Markets and Reliability Committee
Stakeholders Reject PJM Synch Reserve Manual Change; RTO Overrides
VALLEY FORGE, Pa. — The PJM Markets and Reliability Committee voted 54% to reject manual changes that sought to clarify how the RTO can exercise unilateral power to increase the synchronized reserve requirement, with stakeholders opposed arguing that such action should require a FERC filing and doesn’t address the root cause of underperforming reserve resources.
On May 11, PJM announced that it would be doubling the requirement, but the increase was removed May 16 and replaced with a smaller 30% increase May 19, which PJM Senior Vice President of Operations Mike Bryson said was done to reflect stakeholder feedback regarding the initial increase. (See “PJM Doubles Synchronized Reserve Requirement,” PJM OC Briefs: May 11, 2023.)
The proposed language would have specified that “PJM may schedule additional contingency reserves on a temporary basis in order to meet the largest single contingency, as necessary to account for resource performance” to meet ReliabilityFirst requirements. Senior Vice President of Market Services Stu Bresler said it was hoped stakeholders would be in consensus with PJM but that PJM plans to move forward with implementing the manual changes and the 30% increase unilaterally.
The response rate from synchronized reserve resources fell by an average of about 20% following the implementation of an overhaul of the reserve market in October that consolidated the Tier 1 and 2 products, according to a previous presentation to the Markets Implementation Committee. Bryson said PJM has a responsibility to procure reserves that can match the largest single contingency the grid faces, and it is working with Independent Market Monitor Joe Bowring to identify other solutions to address the low performance, including possibly referring resources to FERC for tariff violations.
Senior Dispatch Manager Donnie Bielak said the poor performance could be responsible for a potential violation of NERC disturbance control performance standards during the December 2022 winter storm, when PJM took just over the 15-minute window to recover from a drop in the area control error. The response rate has been stronger from former Tier 1 reserve resources, which were online through economic dispatch and able to increase output within 10 minutes, but PJM said their response will fall off in the future as their operations reflect that they are not receiving added compensation for that response above the going LMP.
The 30% increase is composed of 20% to account for the nonperformance, plus a 10% increase for uncertainty around the future response from uncommitted reserve (former Tier 1) resources. The increase amounts to a synchronized reserve reliability requirement of 2,080 MW, an increase of 480 MW. PJM’s Phil D’Antonio said the 200% increase could be brought back if it is determined to be necessary to meet the contingency reserve requirement, but that PJM will not go above that mark.
Old Dominion Electric Cooperative’s Mike Cocco said increasing the amount of reserves procured to account for underperforming resources is an “inelegant solution” and questioned what a long-term solution looks like. D’Antonio said PJM plans to bring a problem statement and issue charge around August.
Gregory Carmean, executive director of the Organization of PJM States Inc., said he believes the change would affect rates and thus requires FERC authorization, to which Bresler said the PJM tariff sets out a formula including synchronizes reserves and authorizes the RTO to set the reserve requirement.
Paul Sotkiewicz, president of E-Cubed Policy Associates, questioned if the response rate could be affected by an interaction between the October market change and PJM’s software, data input or the ancillary service optimizer. He said it doesn’t make sense that reserve resources aren’t responding to LMPs but noncommitted resources are.
“There seems to be a mismatch between what you’re describing and what’s actually going on here,” he said.
Presenting the Monitor’s perspective on the proposed language, Bowring said he doesn’t believe PJM has the authority to make the changes on its own and the focus should be on perfecting supply, rather than increasing demand. Resources providing synchronized reserves have stated to him that they have issues with the supply curve and that they’re not able to provide what they’re being committed and paid for. While he said the must-offer requirement needs to be enforced, which could include FERC referrals, that is not the optimal way of getting the desired performance.
Bowring cited as possible reasons for the low performance the accuracy of PJM’s ramp rates, ambient rates, fuel availability, demand response performance, resources failing to follow dispatch, incorrect eco max and spin max parameters, and discontinuities in the offer curves.
Stakeholders Discuss Way Forward on Circuit Breaker
PJM presented a first read of its proposal to create a “circuit breaker” to limit high prices over an extended period, continuing deliberations on a topic that divided stakeholders and yielded a half dozen proposals before the frontrunners were rejected by the MRC in December. (See “Two Proposals on ‘Circuit Breaker’ Fail,” PJM MRC/MC Briefs: Dec. 21, 2022.)
The proposal unveiled Wednesday was built off PJM’s previous Package F, which was formed in the Energy Price Formation Senior Task Force and would administratively cap LMPs to $2,000 after PJM has been in an RTO-wide operational emergency, defined as a NERC Level 3 energy emergency alert (EEA) event, and shortage price is in effect because of manual load dump or a voltage reduction. The trigger also includes a step in which PJM will evaluate how activating the circuit breaker would affect reliability and will not implement it if any concerns are identified. The circuit breaker would end once PJM is no longer under EEA 2 or 3 conditions and the shortage pricing is no longer in effect.
PJM’s previous proposal did not include an administrative review as part of the price cap trigger, and it would have terminated after a five-day period. Senior Director of Market Design Becky Carroll said the changes were made to ensure the circuit breaker didn’t harm operations and would not end while an emergency was potentially ongoing.
“We really are concerned about creating adverse impacts to system operations, and we don’t want to do that,” she said.
Carroll said the proposal is still in flux, and additional details on components, such as when the circuit breaker would be triggered, could change by the time tariff language is drafted. Bresler said PJM plans to bring the language directly to the Board of Managers without a stakeholder endorsement, as the issue has already been brought through the full stakeholder process without being able to reach consensus.
Greg Poulos, executive director of the Consumer Advocates of the PJM States, said the impact of the February 2021 winter storm on ERCOT underscored the need to create a price cap for many advocates, and he encouraged PJM to consider how other regions have reacted. He also said PJM should consider the components in the joint stakeholder package, sponsored by ODEC, Southern Maryland Electric Cooperative and Northern Virginia Electric Cooperative, given that the PJM proposal never advanced to the senior committee level. The joint package and a competing proposal from Calpine were both rejected by the MRC on Dec. 21, while five other proposals did not advance from the EPFSTF. (See “Support for Circuit Breaker Remains Mixed,” PJM MRC Briefs: Oct. 24, 2022.)
David “Scarp” Scarpignato said that under the status quo, the scarcity adder gives a buffer over the inflexibility of incorporating fuel costs into offers, which wouldn’t be possible under the uplift provided by the circuit breaker based on those offers. Most generator offers don’t fully represent fuel costs because of how that would administratively burden resource owners, he said. The circuit breaker could create a disparity between the pricing run and the dispatch run, creating a challenging reliability situation for PJM if it’s not sending the proposal signals for generators on how to operate.
The board called for the continuation of the process of creating a circuit breaker in a March 10 letter and asked that a proposal be brought to it by July.
PJM, Monitor Review IROL-CIP Proposals
PJM’s Darrell Frogg presented a first read of the RTO’s proposal to create a cost-recovery mechanism for investments required under NERC’s interconnection reliability operating limits (IROLs) under its Critical Infrastructure Protection (CIP) standards. The proposal was endorsed by the Operating Committee on March 9, receiving 89% support, while the Monitor’s proposal receive 11%. (See PJM OC Briefs: March 9, 2023.)
The proposal would function similarly to PJM’s existing black start cost-recovery mechanism, with generators submitting costs to the RTO and Monitor to review and reviews collected through charges to market participants. Supporters speaking during the OC argued that having a facility declared critical by NERC and required to make reliability upgrades is outside of their control, can carry significant costs and is unpredictable.
The MRC is slated to consider voting on the proposal during its June meeting. Assuming stakeholder endorsement, PJM plans to file a Federal Power Act (FPA) Section 205 filing around August.
Members Committee
PJM Launches Webpage for Tracking Resource Adequacy Concerns
PJM Vice President of State and Member Services Asim Haque told the Members Committee the RTO is planning to launch stakeholder processes on many of the issues discussed during a panel on reliability at its annual meeting.
A page on the RTO’s website has been created to track ongoing studies and detail how it plans to address future reliability and resource adequacy. (See “Panel Discusses Future Reliability Landscape,” PJM CEO, Panelists Address Reliability During Annual Meeting.)
Haque discussed the three timelines the overarching concerns fall into: the immediate need to support resource performance, the near-term need to ensure resource adequacy, and the upcoming concern for maintaining and attracting essential reliability services.
Public Power Decries Override of MC Endorsement on CP
Representing the PJM Public Power Coalition, Customized Energy Solutions’ Carl Johnson said it’s concerning that the PJM board has opted to disregard stakeholders’ endorsement of a proposal to revise the Capacity Performance (CP) construct to reduce the penalties generators face for not meeting their obligations during emergencies.
The MC voted May 4 to endorse a proposal redefining the penalty rate and annual stop-loss limit as being derived from the Base Residual Auction clearing prices, rather than the net cost of new entry, as well as tightening the circumstances under which PJM can declare a performance assessment interval (PAI). Later that month, the board announced that it would only be including changes to the PAI trigger in a FERC filing. (See PJM Board Rejects Lowering Capacity Performance Penalties.)
Johnson expressed his displeasure that PJM chose pieces of a larger package supported by stakeholders to present to FERC, particularly as work continues in the Critical Issue Fast Path process to create proposals overhauling the capacity market.
“It puts groups like mine in a really difficult position when we’re looking to build consensus on a proposal in the future,” he said.
American Municipal Power’s Lynn Horning said there’s open space for stakeholders to consider rules and more specificity around when packages can be partially advanced to FERC.
Avangrid Renewables’ Kevin Kilgallen said the proposal would have injected uncertainty into delivery years for which capacity auctions had already been run. The language would have been effective through the 2024/25 delivery year.
“To change the product definition without there being an urgent need to do so … between the auction and the delivery year, we thought that’s very bad policy, and it adds another level of uncertainty,” he said.
PJM CEO Manu Asthana said staff and the board don’t take the decision to override stakeholders lightly, but the RTO holds the authority to make changes under FPA Section 205 and has an obligation to make filings it believes will uphold reliability.
“I don’t want to keep doing this, but I think it’s a two-way street: We recognize where the stakeholders have … rights, and we give deference as much as we can,” he said, noting that stakeholders hold the rights to make changes related to the Operating Agreement.
