By Suzanne Herel

FERC on Tuesday rejected PJM’s Tariff changes that would have exempted a capacity resource from nonperformance charges if it was following the RTO’s dispatch instructions and operating at an acceptable ramp rate during periods of high load.

The changes, approved in April by the Members Committee after months of stakeholder debate, were designed as an interim solution to guard against generators self-scheduling prior to a performance assessment hour in order to avoid nonperformance charges. Such behavior, PJM said, would pose operational challenges and create reliability issues. (See “MRC, MC Endorse Interim Ramp Rate for Performance Assessment Hours,” PJM Markets and Reliability and Members Committee Briefs.)

“Given the importance of the penalty structure to the Capacity Performance design, we … must carefully weigh whether the operational concerns documented in the record justify the negative impact that PJM’s proposed penalty exemption would have on these performance incentives,” FERC ruled. “We conclude that PJM has not met that burden here” (ER16-1336).

Under PJM’s proposal, resources’ energy offers would include a historical three-month average ramp rate.

The Independent Market Monitor and LS Power said that PJM had not proven its assertion that self-scheduling before an emergency period would cause operational issues.

“According to the Market Monitor, if resource owners self-schedule their resources in anticipation of tight conditions in the energy market, it is less likely that emergency procedures would be triggered and would instead indicate that nonperformance charges are working as intended to incent generation to operate during high-demand conditions,” FERC said.

“The Market Monitor argues that PJM’s proposal is discriminatory and disincents flexibility by holding more flexible resources (i.e., those with faster ramp rates) to a higher standard for expected incremental megawatts during a performance assessment hour than less flexible reserves.”

Calpine and Rockland Capital argued that generators should not be excused from penalties because of their choice of the type of capacity they offer into the market.

The PJM Power Providers Group, the Delaware Public Service Commission and Dayton Power and Light supported PJM’s proposal.

In rejecting the Tariff changes, FERC quoted from PJM’s own initial filing proposing Capacity Performance, which said, “Parameter limits should not be viewed as a permanent entitlement to underperform. Instead, those limits should be exposed to financial and market consequences: If sellers of resources with fewer operating limits earn more from the capacity market … than sellers of resources with more restrictive operating limits, then all sellers will be incented to find ways to minimize those operating limits, which should over time increase overall fleet performance and benefit loads in the region.”