By Rich Heidorn Jr.
PJM Insider
Two unplanned generator outages and high natural gas demand resulted in unusually high Balancing Operating Reserve (BOR) payments in the eastern half of PJM’s footprint in January and February.
BOR payments averaged more than $1 million daily in January and $2 million per day in February, Adam Keech, PJM director of dispatch, told the Market Implementation Committee March 6. That is the higher than any period in recent memory, PJM said.
Balancing Operating Reserves are paid to generators dispatched out-of-merit by PJM that require uplift payments to cover their costs.
The impact of the spike was exacerbated because average daily deviations (in MWh) have declined by almost half in the east over the last three years. We have to spread the costs over fewer MWh,” Keech said.
Discouraging Imports
Member David Pratzon told the Operating Committee that the high BOR charges are discouraging generators outside PJM from exporting power into the RTO.
Keech said a major reason for the increase was the delay in a planned outage as a result of Hurricane Sandy and an equipment failure that shut down a second generator in February.
5-Year High
In addition, spot natural gas prices in Transco Zone 6 were extremely volatile in January and February, spiking far above prices elsewhere in PJM and exceeding $10 per mmBtu for much of the period. Prices hit a five-year high in late January, when the pipeline operator limited supplies with an operational flow order.
Transco Zone 6 supplies not only generators in northern New Jersey but also heating and electric demand in New England and New York. Most of the replacement generators dispatched by PJM were gas-fired units with minimum run times that limit their flexibility.
“If we didn’t have the outages we wouldn’t have needed all the generation …” Keech said. “Maybe the spikes are still there but they’re shorter spikes.”
Other contributing factors are congestion on the Readington-Roseland 230 kV tie line between the Jersey Central Power and Light and Public Service Electric and Gas (PSEG) zones and maintaining the “wheel” between PSEG in northern New Jersey and Consolidated Edison Co. in New York City.
Real-Time Commitments
The additional generation is usually committed in real time as a result of reliability analyses, meaning most of the charges have been allocated to the BOR. Make-whole payments are allocated to day ahead load and exports RTO-wide if the units are committed day ahead.
Keech said the costs fall sharply with a return to normal gas prices. The generator down for maintenance is expected back online in June. Spectra Energy’s New Jersey-New York pipeline expansion will add new supply when it becomes operational as soon as November.
