The Market Implementation Committee endorsed a PJM proposal to revise the base formula rate for compensating black start resources, receiving 95% support. A competing proposal from the Independent Market Monitor received 11% support. (See “First Read on Black Start Compensation Proposals,” PJM MIC Briefs: Feb. 5, 2025.)
The proposal would replace a central component of the formula — the zonal net cost of new entry (CONE) — with a five-year average of the RTO-wide net CONE for the 2025/26 delivery year, which thereafter would be updated annually using the Handy-Whitman index. The changes were proposed in response to the possibility that high projected energy and ancillary service (EAS) revenues could depress regional net CONE values, causing black start revenues to also fall.
PJM’s Glen Boyle said the proposal also would break the tie between the capacity market and black start revenues, which he said would reduce volatility for black start providers and load.
“If we do nothing under the status quo, we would see the black start revenue drop significantly from where they currently are,” he said.
Monitor Joe Bowring said the impetus for PJM’s proposal already has been resolved with FERC’s approval of a request the RTO made to shift the reference resource from a combined cycle (CC) generator to a gas turbine (CT). PJM argued the reference resource change was necessary as the higher EAS revenues for CC units were a major contributor to the drop in net CONE. He said there is no immediate problem and establishing cost recovery payments based on anecdotes rather than evidence is not the way to go. (See FERC OKs Changes to PJM Capacity Market to Cushion Consumer Impacts.)
He said the Monitor’s data showed the exact levels of payment under the current net CONE approach, which does not support the need for a change in the approach.
“The facts do not support the assertion that black start revenue would drop significantly. In response to the goal that all black start providers receive the same payment,” he said.
The Monitor’s package would use the RTO-wide net CONE, rather than the five-year average, with Bowring calling for stakeholders to continue their discussions on black start compensation to pursue a solution that identifies the best way of defining the cost of providing black start service and compensate for that with a reasonable profit.
Bowring said PJM has not defined a metric that defines adequate compensation.
“Absent a metric based on the cost of providing the service, there is no way to objectively evaluate the need for different compensation. PJM’s assertions are not based on any actual evidence. The failure to propose a metric and the assertion that a metric cannot be created are an indication that PJM is not thinking about the issue clearly. PJM’s arguments could have supported any level of increase in payments,” he said.
Exelon’s Alex Stern said PJM has held numerous requests for proposals (RFPs) for additional black start capability that have gone unanswered. Failing to reconsider how resources are compensated could put the reliability of the grid in jeopardy, he said.
“We’re seeing an elevated risk with respect to black start, and we’re most definitely seeing black start resources exiting providing the service, and it’s concerning.”
Boyle said even with the change in reference resource, net CONE values still will fall in the 2025/26 delivery year and PJM has heard concerns that lower black start revenues could fail to cover the costs generation owners incur providing the service.
“We want to fix the immediate problem, but we would certainly be interested in further discussion down the road,” he said.
Bowring said there’s no evidence black start resources are leaving because they’re not being adequately compensated. He said the Monitor’s proposal is to look at the issue rationally and make sure revenues are enough to provide the service.
“The only way to determine whether the payments are covering the costs of providing black start service is to take a detailed look at the costs. PJM has resisted that proposal,” Bowring said.
Boyle said he’s unsure what kind of metric PJM could produce to demonstrate whether generation owners are likely to participate in black start RFPs, adding that the RTO has been canvassing market participants. He also said the proposal would not increase compensation over current levels, which PJM feels are appropriate.
