WILMINGTON, Del. — PJM officials have gained support for a new method of releasing excess capacity, but told the Markets and Reliability Committee on Thursday they were not sure the plan is ripe for a stakeholder vote.

The RTO procured 10,017 MW of new capacity commitments in the Capacity Performance transition auction for delivery year 2017/18. PJM’s Jeff Bastian told the MRC the capacity would likely clear at $0 in February’s third incremental auction under current rules — a price PJM and stakeholders agree would ignore the reliability benefits of retaining the capacity.

Direct Energy and NextEra Energy — which had proposed their own formulas last month — said they supported PJM’s proposal, under which the RTO would retain more capacity at lower prices but release more at a higher price. The plan would release excess capacity on an upward sloping trajectory, ranging from 0 MW at $10.74/MW-day to all 10,017 MW being available at $144/MW-day.

The PJM Industrial Customer Coalition also said Thursday it supports the change.

Direct Energy’s Jeff Whitehead said PJM should bring the issue to a vote at the Market Implementation Committee next month. He said he plans to introduce a problem statement to consider capacity releases for future years.

Whitehead said it is very difficult to quantify the additional reliability value of the excess capacity. “We could end up in analysis paralysis,” he said in pushing for an MIC vote. “We’ve been discussing this for a while.”

Gabel Associates’ Mike Borgatti, representing NextEra, said the PJM proposal has “evolved” and that although it differs from NextEra’s proposal, “we’re comfortable with this.”

But other stakeholders expressed reservations, and PJM’s Chantal Hendrzak, the MIC chair, said, “I don’t know that we’re quite ready” for a September MIC vote.

PJM, which must file its plans for releasing the capacity with FERC by November, first outlined its plan before the MIC earlier this month. (See “Proposal Would Set Higher Prices for Capacity Released in 3rd I.A. for 2017/18,” PJM Market Implementation Committee Briefs.)

In the third incremental auction for the 2016/17 delivery year, PJM offered 4,818 MW at $0/MW-day but cleared 4,556 MW at an average price of $4.79/MW-day, Bastian said.

Using the same formula for 2017/18, Bastian said, the excess “could well clear at zero.”

Calpine’s David “Scarp” Scarpignato asked if the sale could be isolated from other transactions during settlement to identify the impact on costs. Bastian said a simulation might be possible, but he wouldn’t commit to it.

Jeffrey Levine of ENGIE asked if PJM would consider a stepped offer curve instead of the straight-line slope the RTO proposed.

“Yes,” Bastian responded. “This is a stakeholder process.”

Gary Greiner of Public Service Enterprise Group also questioned PJM’s curve. “I don’t think that ‘let’s start at $10.74 because that’s what we paid for it’ is a good strategy,” he said.

But supporters of the PJM proposal said it would be a step backward to consider different shaped curves.

“We are comfortable with the proposal as presented here today,” said Susan Bruce, an attorney representing the PJM Industrial Customer Coalition. “I am a little uncomfortable at the ideas of new curves being” proposed.

“I’m not in a position to argue curves,” said Dan Griffiths, executive director of the Consumer Advocates of the PJM States. He said the debate highlighted a bigger concern for ratepayers — PJM’s systematic over-procurement. “From way too much [capacity] we’re trying to figure out how to get back to just too much,” he said.

Independent Market Monitor Joe Bowring made a pitch for his proposal to not release any of the excess, suggesting any release could suppress prices.

No matter the outcome of the release, it will likely incite second-guessing, said Jason Cox of Dynegy: If the price is high, critics will ask why wasn’t more capacity offered; if it’s low, why wasn’t less offered?

“PJM’s in a really tough spot,” he said.

Revisions Proposed to Cost Development Procedures

PJM’s first read of its proposed fuel-cost policy revisions generated little discussion at the MRC.

But Bowring predicted the proposal is “very likely to be changed by FERC” because it gives PJM, rather than the Monitor, the power to approve or reject generators’ policies. That, Bowring said, would violate the RTO’s Tariff.

Bowring also said the revisions, to be contained in Manual 15, were “stretching” the definition of a market seller.

PJM says it will bring the proposal to an MRC vote in September contingent on FERC’s approval of its related Aug. 16 compliance filing on implementing hourly offers.

In response to opposition by generators, PJM earlier reduced the proposed penalties for noncompliance with the new rules. (See Heeding Stakeholders, PJM Reduces Proposed Fuel-Cost Penalties.)

PJM’s Jeff Schmitt also presented the MRC with changes resulting from a biennial review of Manual 15, which are expected to be brought to a vote in September.

Metering Standards Ready for Stakeholder Vote

After identifying gaps in understanding between staff and members on metering procedures, PJM has developed a proposal that would substantially rewrite the Manual 1 language that governs metering.

The “high level of the high-level” changes proposed focus on the definition of accuracy and how to achieve it in every metering capacity, PJM’s Ryan Nice said.

To the make the plan “palatable” to members with decades-old infrastructure, PJM is proposing a “tuned-up” grandfather clause. (See “Metering Task Force Presents Proposal to Improve Clarity,” PJM Operating Committee Briefs.)

All equipment installed after the publication of the manual would be required to be fully compliant with the new metering standard. Equipment installed earlier than 1997 would be exempt from the new requirements. Equipment installed after 1997 but before the manual’s publication would have to meet all but a few requirements.

Stakeholders will be asked to endorse the changes at the September MRC.

Manual Changes Approved

The MRC unanimously endorsed the following manual changes:

• Manual 3A: Energy Management System Model Updates and Quality Assurance. Changes reflect administrative and modeling process updates.
• Manual 11: Energy & Ancillary Services Market Operations. Conforming changes, updated references and spelling and grammatical corrections are the result of a periodic review.
• Manual 12: Balancing Operations. Administrative and conforming updates align with NERC reliability standard BAL-001-02, which went into effect July 1, and with the frequency bias calculation in BAL-003-1.
• Manual 14D: Generator Operational Requirements. Changes include updates to the cold weather generation resource preparation section. Amends cold weather testing process effective with winter 2016/17. Generators that cleared as Capacity Performance in the current delivery year will no longer be eligible for compensation for conducting the exercise but may test and receive compensation as a self-scheduled resource. (See “PJM Plans to End Compensation for CP Units Participating in Winter Testing,” PJM Operating Committee Briefs.)
• Manual 37: Reliability Coordination. Updates are the result of an annual review.

— Rory D. Sweeney and Rich Heidorn Jr.