Members voted Thursday to approve a problem statement to consider modifying the design of the Reliability Pricing Model to ensure physical delivery of resources that clear the capacity auction.
Jason Barker, of Exelon, proposed the inquiry, saying it was needed to prevent potential reliability issues because PJM is becoming increasingly reliant on proposed new generation to maintain its reserve margin. Some planned generators that cleared for delivery two years from now “haven’t broken ground yet,” he said.
“While there doesn’t appear to be any reliability threat imminently, we believe this issue is pressing,” he said.
Some players may be speculating without any intention of bringing physical capacity by bidding into the base auction and then buying replacement capacity at a discount in the interim auctions. Barker said one goal of the inquiry would be to “parse speculation from legitimate covering” of shortfalls and increasing penalties for those who offer capacity resources but fail to produce them in the delivery year.
The problem statement was approved by a 4.15 to 0.85 vote but not before several members expressed concerns over the inquiry.
“We could potentially create more problems than we’re solving,” said Frank Francis, director of regulatory affairs for Brookfield Energy Marketing LP,
Gloria Godson, vice president federal regulatory policy for Pepco Holdings Inc., said her company has legitimate reasons for buying in the incremental auction. “How can you define intent?” she asked.
Dan Griffiths, of demand response aggregator Comverge, said his company doesn’t speculate but needs to use the incremental auction to respond to changes in market rules. “Every year the rules change. That forces us to reevaluate our needs.” “We don’t have regulatory certainty.”
Susan Bruce, an attorney representing the PJM Industrial Customer Coalition, said the initiative should not quash competition: “I want to make sure we are keeping the welcome mat out for new resources and that we don’t discriminate.”
Barker insisted, “It is not our intent to create barriers to competitive entry.” Any increase in deficiency penalties would apply to all resources, he said.
PJM Executive Vice President for Markets Andy Ott said the issue would be assigned to either the Capacity Senior Task Force or the Market Implementation Committee.
