By Suzanne Herel
PJM made it through the winter without having to invoke a temporary cost-based energy offer cap of $1,800/MWh, the Independent Market Monitor reported last week.
In the 75 days ending March 31 that the waiver was in effect, there were 54 cost-based offers between $1,000/MWh — the historical cap — and $1,800/MWh, but none cleared, according to the report, which the Federal Energy Regulatory Commission ordered in granting the waiver Jan. 16 (EL15-31). (See FERC OKs $1,800 Offer Cap.)
“None of the cost-based or price-based offers between $1,000 and $1,800/MWh cleared with an incremental rate above $1,000/MWh, although one unit with an incremental offer curve that included points below $1,000 and above $1,000/MWh was dispatched at incremental offers below $1,000/MWh on three days,” it said.
“The Market Monitor’s review … indicates that energy offers with scheduling rates or with incremental curve offer components above $1,000/MWh did not affect energy market prices or result in uplift payments to generators,” it said. “LMPs greater than $1,000 were the result of transmission constraint penalty factors and not the result of unit offers.”
The Monitor said it was “investigating the offer behavior of several units and will take appropriate actions consistent with Attachment M of the PJM Tariff.”
PJM requested the waiver over concern that some natural gas-fired generators might encounter the same fuel price spikes that occurred during the polar vortex in January 2014. PJM asked for the allowance to ensure that generators would recover their costs if called upon during periods of high demand.
In fact, the cold temperatures of this past winter sent PJM to a new winter record for electricity use on Feb. 14, and the RTO still was able to avert use of the higher cost-based offer cap. Demand hit about 143,800 MW, surpassing the previous peak of 141,846 on Jan. 7, 2014. (See Cold Sends PJM to New Winter Record.)
Analysts have attributed this winter’s lower natural gas prices to ample supply, a later onset of cold temperatures and increased imports of liquefied natural gas to the Northeast.
The waiver request was made as a section 206 filing after stakeholders failed over eight months to come to a consensus.
At the time the waiver was being debated, Market Monitor Joe Bowring said fewer than 25 offers had breached $1,000 in January 2014. While some of the proposed offers were in the $1,700/MWh range, he said, there had been no legitimate offers greater than $1,400/MWh.