Markets and Reliability Committee

Stakeholders Endorse Multi-schedule Modeling Solution

VALLEY FORGE, Pa. — The PJM Markets and Reliability Committee on Dec. 20 endorsed a proposal to add multi-schedule modeling capability to the market clearing engine (MCE) without causing a substantial increase in computational times. It would do so by using a formula to narrow the number of market seller offers entered into the engine.

The proposal, originally sponsored by PJM at the Market Implementation Committee, would adopt the formula currently used in the day-ahead market to select one schedule from a resource to be modeled by the MCE, with the aim of arriving at the lowest total dispatch cost. The introduction of multi-schedule modeling is one part of a larger overhaul of the engine under PJM’s Next Generation Markets (nGEM) initiative. (See “Endorsement of Multi-schedule Modeling Solution Deferred,” PJM MRC/MC Briefs: Nov. 15, 2023.)

The package received 72% support, heading off consideration of an alternative brought by GT Power Group and PJM that modified the formulaic approach by reducing the offer types considered when a resource is mitigated for market power and during emergency conditions. Resources that fail the three-pivotal-supplier (TPS) test would be mitigated to their cost-based offers, disregarding any price-based offers; during emergency conditions, capacity resources would be limited to their price-based parameter-limited offers.

The new approach is meant to address an issue PJM identified with multi-schedule modeling in which the number of configurations under which a combined cycle generator can operate leads to a large number of schedules that those resources can offer into the real-time market. Considering all of those schedules would lead to an exponential increase in computational times, exceeding the 2.5-hour clearing window, PJM said in the MIC-approved problem statement.

The changes to the MCE redesign planned in the nGEM process also includes expanding the ability to consider the varying operating models for energy storage and hybrid resources, which PJM said may also increase solution times.

PJM’s Danielle Croop said the formulaic approach will look at the highest configuration for combined cycle generators and will be applied to storage when those resources are discharging.

Deputy Independent Market Monitor Catherine Tyler said PJM’s approach would open new opportunities for market power exercise and market manipulation that don’t exist now, particularly through a “crossing curves” issue where the engine considers offers only at their economic minimum (EcoMin) value even if that offer becomes more expensive at higher outputs. The alternative motion sought to address that possibility by using cost-based offers to mitigate resources that have the potential to exercise market power and using parameter-limited schedules during emergency scenarios.

Tyler also highlighted a concern that by considering only one of a resource’s cost-based offers, dual-fuel generators may be selected to run on a schedule using a fuel that is not economical for a portion of the day. She said neither of the proposals before the MRC would have resolved the issue.

Paul Sotkiewicz, president of E-Cubed Policy Associates and representing J-Power USA, said PJM’s proposal puts market monitoring ahead of least-cost operations. But he argued that it still is the best choice for implementing multi-schedule modeling out of a series of bad options stemming from the vendor administering the nGEM being unable to deliver on its promised capabilities. He argued PJM could have invested more effort into exploring algorithms and higher computational power as solutions that leave market design intact.

PJM Presents Regulation Market Rework

Stakeholders endorsed a proposal to overhaul the regulation market to operate on a single price signal and rely on two products representing a resource’s ability to adjust their output up or down. (See “PJM Presents Regulation Market Rework,” PJM MRC/MC Briefs: Nov. 15, 2023.)

The proposal would shift the market to a single signal and resources offering regulation up and down products, rather than the current approach of having both Regulation A for long deployments and Regulation D for fast response paired with a bidirectional product offered by generators.

The market redesign also contains several smaller changes, including using a ramp-limited lost opportunity cost (LOC) calculation designed to avoid overestimating LOC; a 30-minute clearing and commitment period; and a reworking of performance scoring to consider only the precision of a resource’s deployment, rather than accuracy, delay and precision. The number of qualification tests for new resources also would drop from three to two, and disqualified resources would need to pass one test rather than three to re-enter the market. Croop said PJM’s experience has been the number of tests conducted is higher than necessary.

Croop said PJM intends to bring the proposal to the Members Committee for endorsement this month and likely would ask FERC for a one-year implementation period, with a prospective effective date in spring 2025.

The market overhaul would be split into two phases, with the first year introducing all the changes except the RegUp and RegDn products, which would be added in the second year. Croop said implementing the products involves many changes and splitting the proposal into phases would provide the time necessary to do the work properly without holding up the other components.

Monitor Joe Bowring said the proposal would significantly improve the regulation market, but it also raises several areas of concern. He said the plan to introduce separate regulation up and down products is “clearly not fully developed and requires more modeling to understand the potential impacts, including interactions with the energy market.”

Bowring also said the proposal includes inflated opportunity costs that are inappropriately carried from hour to hour in the hourly regulation market. He argued that regulation revenues should be included in the calculation of uplift payments, as they had been in the past, to be consistent with the treatment of all other market revenues in defining the need for uplift. The arbitrary exclusion of regulation revenues results in an unsupported increase in uplift payments, he said.

While generation revenues likely would decline due to the LOC changes, Calpine’s David “Scarp” Scarpignato said the changes still are needed because of how dysfunctional the market is.

Energy Price Formation Senior Task Force Sunset

The MRC voted to sunset the Energy Price Formation Senior Task Force as part of the consent agenda, concluding a process focused on creating a “circuit breaker” to limit extreme pricing that outweighs any added reliability.

The group considered several packages, but none received majority support from the task force. Two were brought to the MRC in October 2022, where they also did not receive endorsement during a December 2022 vote. Greg Poulos, executive director of the Consumer Advocates of the PJM States, said advocates were frustrated the process was being closed before a circuit breaker design could be reached and are concerned about the potential for PJM to see the price spikes ERCOT experienced during the February 2021 winter storm. (See “Two Proposals on ‘Circuit Breaker’ Fail,” PJM MRC/MC Briefs: Dec. 21, 2022.)

Scarp said a decision ultimately had to be made and many flaws were identified with the circuit breaker designs.

“Sometimes the medicine is worse than the disease you’re trying to cure,” he said.

Members Committee

Elections Held for Several Stakeholder Positions

The MC approved a slate of new Finance Committee members, sector whips and its vice chair for 2024.

Lynn Horning, director of PJM regulatory affairs at American Municipal Power, was selected to be the MC vice chair, which puts her in place to assume the chair position in 2025 under the committee’s rotating schedule.

The new Finance Committee members, whose terms expire in 2026, include:

• • Barney Farnsworth, of the Wellsboro Electric Co., representing Electric Distributors;
  • Poulos, representing End-Use Customers;
  • George Kogut, of the New York Power Authority, representing Other Suppliers; and
  • Gary Mason, of Monongahela Power, representing Transmission Owners.

The 2024 sector whips, who serve one-year terms, include:

• • Bill Pezalla, of Old Dominion Electric Cooperative, for Electric Distributors;
  • Poulos, for End-Use Customers;
  • Scarp, for Generation Owners;
  • Steven Kirk, of NextEra Energy Marketing, for Other Suppliers; and
  • Jim Davis, of Dominion Energy, for Transmission Owners.

Scarp, the outgoing MC chair, finished his term by saying that 2023 will go down as a consequential year of change for PJM, with several major changes made to the markets to bolster reliability and prepare for the clean energy transition. He said stakeholders worked constructively during the Critical Issue Fast Path process, resulting in two filings pending at FERC that support the fundamentals of supply and demand.

Multi-schedule Modeling Proposal Approved

The committee also endorsed PJM’s proposal for implementing multi-schedule modeling, receiving 70% sector-weighted support. The item was added to the committee’s agenda following the MRC vote.