Stakeholders Endorse Proposal on Large Load Capacity Obligations

VALLEY FORGE, Pa. — PJM’s Market Implementation Committee on April 3 endorsed a package revising how capacity obligations associated with forecast large load additions (LLAs) are assigned to electric distribution companies (EDCs).  

The Dominion Energy and American Electric Power (AEP) proposal aims to prevent an LLA expected in a region participating in the Reliability Pricing Model (RPM) from increasing the capacity obligation for Fixed Resource Requirement (FRR) regions and vice versa. 

In prior MIC meetings, AEP’s Joshua Burkholder said once PJM includes an LLA on Table B-9 of its load forecast, the need to procure additional capacity is spread across that transmission zone. When a zone includes both RPM and FRR regions, an FRR entity may be required to procure more capacity than is needed to serve its customers, he said. 

The issue has become particularly prominent as evolving forms of load create pockets of high energy consumption, namely data centers and industrial customers such as steel mills or chip manufacturers, Burkholder said. 

The proposal was revised from the first read conducted at the March 6 MIC meeting to add transparency around how PJM includes LLAs in its load forecast and how they impact auction parameters. The Tariff and Manual 18 revisions would require the RTO to post LLAs and adjusted FRR and RPM scaling factors and align those postings with the pre-auction activity timeline. (See “1st Read of Proposal on Capacity Obligations Resulting from Large Load Additions,”  PJM MIC Briefs: March 6, 2024.) 

The changes also clarify that EDCs may submit LLAs to PJM, although load-serving entities, electric cooperatives and municipal power authorities may elect to submit their own forecasts instead. 

The package would revise the capacity obligation calculation to exclude any LLAs included in Table B-9 from base zonal scaling factors and add those LLAs back into the equation when determining the obligation peak load input. 

Lynn Horning, of American Municipal Power (AMP), said the transparency additions improved the proposal, but they would not resolve potential downstream issues with PJM lacking a process that ensures accuracy in identifying large load forecasts adjustments submitted by market participants. 

Independent Market Monitor Joe Bowring pointed out the proposal ignores the effect of changes in the forecasts of LLAs on customers outside the affected locational deliverability area (LDA). “If large load additions are forecast prior to the capacity auction but fail to materialize, the costs of the large load addition are spread to other LDAs. This proposal addresses only cost shifting within an LDA but not across LDAs.”

First Read of CIFP Governing Document and Manual Revisions

PJM’s Skyler Marzewski gave a first read of the first phase of governing document and Manual 18 revisions to implement capacity market changes approved by FERC following the Critical Issue Fast Path (CIFP) stakeholder process held last year. (See FERC Approves 1st PJM Proposal out of CIFP.) 

The language reworks the RTO’s resource accreditation calculations, how it models reliability risks and the inputs used to determine how much capacity must be procured in Base Residual Auctions (BRAs) and by FRR entities. The changes are effective for the 2025/26 delivery year except those related to performance testing and penalty charges for demand response resources, which are effective for the 2024/25 delivery year. 

The penalties market suppliers must pay for underperforming during emergency conditions would be reindexed to be based on BRA clearing prices rather than the net cost of new entry, effectively reducing both the hourly penalty rate and annual stop loss limit. 

Resources expected to come online between the conclusion of the auction and the start of the delivery year would be required to notify PJM of their intent to participate in the auction ahead of time. 

Marzewski said the draft governing document and manual language codifying the remainder of the changes approved in ER24-99 is expected to be brought to stakeholders after the 2025/26 Base Residual Auction in July with the aim of implementing the changes by December. 

PJM Provides Guidance on Co-located Load Configurations

PJM’s Tim Horger walked through a posting the RTO issued in March providing market participants with information about the rules around the two configurations for load co-located with generation. Horger told the MIC the guidance reflects the status quo rules and not any new interpretation of existing manual language. (See “Proposed Rules for Generation with Co-located Load Rejected,” PJM MRC Briefs: Oct. 25, 2023.) 

Much of the focus is on co-located load that does not receive network service from PJM, which is not considered FERC jurisdictional and therefore does not pay PJM fees or receive firm transmission service. Under such circumstances, the generator must reduce its capacity interconnection rights (CIRs) by the “highest expected hourly demand” for the load and have system protection facilities in place to ensure that if the generator goes offline, the load also trips and cannot receive any energy from the PJM grid. 

A portion of the resource can serve as a backup generator to the non-network load while retaining CIRs if it can continue to meet its capacity and energy must-offer requirements. The load must be reduced to zero before being served by the backup generator, which must be approved for an outage for the period it is serving the load. 

PJM’s recommended co-location configuration is for the load to receive firm transmission service from the RTO, which will study the network impact of the change and subject the load to service charges. Both the generator output and the load must be metered separately for settlement and operational security under the networked configuration, and the generator is able to retain its CIRs. 

The distinction between network and non-network load is enshrined in the generator’s PJM service agreement and is considered permanent unless the agreement is revised and necessary network upgrade studies are completed. 

The guidance comes after several proposals to rework co-located load rules failed to receive stakeholder support in October 2023. One of the core sticking points between the proposals was whether capacity resources should be permitted to retain their CIRs while serving non-network co-located load if that load could be quickly curtailed to allow the generator to meet its capacity obligation. 

PJM attorney Mark Stanisz said modifying a generator’s configuration would require re-entering the interconnection queue, but at a different point that would not place it at the back of the line like an entirely new resource. Due to the number of factors that could influence the potential network impacts, he said there is no typical timeline for how long the studies may take. 

Horger said the studies are similar to those conducted for a generation deactivation request, though they vary between specific configurations. Any costs associated with reducing CIRs would be assigned to the generator. 

Discussion of Energy Efficiency Resources Continues

Discussion of energy efficiency resources’ role in the capacity market continued after four packages were rejected by the Markets and Reliability Committee on March 20. PJM’s Pete Langbein said staff does not plan to move ahead with a proposal revising its approach to measuring and verifying the capacity offered by EE after its package was rejected alongside three stakeholder alternatives. Langbein said PJM continues to believe that EE rules need to be more robust, and it plans to continue working with stakeholders toward a compromise resulting in a FERC filing. (See “Stakeholders Reject Changes to EE Measurement, Verification,” PJM MRC/MC Briefs: March 20, 2024.) 

Bowring presented on the pathway that led to EE being included in the market, documenting that it was a response to PJM’s load forecasting method that reflected energy efficiency with a four-year lag. When the RTO began including the effect of EE in the forecast without a lag, he pointed out, the explicit tariff language required the removal of EE from the capacity market. While PJM did remove EE from the capacity market, PJM created a convoluted process that continued to pay EE the clearing price despite the fact EE is not a capacity resource under the tariff. PJM’s approach recognizes EE does not help meet the reliability requirement for a given BRA, but nonetheless pays EE the auction clearing prices. Bowring explained the details of the addback mechanism.

Affirmed Energy’s Luke Fishback said the EIA figures capture some of the incentives provided by both states and wholesale market revenues, but according to EIA, results should be interpreted not as predictions of EE, but projections of what EE would be under existing laws and regulations. He asked the IMM and PJM whether and by how much the removal of capacity revenues would reduce the amount of EE projected in the load forecast.

Langbein argued that PJM’s forecasting now accounts for EE and that capacity market revenues being paid to EE providers are not incentivizing program growth or increased energy-saving equipment installation. He pointed to a steady rise in EE participation in RPM even as capacity prices have fallen. 

Other MIC Business

• • Stakeholders closed an issue charge to explore creating an alternative capacity compliance construct for weather-sensitive demand response and price-responsive demand. The discussion was held at the Distributed Resources Subcommittee (DISRS), where package formation has stalled since the only proposal was withdrawn last year, subcommittee Chair Ilyana Dropkin told the MIC. 
  • The committee endorsed a PJM proposal adding synchronous condenser market parameter definitions to its governing documents and manuals. The language would codify existing practices around condense startup costs, condense energy use and condense-to-generate costs. 

Stakeholders questioned the approach the DISRS is taking in drafting potential changes to the rules around solar-battery hybrid resources, arguing that including a broader set of storage resources in any proposal would go beyond the intended scope of the issue charge. MIC Facilitator Foluso Afelumo said an agenda item will be added on the issue charge’s scope for the May 1 MIC meeting.