PJM on Wednesday defended its handling of Dominion Energy Virginia’s decision to opt out of the May 19 capacity auction, rejecting a complaint by LS Power (EL21-72).
But the RTO’s Independent Market Monitor and two groups of independent power producers joined LS Power in calling for FERC to block Dominion’s fixed resource requirement (FRR) election.
Dominion confirmed last week it would not participate in PJM’s upcoming Base Residual Auction for 2022/23 over concerns the minimum offer price rule (MOPR) will undermine its ability to meet Virginia’s renewable energy targets. More than 60 Dominion generating units totaling more than 18.1 GW were included on PJM’s posting of FRR units on April 23.
PJM’s Reliability Assurance Agreement (RAA) requires load-serving entities choosing the FRR to exit the capacity auction for at least five years and demonstrate the “commitment of capacity resources for the term of such election sufficient to meet such party’s daily unforced capacity obligation.”
LS Power filed a complaint Friday alleging that PJM violated the RAA by approving Dominion’s FRR election based on a capacity plan covering just the first delivery year of the five-year minimum. It asked FERC to rule by May 17 and invalidate Dominion’s withdrawal from the BRA, which it said will suppress prices. (See LS Power Challenges Dominion FRR Plan.)
Because FERC did not post notice of the complaint until May 14 and said it would accept comments through May 27, it appears the commission will not grant LS Power’s request for relief before the auction, ClearView Energy Partners said in a note to clients. “Since LS Power’s complaint predates the auction, refund obligations would appear to attach to the auction results pursuant to Section 206 of the Federal Power Act (FPA) if FERC grants the complaint after the auction,” ClearView said. “However, the commission has not, to date, ordered an auction to be re-run.”
In its response Wednesday, PJM called on FERC to reject the complaint, saying the RTO’s “approval of one-year FRR capacity plans is consistent with both the language and intent of PJM’s RAA and manual, and it would not be practical or reasonable to require a five-year FRR capacity plan given the timing with which certain parameters are determined that define a FRR entity’s obligations.”
“The sole disagreement in the underlying complaint is whether PJM’s governing documents allow FRR entities to submit one-year FRR capacity plans for a minimum of five consecutive years or whether the rules require an initial submission of a five-year FRR plan,” the RTO continued. “PJM submits that the express and implied language in both the RAA and PJM manuals permits FRR entities to submit one-year FRR capacity plans and such FRR entity is required to submit an updated FRR capacity plan each subsequent delivery year.”
PJM said if the RAA language is ambiguous, the language in Manual 18: PJM Capacity Market is clear, saying an LSE “must submit an initial FRR capacity plan at least one month prior to the conduct of the Base Residual Auction for the first delivery year by demonstrating that it has sufficient capacity resources in its FRR resource portfolio.”
The RTO also noted that the RAA requires an FRR entity to identify enough capacity resources to meet “the forecast pool requirement for each applicable delivery year times the FRR entity’s allocated share of the preliminary zonal peak load forecast for such delivery year.”
PJM sets the forecast pool requirement and the installed reserve margin annually at least three months before each BRA. “As a result, there would be no forecast pool requirement for subsequent delivery years beyond the one that is established prior to the most recent BRA,” it said.
The RTO also calculates capacity emergency transfer objectives and capacity emergency transfer limits annually, “which may impact an FRR entity’s minimum internal resource requirement for future delivery years,” PJM added.
‘Not Consistent’
The Monitor, however, joined LS Power in challenging PJM’s interpretation of the rules.
It cited the RAA’s requirement that “each FRR entity shall submit its initial FRR capacity plan … and shall annually extend and update such plan by no later than one month prior to the Base Residual Auction for each succeeding delivery year in such plan.”
“The tariff’s use of the phrase ‘extend and update’ is not consistent with PJM’s interpretation,” the Monitor said. “‘Extend’ means to extend the plan for an additional year. ‘Update’ means to revise the existing plan to reflect more current information. PJM’s past practice and interpretation of the manuals cannot supplant the required application of the filed rate, which provides for extending and updating an initial FRR capacity plan that covers the five-year term of the election.”
The PJM Power Providers (P3) Group and the Electric Power Supply Association (EPSA) also backed the complaint.
“Unless PJM can show that an FRR plan for Dominion from the 2022/23 delivery year through the 2026/2027 delivery year was timely submitted, a violation of the RAA has occurred that the commission must remedy,” said P3, which represents at least a dozen independent power producers, including LS Power, Calpine, NRG Energy and Vistra.
“If the FRR option is to stay viable, it must remain a mechanism that offers capacity market exit without impacting that market for all other market participants, states and consumers,” EPSA said.
Transparency
The Monitor also took issue with PJM not more quickly disclosing Dominion’s plans to other capacity market participants. Although PJM said Dominion informed of its intent to pursue the FRR alternative on Jan. 11, the RTO did not provide notice of the election until its April 23 posting of the FRR units for the upcoming BRA.
The IMM said that although market rules require notice of an FRR election four months in advance, they do not say whether the notice is confidential to PJM or is intended to notify the markets. It asked FERC to clarify that PJM should publicly post notice of FRR elections.
“An important purpose of the tariff requirement for four months’ notice is to allow market participants to adapt their plans based on potentially significant market information,” the Monitor said. “Participants cannot prepare if the notice is not posted. Four months’ notice would also permit participants to raise issues with the commission without the need for emergency action.”
