs in the RTO’s proposal evaluation, but LS Power’s Sharon Segner presented a counterargument that cost cap considerations should extend to factors such as return on equity and annual revenue requirements.

The proposal is “very divergent from other FERC-approved tariffs” and “doesn’t actually answer the question about how PJM will consider cost estimates versus cost-containment provisions,” Segner said.

American Municipal Power’s Steve Lieberman “strongly” supported Segner’s position, and Bowring also endorsed it.

Representatives of several transmission owners supported PJM’s proposal. Alex Stern of Public Service Electric and Gas and Tonja Wicks of Duquesne Light acknowledged they were initially against adding cost cap provisions but eventually changed tack.

“It was a balanced negotiation, so we relented to have cost cap language” included as long as it remained restricted to construction costs, Wicks said.

PJM’s proposal will be up for endorsement at the January meeting, and Segner will need to make a separate proposal if desired.

Acclamation Votes

Stakeholders endorsed by acclamation several manual revisions and other operational changes:

• Manual 1: Control Center and Data Exchange Requirements. Revisions developed to update NERC references and procedures related to outages and system-restoration planning. PJM members will be required to send the RTO data on transmission megawatt and MVAR flows and bus voltages at greater than or equal to 100 kV, down from 345 kV.
• Manual 10: Pre-Scheduling Operations. Revisions developed to comply with NERC standards as part of a periodic review of the manual. Generators will be required to notify PJM of operating conditions that could result in a single contingency causing an outage of multiple generators.
• Manual 14D: Generator Operational Requirements. Revisions developed as part of a periodic review. Generators will need to be modeled in eDART consistent with the PJM energy management system model.
• Revisions to the Tariff, Manual 28: Operating Agreement Accounting and Manual 6: Financial Transmission Rights resulting from special sessions on FTR issues. The revisions will address changes to long-term FTR modeling for future transmission expansion, streamlining management of overlapping FTR auctions and allocating any surplus funds from day-ahead congestion and FTR auction revenue. Members endorsed the auction surplus proposal at the Dec. 13 MIC meeting, which allocates all surplus to auction revenue rights holders. The changes will be implemented for the 2018/19 planning period. (See related story, “FTR Changes in the Works,” PJM MIC briefs: Dec. 13, 2017.)
• Members will be asked to endorse changes to the procedures for the study of transmission service requests and upgrade requests in the new services queue process. (See “Interconnection Study Process to be Rearranged,” PJM Planning/TEAC Briefs Oct. 12, 2017.)

— Rory D. Sweeney