VALLEY FORGE, Pa. — On the day PJM submitted its five-minute settlement compliance filing to FERC, the Market Implementation Committee endorsed two proposed Manual 11 revisions related to shortage pricing, both of which were developed in response to FERC Order 825.
The order requires RTOs to align their settlement and dispatch intervals and implement shortage pricing as soon as a reserve shortage is detected in real time, rather than the current practice of allowing an RTO to wait until it has determined that the shortage will last for a sustained period of time.
Stakeholders asked PJM to perform a comprehensive review of the proposed manual changes — which would adjust the operating reserve demand curve — to ensure that all potential impacts are considered. Members were particularly concerned about whether the new three-step shortage pricing created any opportunities to take advantage of the system, or if it affected any existing market rules.
PJM believes the demand curve changes are necessary in order for it to appropriately implement Order 825’s five-minute interval requirement. The RTO hopes to submit revisions as a Section 205 filing sometime around March 1.
The revisions would insert an additional step in the curve at the $300 penalty factor allowing the reserves to be “extended” or increased. Under current practice, PJM can only extend reserve requirements in specific situations related to the issuance of hot or cold weather alerts. (See “Protocol Changes Proposed for Implementing Order 825,” PJM Market Implementation Committee Briefs.)
Citigroup Energy’s Barry Trayers asked whether the new steps would affect the “Four-Tick Rule,” which affects how some costs, such as balancing uplift charges, are allocated based on the number of intervals within an hour that certain conditions exist. PJM’s Dave Anders said that issue is being discussed through the Energy Market Uplift Senior Task Force.
“It seems like we’re finding [issues created by the new rules] instance by instance, and it might be better if somebody went through and … found [all of] the impacts,” Trayers said.
Other stakeholders asked about the potential for “opportunistic behavior” among some market participants if shortage pricing is implemented without simultaneously switching to five-minute settlements. PJM Independent Market Monitor Joe Bowring acknowledged that there is no rule against such activity, but he said “if people are taking advantage of that rule, we will refer them to FERC.”
While Order 825 specified a May 11, 2017, implementation date, PJM is requesting that its proposals on five-minute settlements and shortage pricing be implemented simultaneously on Feb. 1, 2018. The compliance filing seeks a response from FERC by Feb. 15.
If FERC approves the delayed implementation date, PJM would relax its timeline for the Section 205 filing related to the demand curve until April. Otherwise, it will keep its March 1 target for the filing and request that shortage pricing be implemented simultaneously with five-minute settlements.
PJM Gives First Take on NOPRs
PJM staff offered their initial impressions of two Notices of Proposed Rulemaking recently distributed by FERC.
One NOPR addresses price-setting related to fast-start resources, while the other considers rules for storage and distributed energy resource aggregation.
The fast-start NOPR issued on Dec. 15 has five proposed requirements to better integrate fast-start units in market pricing. PJM’s Lisa Morelli said the commission will likely need to expand its fast-start definition to cover resources with start-up times of an hour or less in order to realize intended benefits. The proposed rule limits the definition to units capable of ramping up within 10 minutes.
“We really have minimal resources that fall into the 10-minutes-or-less bucket,” Morelli said.
PJM’s response to FERC will clarify that it believes the fast-start category also applies to demand response. The RTO also believes that FERC intends for the rule to provide more flexibility for block-loaded resources such as combustion turbines, but Morelli said staff think disincentives for over-generation will be need to developed. RTO staff also have “some hesitation” about FERC’s proposal to allow offline resources to set the fast-start price, she said.
To fulfill FERC’s final proposal on including fast-start pricing in both day-ahead and real-time markets, PJM would focus on keeping the modeling and rules appropriate for each market, although not necessarily the same.
“In general, we like to keep the modeling consistent,” Morelli said, but she acknowledged the RTO is “not guaranteeing” it.
The deadline for filing comments is Feb. 28.
The DER and storage NOPR issued on Nov. 17 includes multiple proposals.
“It’s pretty broad,” PJM’s Andrew Levitt said. “Even within those sections, there’s quite a lot in play.”
Regarding the storage provisions, “PJM has already checked a lot of those boxes,” he said. The NOPR could be read to indicate that RTOs should be managing the state of charge for new offers, and “that’s something we’re chewing on internally.”
The DER section has prompted an “extensive” discussion about coordination with electric distribution companies, Levitt said.
Several stakeholders representing state interests expressed reservations about the proposal.
“In general, we states like to keep our hands on the mechanisms that control retail, and FERC [and RTOs] handle wholesale,” said Debbie Gebolys, a research analyst with the Public Utilities Commission of Ohio. “If we’re going to have them at the same party, how do we handle that?”
John Farber of the Delaware Public Service Commission said that debate is a “touchstone issue” because it’s not possible to “unmingle electrons.”
“Unless that issue is fully satisfied, it could create problems for states,” Farber said.
Levitt acknowledged the concerns. “We’re recognizing there’s much closer contact between retail and wholesale with DER.”
Problem Statement Endorsed to Address Pseudo-Tie Meter Correction
Stakeholders endorsed by acclamation a problem statement and issue charge proposed by the North Carolina Electric Membership Corp. to develop a protocol for monthly pseudo-tie meter correction.
Currently, no mechanism exists for monthly corrections of reported energy flow. Dave Pratzon of GT Power Group questioned whether the issue will be solvable within PJM or require collaboration with neighboring RTOs. PJM’s Ray Fernandez acknowledged that the question will be addressed in the research performed by the Market Settlement Subcommittee.
Spot-in Transmission Analysis Expanded to all Interfaces
Stakeholders approved revisions to a problem statement and issue charge intended to address spot-in transmission issues, expanding the analysis to consider all of PJM’s interfaces, not just that with NYISO.
The committee has already identified two potential solutions.
The first, more complex solution would entail NYISO modeling PJM’s available transfer capability (ATC) alongside its own in the ISO’s economic clearing engine. Spot-in transactions would then be allowed to clear economically up to the lower of the transfer values.
The second solution would move PJM’s earliest request time for spot-in service to 10 a.m. from the current 9 a.m. The delay would allow potential market participants to learn if their NYISO bid has been approved before requesting service into PJM. While this option would be easier to implement and easier to apply universally, it doesn’t directly address the issue.
The Monitor has insisted that any change to one interface should be applied to them all and urged that the problem statement and issue charge be expanded to consider all seams. (See PJM Considering Expansion of Spot-in Tx Solution to All Borders.)
Joe Wadsworth of Vitol, who has long sought resolution of the issue, prefers the first solution. “We wouldn’t oppose solution ‘B’, but it doesn’t get to the heart of the situation,” he said.
PJM Has No Objection to IMM’s ‘Paper Capacity’ Report
Bowring presented updated results of his team’s ongoing study on replacement capacity. The report found that some market participants are offering “paper capacity” into Base Residual Auctions and buying out of the obligations during subsequent Incremental Auctions to take advantage of price differences. (See PJM Monitor Asks FERC to Act on ‘Paper Capacity’.)
EnerNOC’s Katie Guerry contended that Bowring hadn’t sought comments from stakeholders before publishing the report and filing it at FERC. She asked what PJM’s stance was on the topic.
“Generally speaking, we don’t disagree with the report,” PJM Senior Counsel Jen Tribulski said. “We wouldn’t file anything with FERC to say we disagree with the report.”
– Rory D. Sweeney