FERC last week approved PJM’s proposal to use the effective load-carrying capability (ELCC) method for determining capacity values for variable, limited-duration and combination resources (ER21-2043).

PJM stakeholders last September endorsed a revised joint stakeholder proposal to revise the RTO’s tariff and Reliability Assurance Agreement (RAA) to implement ELCC, over the objections of the Independent Market Monitor and others who said the plan was flawed and could have a profound effect on the capacity market. (See ELCC Method Endorsed by PJM Stakeholders.)

FERC initially rejected PJM’s proposed ELCC revisions in April, finding that the plan’s “transition mechanism” was “unjust, unreasonable and unduly discriminatory” (ER21-278-001). The commission had said the mechanism would discount the accredited capacity value of some ELCC resources “below their actual capacity value in order to value other ELCC resources above their actual capacity value,” but it noted that PJM’s approach to determining the accredited capacity value of variable, limited-duration and combination resources was “just and reasonable.”

In June, PJM submitted an updated ELCC proposal that removed the transition mechanism and also defined the ELCC classes in the RAA, which the commission also suggested in April. PJM said its updated ELCC proposal was nearly identical to its initial proposal besides the removal of the transition mechanism.

The updated proposal took effect Aug. 1.

ELCC Methodology

In its updated proposal, PJM argued that the ELCC construct performed several important functions, including recognizing the “diminishing returns associated with greater levels of deployment for most ELCC resource types,” ensuring that the RTO doesn’t become overdependent on a single resource with “inherent limitations.” PJM also said the methodology “recognizes the synergistic relationship among distinct resource types” across the RTO region and “evolves with a changing load shape to account for changes in the future grid such as greater electrification of heating and transportation.”

The commission found the updated proposal to be just and reasonable because it “assigns a capacity value to the portfolio of ELCC resources consistent with their collective contribution to meeting PJM’s loss of load expectation (LOLE) standard.” FERC also said the proposal “recognizes the synergistic and antagonistic interactions between ELCC resource classes, and justly and reasonably allocates ELCC capacity value amongst those resource classes.”

Both AES and the IMM argued that the ELCC was unjust and unreasonable because it “values all resources of a given class at the class average ELCC capacity value computed by PJM for that delivery year, and thereby overvalues their expected contribution to system reliability.” The protesters advocated for an ELCC framework that would “assign a lower capacity value to the ‘last’ incremental megawatt of ELCC resource capacity.”

But the commission was not persuaded by the AES arguments and contention that the ELCC framework “must preserve the capacity value of a resource at the time of interconnection.”

“We rejected PJM’s prior ELCC filing because we found unjust and unreasonable and unduly discriminatory PJM’s proposed transition mechanism, which would place a floor on ELCC capacity value for earlier vintages of resources,” FERC said in its order.

The commission also found the IMM “failed to demonstrate that PJM’s proposal to use an average method for determining ELCC values is unjust and unreasonable.” FERC said it disagreed with the assertion that PJM’s proposal would “assign an ‘incorrect’ class average capacity value to ELCC resources, in contrast to the IMM’s preferred marginal ELCC value.”

“By its nature, the ELCC method of capacity valuation depends on resources’ relative share of the resource mix, how resources’ output compares to the expected load profile, and the order in which resource classes and individual resources are modeled within the ELCC analysis,” the commission said in its order.

In its filing, PJM said it intends to continue reviewing and managing the ELCC methodology, assumptions, inputs and administrative procedures “through an annual stakeholder cycle and post an annual report on the ELCC construct” and that it intends to “provide sufficient transparency” in documentation. The RTO said it plans to post a model and data that includes simulated dispatch of demand response resources and forced, planned and maintenance outages for unlimited resources.

PJM has been formulating conforming revisions to several manuals addressing ELCC limited-duration and intermittent resources in stakeholder meetings. (See “ELCC Manuals,” PJM MRC/MC Briefs: June 23, 2021.)

“We find that, given PJM’s commitment ‘to provide sufficient transparency that interested parties have the opportunity to reproduce ELCC results to a sufficient degree of accuracy that they can anticipate future ELCC values, especially for the purposes of investment decisions,’ the measures PJM includes in the updated ELCC Proposal will provide interested entities sufficient transparency into its ELCC methodology, results and key values,” FERC said in its order.

Concurrence and Dissent

Commissioner Mark Christie dissented from the order, saying the proposal “has not been improved sufficiently” since FERC ruled on it in April and that “consumers and system reliability may well suffer.”

Christie agreed with the IMM’s opposition to the proposal and said that “the mere possibility of future refinements that may fix its fundamental flaws is speculative.”

“It comes down to this for me: PJM’s ELCC may well force consumers to pay for capacity that does not deliver or to overpay for the amount of capacity that the resource does deliver,” Christie said in his dissent. “That is both a cost problem and a reliability problem.”

Commissioner James Danly issued a separate concurrence on the order, while agreeing with Christie’s assertion that a “marginal approach to allocating capacity to individual resources would be preferable to PJM’s proposed resource-class based averaging mechanism.” But despite his view that PJM could take a better approach to the issue, Danly said it didn’t change the standard FERC must apply under a Section 205 filing.

“Should parties seek rehearing, I urge them to concentrate their pleadings on why PJM’s proposal is not just and reasonable or why it is unduly discriminatory or preferential,” Danly said in his concurrence. “That, ultimately, is all we are called upon to decide here.”