FERC has approved PJM’s request to revise its tariff to tighten the triggers for a performance assessment interval (PAI), requiring that a primary reserve shortage be in effect paired with a set of emergency actions (ER23-1996).
In its May 30 filing, PJM argued that adding the primary reserve shortage would better align the timing of PAIs with their intended generator performance when it would be most beneficial to reliability. For a PAI to be declared, a shortage would have to be in place as well as a voltage reduction warning paired with any of the following actions: reduction of critical plant load, manual load dump warning, maximum emergency generation action or the curtailment of non-essential building loads and voltage reduction. The July 28 order stated that the changes would provide dispatchers with more certainty during stressed conditions.
The emergency actions necessary for the declaration of a PAI also were reduced to no longer include pre-emergency demand response, which PJM argued should be available for dispatchers to utilize without initiating a full emergency declaration.
“We also find that it is appropriate to remove the deployment of pre-emergency load response and emergency load response from the trigger for a PAI because PJM cannot verify the amount of response these resources are providing until 60 days after an event, and therefore it may be prudent for PJM operators to maintain load response even after capacity shortage conditions pass,” the order says. “As PJM explains, its proposed revisions will enable PJM operators to efficiently and effectively operate the grid without second guessing their decision to keep emergency procedures in place during non-capacity shortage instances, such as the hours between morning and evening peaks during extreme winter conditions.”
In directing the board to file the proposal, the PJM Board of Managers took one of three components of a package endorsed by stakeholders during the May 11 Members Committee meeting. The other two portions of the package would have based the penalty for resources that perform below their capacity obligation and the annual stop-loss limit on the Base Residual Auction (BRA) clearing price for the locational deliverability area (LDA) that the resource is located within. (See PJM Board Rejects Lowering Capacity Performance Penalties.)
Several organizations filed in support of the change to the trigger, but asked that the commission remain open to the possibility of changes to the penalty rate and stop loss in the future.
Though it supported the change to the trigger, the Independent Market Monitor argued that PJM did not make a satisfactory case for not including the full stakeholder-endorsed proposal and suggested that the commission should open a Federal Powers Act (FPA) 206 proceeding to evaluate if the charge rate is just and reasonable.
PJM filed a response stating that commission action is not needed as stakeholders are considering changes to capacity market design, including the penalty charge rate and stop loss limit, through the critical issue fast path (CIFP) process. American Municipal Power (AMP) argued in response that it’s unknown what the result of the CIFP process may look like, whether the commission will approve any resulting filing and whether changes will be effective for the next auction.
The latest version of PJM’s CIFP proposal, presented during the Aug. 1 stakeholder meeting, did not include changes to the penalty charge rate or stop loss limit.
The Public Service Commission of West Virginia protested the filing, arguing that the change to the trigger would create unbalanced obligations between load and generation. Under the proposed language, it said load will receive voltage reduction and load shedding warnings encouraging consumers to reduce their consumption, but capacity resources will not be notified that they need to be ready for dispatch.
Vitol argued that the tariff revisions would violate the filed rate doctrine and rule against retroactive ratemaking if it were to be applied to auctions that already have concluded. The company stated that market sellers include their expectations about the number of PAIs and how they will impact their generators when forming the capacity performance quantified risk (CPQR) component of their market offers, which goes on to influence their bids and the ultimate auction clearing price.
PJM responded that it is not aware of any unit with a CPQR component that did not clear in either auction which has been concluded for future delivery years that would be affected by the tariff language, nor did the marginal unit in either auction contain a CPQR component to its offer.
The commission stated in its order that insufficient evidence had been provided that the proposed language would have had any impact on capacity offers. In considering the balance of settled expectations for those auctions, the order states that the commission found that the benefits of more accurately aligning PAIs with stressed grid conditions where generator performance impacts reliability outweighed market participants’ expectations based on the emergency action definition.
“There is insufficient record evidence, and no evidence from parties that raise such arguments, that such risk had a material impact on final capacity offers, especially given the other major uncertainties that affect suppliers’ assessments of PAI penalty risk, such as weather, fuel availability or equipment failures,” the order says.
In supporting the filing, the PJM Power Providers Group (P3) argued that it would allow PAIs to be more reflective of when emergency conditions exist on the grid and avoid “false positives” that have been seen in PJM’s history.
The order directs PJM to submit a compliance filing within 30 days to correct clerical errors and capitalize the phrase “Primary Reserve requirement” to more explicitly refer to the parameter defined in the RTO’s manuals by the same name.
The Ohio Federal Energy Advocate and Earthrise argued there was ambiguity in PJM’s filing around whether the primary reserve requirement by which a shortage is measured against referred to the manual defined reserve requirement or to the broader reserve requirement for primary reserves, which includes the extended reserve requirement. The primary reserve requirement is set at 150% of the synchronized reserve reliability requirement, which itself is based on the single largest contingency on the grid.
Earthrise argued that the filing should be read to refer to the primary reserve requirement without extended reserves and that PJM should be required to make a compliance filing specifying its intent. PJM filed that it preferred to include extended reserves in its definition and included new proposed tariff language in its response.
The commission’s order stated that the language of PJM’s original filing referred to the primary reserve requirement without the inclusion of extended reserves and its intent or preference to include extended reserves was not reflected.
