Additional Parameters for Demand Response Endorsed
VALLEY FORGE, Pa. — PJM’s Market Implementation Committee endorsed by acclamation a proposal to add two energy market parameters for economic demand response. (See “First Read on Proposed Demand Response Energy Market Parameters,” PJM MIC Briefs: May 1, 2024.)
The changes would allow DR providers to set a cap on how long they can be dispatched and a minimum interval before they can be committed again after being released from a previous dispatch.
FERC last July approved a PJM proposal to tighten performance assessment interval triggers, allowing pre-emergency demand response to be deployed without prompting a full capacity call for all resources. (See FERC Approves PJM Change to Emergency Triggers.)
PJM’s Pete Langbein offered an amendment to the proposed Manual 11 revisions to state that energy market parameters cannot supersede a load management deployment in the capacity market, a stipulation he argued already is reflected in the status quo language.
Langbein gave the example of a DR resource that had been released from an energy market commitment and was in the middle of a minimum release time when it was called on for capacity. If that resource did not respond and followed its energy market parameter, it could be subject to Capacity Performance (CP) penalties and testing requirements.
PJM plans to ask the Markets and Reliability Committee for endorsement at its Aug. 21 meeting, followed by the Members Committee on Sept. 25 and a FERC filing in October. The filing likely would ask for a sixth-month implementation period.
PJM to Refile Portions of Rejected CIFP Proposal
PJM laid out its plan to refile several components of its Critical Issue Fast Path (CIFP) proposal rejected by FERC in February, which focused on the CP construct and market seller offer caps (MSOC). (See FERC Rejects Changes to PJM Capacity Performance Penalties.)
PJM’s Walter Graf said the components selected for refiling were those that order rejecting the order either indicated support or did not touch on. For items where PJM received minimal feedback from the commission, Graf said PJM’s future filing is likely to be fairly similar.
The proposal includes “clarifying revisions” to the definition of Capacity Performance quantified risk (CPQR), MSOC values for planned generation based on net cost of new entry (CONE), segmented offer caps, and a forward-looking energy and ancillary service (EAS) offset for offer caps and the minimum offer price rule (MOPR).
The proposal would allow generators that intend to participate in the energy market regardless of whether they clear in the capacity market to offer into Base Residual Auctions (BRAs) at least as high as their capacity performance quantified risk (CPQR) value.
In its October 2023 transmittal letter, PJM said allowing generators likely to remain in operation regardless of their position in the capacity market would avoid over-mitigating market sellers with a low or negative avoidable cost rate (ACR). The filing argued that the status quo market seller offer cap (MSOC) prevents some market sellers from fully representing their costs to deliver capacity — a dynamic it said could be leading some resources not subject to the must-offer requirement to avoid participating in the capacity market entirely.
PJM does not plan for the refiling to include many of the core changes addressed in its original filing, such as limiting bonus payments for generators that overperformed during emergency conditions to only committed capacity resources, excusing generators whose price-based offers exceeded their cost-based offers from CP penalties and third-party review of unit-specific MSOC proposals.
PJM is not including a process for calculating alternative offer caps if it determines that a market seller’s proposed MSOC did not conform to the tariff as it awaits a FERC ruling on its rehearing request. The refiling also will exclude an element of PJM’s original proposal to remove the physical penalty option for fixed resource requirement entities. The PJM Power Providers (P3) and Electric Power Supply Associated (EPSA) have jointly requested rehearing on that element of FERC’s rejection of ER24-98.
PJM is not seeking to move forward with a standardized CPQR calculation because the specificity the commission sought would be difficult to uniformly produce across resource classes, Graf said. But he added that the calculation PJM proposed to use could be used by market sellers to aid in their own CPQR proposals.
Exelon’s Alex Stern said he’s glad PJM is reviewing the commission’s rejection order because the resource adequacy concerns which prompted the filing have only grown over the past year.
Energy Efficiency Proposals Deferred While Complaint Pending
PJM, its Market Monitor and Affirmed Energy all delayed presenting proposals to revise how the RTO measures and verifies (M&V) energy efficiency resources due to a complaint the Monitor filed last week asking FERC to deny capacity market payments to 10 EE providers. (See PJM Monitor Alleges EE Resources Ineligible to Participate in PJM Capacity Market.)
Aaron Breidenbaugh, of CPower, said he understood that the EE providers named in the complaint have been counseled to avoid discussing issues raised in the filing until the issue has been resolved. Because the filing argues that mid- and upstream EE programs have not met the Reliability Pricing Model (RPM) participation requirements, he said the complaint overlaps with the very issue before the MIC.
Affirmed Energy’s Luke Fishback said the company withdrew its package from the June 5 agenda because it would be unproductive to engage with discussions about potential revisions to M&V requirements while the complaint about existing standards is pending.
Exelon’s Alex Stern said the pending complaint can’t help but “put a chilling effect on not only these stakeholder discussions but also EE generally.”
PJM Associate Counsel Chen Lu said he thinks the complaint is limited to the validity of post-installation measurement and verification (PIMV) reports filed for the 2024/25 delivery year and therefore would not clash with discussion about future M&V design.
Marji Philips, of LS Power, rebuked PJM for a communication sent to EE market participants on May 31, which said the RTO will be delaying action on PIMV reports until the complaint has been resolved, effectively holding up all EE revenues in the process. She said the complaint is an allegation that must be substantiated before PJM can take action through a deficiency process in accordance with a FERC order.
“It’s completely violative of any FERC procedure,” she said. ” … You don’t take an action based on a filed complaint.”
Responding to questions about the implications of the PIMV delay for EE providers, Lu said no payments are made and prospective market participants are not subject to deficiency charges until PJM has makes a determination on the reports. If the reports were rejected, he said, entities would be considered unavailable during the delivery year and subject to deficiency charges.
Langbein said PJM is reviewing the May 31 communication and plans to send out an update on how it intends to proceed with the PIMV reports and EE payments.
PJM Presents Revised CONE Values
The Brattle Group presented revised financial parameters used to calculate net CONE for the 2026/27 Base Residual Auction (BRA).
Net CONE is one of the inputs used for defining prices on the Variable Resource Requirement (VRR) curve. (See “Update Re-evaluation of CONE Inputs,” PJM MIC Briefs: May 1, 2024.)
PJM in April proposed reviewing the financial inputs to net CONE to account for shifting market conditions since the 2022 Quadrennial Review. Increasing interest rates were among the major contributors, PJM’s Skyler Marzewski said. The change is being pursued through the quick fix process, which allows an issue charge to be brought and voted on concurrent with a proposed solution.
“We’re trying to make sure net CONE would be better aligned with the financial conditions that we’re currently seeing,” Marzewski said.
Brattle recommended increasing the after-tax weighted-average cost of capital (ATWACC) from the 8.85% used in the quadrennial review to 10%, which increases the cost to construct a combined cycle resource — currently the reference resource — by $15 to $18/kW-year. The cost of combustion turbines increased by $10 to $12/kW-year and battery electric storage systems by $18 to $20/kW-year.
Given market volatility, Brattle’s Bin Zhou recommended adjusting the financial parameters for at least the next few auction cycles.
Responding to stakeholder questions about how the review was conducted, Brattle’s Sam Newell said it relied on the same study approach as the quadrennial review.
Marzewski said Brattle also is considering whether PJM needs to reconsider the overall cost for a new resource, with preliminary analysis suggesting there’s no need at this time. Newell encouraged market participants to reach out to Brattle with any specific market information to assist its reevaluation of financial parameters or cost indexing. Increased turbine prices could be one such data point, he said.
Stakeholders Discuss Path Forward on Multi-Schedule Modeling
PJM intends to move forward with an alternative solution for selecting schedules in the market clearing engine (MCE) to facilitate its multi-schedule modeling design, which is expected to significantly increase computing times under the status quo schedule selection approach. (See “Stakeholders Endorse Multi-schedule Modeling Solution,” PJM MRC/MC Briefs: Dec. 20, 2023.)
FERC in March rejected the multi-schedule modeling proposal endorsed by stakeholders in December 2023. That package would have introduced a formula to evaluate generators’ offers and select one expected to produce the lowest total dispatch cost and forward only that offer to the MCE.
The commission rejected that proposal, citing the “crossing offer curves” scenario the Monitor raised, under which PJM’s proposed formula would select market-based offer based on its dispatch cost at EcoMin even if it would be notably more expensive than a cost-based offer at higher outputs.
“PJM’s proposal would largely eliminate market power mitigation in the day-ahead Energy Market by selecting for consideration in PJM’s market clearing optimization software a single offer per resource solely on the lowest dispatch cost at EcoMin … it would no longer mitigate a seller’s offer to the offer producing the lowest total production cost by considering the entire offer curve for each of a seller’s offers,” the commission wrote.
PJM’s Keyur Patel said the RTO planned to advance the MIC proposal co-sponsored by PJM and the GT Power Group, which received the second-highest degree of support during an October 2023 vote. That proposal attempts to address the crossing curves issue by selecting market-based offers only when a resource passes the three pivotal suppliers (TPS) test under non-emergency conditions and select cost-based offers only when a resource fails the TPS test.
Several stakeholders took issue with presenting a proposal that was voted on months in the past as the presumptive motion to advance at the MRC. It was suggested a proposal sponsored by the Monitor during last year’s deliberations should be considered at the MRC as well and the truncated voting rules waived to allow the two to be voted on side-by-side.
