By Suzanne Herel

PJM’s regulation market is purchasing too much from fast-responding “RegD” resources, negatively affecting regulation and reliability, at the same time the RTO is incorrectly compensating those providers, the Independent Market Monitor said in a report presented last week to the Operating Committee.

Howard Haas of Monitoring Analytics said the root of the problem is an incorrectly defined marginal benefit factor that describes the relationship between RegD and traditional RegA resources.

While the MBF should be indicating when there is a diminishing return on the use of either resource, it has resulted in the over-procurement of RegD. In addition, it has led RegD resources to be alternately overpaid and underpaid. On average, Haas said, RegD resources have been undercompensated 46% from October 2012 through March using the current method.

“We never seem to be paying it the right amount,” Haas said. “It’s sending a strange signal to the market.”

PJM operators already had observed decreased market optimization during times when a large percentage of RegD is on the system. It provides more than 42% of response on average, shooting up as high as 70% during some events.

Last week, PJM presented the OC with a problem statement and issue charge to investigate the issue. The IMM wants to add to the inquiry an investigation into how the MBF is being defined and applied.

“If we follow it through, we’re going to correct more than one issue,” Haas said.

However, stakeholders agreed that the problem statement had been so substantially broadened since it was initially proposed that it was not ready for a vote. (See “Too Much of a Good Thing? PJM Concerned Fast Response Regulation Crowding Out Traditional Resources”, PJM Operating Committee Briefs.)

Instead, it will be reworked in a series of special OC meetings.