VALLEY FORGE, Pa. — After months of debate, PJM’s Manual 15 revisions on fuel-cost policies and hourly offers won the approval of the Market Implementation Committee on Wednesday.

The changes are based on FERC’s approval of related Tariff changes that were filed in August (ER16-372).

Catherine Tyler Mooney of Monitoring Analytics, PJM’s Independent Market Monitor, questioned why some language on the review process that the Monitor and PJM had previously agreed upon had been struck from the revisions.

PJM’s Jeff Schmidt explained that elsewhere in the manual, the policy review was detailed as a “collaborative process” between the Monitor and PJM, so it needed to read that way everywhere in the manual. “The way we had it broken up before, it was staged,” he said. “It didn’t make sense for one [section] to be staged or stepped, and one to be at the same time.”

The section in question put generators on a five-day clock for responding to inquiries from the Monitor. “If the [Monitor] lets us know you want us to keep track of the clock, we’ll start the clock,” Schmidt explained. “If you have some specific question during the process about the fuel-cost policy, you have to let us know [to start the clock]. Then we’ll keep track of it.”

Mooney indicated that the explanation wasn’t satisfactory, but she declined to continue the debate. The exchange was the latest skirmish in an ongoing dispute between PJM and the Monitor. (See PJM Attempting to Usurp Market Mitigation Role, Monitor Says.)

Several stakeholders, including Mike Borgatti of Gabel Associates, had concerns with how that plan would be implemented to ensure a generator is aware whether it’s on the clock or not. Schmidt assured him that PJM would make them aware.

Schmidt’s efforts were good enough for Calpine’s David “Scarp” Scarpignato. “I’d like to do something I usually don’t do: I’d like to commend you,” he told Schmidt. “It’s pretty specific what this engineering judgment is referring to, and I think this is a well-written sentence.”

The revisions were endorsed with seven objections and two abstentions.

‘Fully Metered’ EDC Definition OK’d

Members endorsed by acclamation Manual 28 changes describing a “fully metered” electric distribution company.

The changes were developed in response to a stakeholder request for a definition of the phrase, which was added in a recent update to Manual 01: Control Center and Data Exchange Requirements.

The new language in Manual 28: Operating Agreement Accounting defines a fully metered EDC as one that “reports hourly net energy flows from all metered tie lines to PJM via Power Meter and revenue meter data for the hourly net energy delivered by all generators within that EDC’s territory via Power Meter, for the purposes of energy market accounting.”

Monitor Concerns Delay Operating Parameter Revisions

PJM’s Tom Hauske had come to the MIC meeting hoping for endorsement of changes to the Tariff and Manuals 11, 12 and 28 relating to operating parameters. But the Monitor’s concerns about definitions and modeling shelved that idea and the item was changed from an endorsement to a first read. (See “Stakeholders Approve Last-Minute PJM-IMM Operating Parameters Collaboration,” PJM Market Implementation Committee Briefs.)

Monitoring Analytics’ Joel Romero Luna raised concerns with how the definitions were applied, specifically pointing to what he saw as an over-complication of how to handle facilities with multiple breakers. He suggested standardizing the language to “the last breaker” throughout the revisions.

“When there’s one breaker, that’s always the last one,” he said.

Based on Luna’s concerns, Dave Pratzon of GT Power Group suggested delaying the vote until the Monitor had revised the language. “Personally, I can’t see voting on something where the [Monitor] is going to come back and make changes,” he said.

More Adjustments for Five-Minute Settlement

PJM will transition from an hourly calculation to a five-minute calculation for balancing spot market energy charges in order to eliminate an imbalance created when values such as demand, generation, imports and exports are calculated on different time scales, PJM’s Ray Fernandez explained.

Additionally, PJM proposed including the value of the generation and load imbalance in the transmission loss charges calculation and the transmission loss credits allocation. (See “Order 825 Progress,” PJM Market Implementation Committee Briefs.)

“The key piece to remember in here is the five-minute [generation-to-load] imbalance component,” Fernandez said. “That component is part of the balancing spot-market charge.”

Next, PJM’s Rebecca Stadelmeyer explained the RTO’s proposed adjustments to shortage pricing to integrate with five-minute settlement requirements. PJM’s plan would change the scarcity signal for the maximum $850 penalty factor from the economic maximum of the single largest contingency to the highest actual output of a single unit. Next, it would add two lower “steps” that would trip a $300 pricing level. One step would be calculated as the highest actual output plus 190 MW — a static number derived from the synchronous reserve mean of the Mid-Atlantic Dominion zone plus one standard deviation. The second step would be calculated as the previous step plus an extension.

Stakeholders had several concerns with the proposal. Direct Energy’s Jeff Whitehead questioned the value of additional penalty thresholds that would just trigger lower levels of scarcity pricing more often. “I’m still a little perplexed as to why the reserve requirement is even being discussed here,” he said.

PJM argued it would reduce volatility.

IMM Clarifies Fuel-Cost Policies

Bowring outlined fuel-cost issues he’s observed and how they should be handled. First, he addressed penalty gas — gas used by generators that exceeds the amount the generator committed to using that day.

“The basic issue with penalty gas is it’s intended to be an incentive to not use the gas,” he said. “It’s not appropriate to include that in the cost of your gas.”

Stakeholders took exception to that, saying not being able to recover those costs would make them less likely to respond if called by PJM.

Bowring also discussed how generators should account for the costs of “ratable take” gas — gas that is not guaranteed to be available. “If a generator chooses to take a less-firm service, that’s fine, but they should take the risk,” he said.

Again, stakeholders were less than enthusiastic with Bowring’s perspective. “We need to be able to recover the costs of responding to PJM’s request. If we can’t do that, we’re going to have issues,” Dynegy’s Jason Cox said. (See Heeding Stakeholders, PJM Reduces Proposed Fuel-Cost Penalties.)

Generators Displeased with FTR Adjustments

To comply with FERC’s order on assigning balancing congestion costs, PJM is proposing several changes to its financial transmission rights market. First, it plans to assign all real-time balancing congestion to load. Along with that, PJM proposed returning to auction revenue rights holders any FTR auction and day-ahead congestion surplus after ARRs and FTRs are fully funded.

“PJM believes the allocation of FTR surplus should change to align closer with allocation of balancing congestion,” PJM’s Asanga Perera said in his presentation.

While stakeholders took issue with the proposal and said it went beyond the scope of the compliance order, Bowring said, “we think it’s entirely within the scope.” (See Monitor Says FERC Erred in PJM FTR Ruling, Seeks Rehearing.)

PJM also proposed annual replacement of retired Stage 1 paths. “We would only consider any future replacements as units retire. in other words, we wouldn’t be doing this process over and over every year,” Perera said. PJM has proposed a hybrid plan that would replace merchant paths RTO-wide and zonal-wide rate-based paths only in that zone.

Calpine’s Scarp was concerned with this approach. “I think you need to go back to the original presumption, which is, ‘Those who pay for the transmission get the rights,’” he said. “To say I have [capacity injection rights] and don’t get some of the incremental ARRs doesn’t make sense.”

“Why would a generator need a congestion hedge?” asked PJM’s Tim Horger. “They have no load.”

“I think the generator deliverability analysis lines up directly with the load deliverability analysis,” Scarp said. “There’s a parallel here. You can ignore it if you want, but I’m telling you it exists.”

– Rory D. Sweeney