The Operating and Planning committees endorsed the following manual changes last week:
Planning Committee
Manual 7: PJM Protection Standards
Reason for Changes:Changes were required to align this manual with PJM’s protective relaying philosophy and design guidelines.
Impact: The revisions include changes to section 7 (Line Protection) and section 8 (Substation Transformer Protection).
Manual 14A: Generation and Transmission Interconnection Process
Reason for Changes: Ministerial.
Updates the list of manufacturing data sheets PJM has on file for wind turbines.
Manual 21: Rules and Procedures for Determination of Generation Capability
Reason for Changes: The changes clarify rules regarding seasonal verification of generators.
Impact: The changes clarify that intermittent resources are not required to perform seasonal verification. They also spell out that the installed capacity rating of all generators should be based on the generator’s demonstrated output under PJM summer peak load conditions, and that hydro and pumped storage units should perform their annual ratings test during the summer. Other notable changes apply to ambient conditions recording and reporting.
Operating Committee
Manual 40: Training and Service Requirements
Reason for Changes: Required annual update in accordance with NERC standards.
Impacts: Changes data retention requirement and clarifies continued training requirements for transmission operators and initial training requirements for new entities.
Adds a “human performance program” for use in PJM system operations to achieve an “event-free” culture. The program encourages a questioning attitude, peer checking methods, the use of 3-part communications, and adherence to procedures.
Members will consider relaxing metering requirements to make it more practical for residential customers to offer demand response into the synchronous reserve market under a problem statement approved by the Market Implementation Committee Friday.
Frank Lacey, of curtailment service provider Comverge, proposed the problem statement, saying DR has proven to be “a capable synchronous resource.” He said current PJM rules that require one-minute metering of synchronous resources are cost prohibitive to residential customers at $1,000 to $1,500 per meter.
PJM’s Pete Langbein said “There’s nothing today to prevent residential customers from entering the market,” though he conceded that “metering is another issue.” The question, he said, “is there a way to measure [DR response] without one-minute metering?”
Dave Pratzon, of GT Power Group, noted that only 59% of metered DR provided Tier 2 synch reserve as expected in 2013 (similar to the rate for Tier 2 generation resources). “I think it’s going to be a high hurdle to add a new class of customers that isn’t metered at all,” he said.
The MIC approved the problem statement with 12 no votes and 11 abstentions. It will hear the issue charge at its March meeting.
PJM plans to change its definition of the PJM-MISO interface to eliminate double counting that can inflate congestion calculations in market-to-market transactions.
Transactions overestimate congestion when they settle with both RTOs because both RTOs are pricing its full effect on the constraint.
Interface Pricing Flaw: Today, the full effect of transactions on the MISO M2M constraint is modeled by both RTOs.(Source: Potomac Economics)
PJM’s Rebecca Carroll officials told the Market Implementation Committee last week that PJM’s definition puts the interface too far west of the congestion and that a revised definition — comprised of 10 generator pnodes that account for 80% of tie line flows — will move it closer to the RTOs’ seam. PJM ran simulations with these 10 pnodes, using transactions from December and January, and found lower prices, though the decreases were often relatively small.
PJM officials said they would like MISO to agree to a common definition. However MISO’s Market Monitor, Potomac Economics, which identified the problem, has proposed a different solution. It would eliminate the double payment by basing the settlement entirely on the monitoring RTO’s shadow price.
If the two RTOs are unable to agree, PJM Vice President of Markets Stu Bresler said he sees no reason PJM can’t change its definition unilaterally. PJM would like to see the changes implemented by June 1, he said.
On a related issue, PJM will stop using the slice-of-system method for calculating market flows with MISO. It will begin using the marginal zone participation factor (MZPF) method, which is already used in firm flow entitlements and the interchange distribution factor.PJM and MISO are expected to jointly file the language for inclusion in their Joint Operating Agreement in March, and PJM plans to implement the changes on June 1.
Eight of PJM’s top 10 winter peaks occurred in January 2014.
Load serving entities in PJM are starting to calculate how much their bills are going to increase for a frigid January that sent load and prices to new records. And, as they made clear to PJM last week, they aren’t happy.
“We have a market that’s not functioning,” said one stakeholder during a testy session of the Market Implementation Committee Friday. “We have people who scheduled in the day-ahead market as they were supposed to and they are getting hit with these unbelievable costs.”
Carl Johnson, representing the PJM Public Power Coalition, said his members’ operating reserve charges will be “absolutely extraordinary.”
Referring to other PJM members, he added: “We’ve seen unprecedented confusion, verging on panic.”
The complaints were sparked by high natural gas prices that prompted PJM to obtain a waiver allowing the RTO to issue make-whole payments to generators whose costs exceeded the $1,000/MWh offer cap.
Generators, who want the high costs to set market clearing prices, are also unhappy.
“We cannot ever let this happen again. We have to get these prices reflected in offers,” said a second stakeholder. “You’re creating day-ahead versus real-time risk. You’re creating risk that [generators are] going to buy fuel and then not burn it.”
“Even if you don’t have deviations, the way it looks now, every megawatt that flows is going to get hit” with make-whole charges, said a third.
PJM officials were unable to provide members last week with the total energy market and uplift charges from January.
PJM Chief Financial Officer Suzanne Daugherty said that PJM, which billed $33 billion in all of 2013, billed “a lot more than 1/12th of that” during the month. Eight of the top ten winter demand peaks in PJM’s history occurred during January.
Members won’t see the full impact of January in their bills for months because of a lag in demand response data. The debate over the future of the $1,000 price cap will likely last far longer.
Windfall vs. Market Integrity
The Federal Energy Regulatory Commission, which approved PJM’s request to allow make-whole payments for generators whose costs exceeded the cap, has yet to rule on PJM’s request to lift the cap altogether through March 31.
That would allow high-cost gas generators to set clearing prices, which PJM and generators say is essential to preserving the integrity of the RTO’s single price energy market, in which the marginal unit sets the price for all generation operating.
Load serving entities say lifting the cap would result in an unjust windfall for the vast majority of generators, whose costs never approached $1,000/MWh.
PJM said the make-whole payments would affect about 6,800 MW of mostly older combustion turbine generation, whose prices could be as high as $1,500 to $2,000/MWH.
“Since this generation is the least efficient on PJM’s system, much of it rarely or never operates, and as little as 50 to 100 MW may be all that is operating and bearing these high costs,” the Maryland Public Service Commission said in arguing against lifting the cap. “Shockingly, PJM has requested that the entirety of the 135,000 to 140,000 MW required to operate to provide service during extreme cold weather events receive this price spike-induced pricing.”
Rationale for Cap
In a 2002 rulemaking, PJM noted that the cap was at least five times the marginal cost of production of its highest cost units, and said it “serves to permit scarcity pricing while preventing the exercise of market power that would result if the cap were higher.”
In arguing to lift the cap for the remainder of the winter, PJM told FERC that continuing to rely on make-whole payments “falls short of Commission policy, and PJM’s fundamental market design, that clearing prices should reflect the marginal costs of the last resource needed to clear the market.”
The RTO cited a prior FERC ruling saying that uplift costs must be minimized because they “fail to send clear market signals” needed to encourage new market entry.
PJM vs. NYISO Approach
The Electric Power Supply Association, which represents generators, asked FERC to not only allow PJM’s market-clearing request, but also to impose it on NYISO. “It is time to move past Band-Aid fixes for persistent structural problems in these markets,” EPSA said, calling the price caps “outdated.”
The New York ISO also won a make-whole waiver to its $1,000 price cap, through Feb. 28. But unlike PJM, it did not seek permission to let units with costs over the cap set clearing prices. That, NYISO said, would lead to “over-compensating” generators.
DC Energy LLC, which trades financial transmission rights in PJM, supported EPSA’s request, saying a disparity in treatment between the two regions would lead to “unwarranted interface flow and congestion in the NYISO-to-PJM direction” that could lead to “even more generators being dispatched and compensated out-of-market in NYISO.”
Criticism of PJM Operations
At Friday’s MIC meeting, members also pressed PJM staff to commit to full after-action review similar to what it provided regarding the September heat wave.
“I would hate for PJM staff to be disconnected from the emotional state in the market created” by January’s events, one stakeholder said. “That would come across as tone deaf… I think this does really warrant all hands on deck.”
Members also complained that poor load forecasts led to excessive uplift charges.
Emergency demand response was called on January 7, 8, 27 and 28, although the Jan. 8 dispatch was cancelled when load came in lower than expected.
PJM officials have said their load forecasts in early January were inaccurate because there was no historical record for the kind of RTO-wide cold experienced during the polar vortex.
“Based on the waiver and tariff it’s tough to put those costs anywhere but BOR,” said Adam Keech, director of wholesale market operations.
Costs due to operator actions to preserve reliability — “conservative operations” — will be assessed to real-time load and exports. Uplift resulting from deviations between day-ahead and real-time schedules are collected from all those with deviations including increment offers and decrement bids.
PJM officials said the make-whole payments will be recovered through Balancing Operating Reserve (BOR) charges in bills to be sent in February. Because DR providers have 60 days to submit metered data, uplift charges from the DR calls won’t show up in bills until March and April.
Market Manipulation?
Opponents of lifting the caps urged FERC to conduct fact-finding before issuing a ruling in the case, in part to determine whether market manipulation played a role in the high gas and power prices.
The Maryland PSC said the commission should investigate PJM’s claim that inefficient combustion turbines with heat rates of 14,000 to 18,000 Btu/kWh were needed to provide service during the cold.
“PJM forced outage rates this winter have exceeded 20% where they normally do not exceed 8%, an increase that affects almost 20,000 MW of generation,” the PSC wrote. “…Can the commission rule out the potential that some of this generation has been withheld in order to drive market prices higher or is suffering outages for other impermissible reasons?”
Washington Gas Energy Services, Inc., a retail gas and electricity marketer, said PJM’s dispatch during the cold “left gas generators having to bid `whatever it takes’ to buy the gas in the open market…When electricity generators become gas buyers with no alternatives, the gas sellers quickly raise prices as high as possible. With the $1,000/MWh cap in place, there is at least some resistance to the gas prices exceeding $100/MMBtu.”
Maryland regulators also noted there was a disparity in gas prices on pipelines serving PJM generators. While PJM cited prices at two city-gates on the TRANSCO pipeline that could push generators’ costs above the cap, TETCO’s pipeline was offering pricing that allowed CTs to produce power at costs below the cap, Maryland said.
Impact on retail marketers
In addition to uplift charges, market participants also will be assessed for more than $2 million to cover defaults by two power retailers that were unable to cover the price spikes. CCES LLC, operating as Clean Currents, defaulted on $1.6 to $1.8 million while People’s Power & Gas LLC owes PJM $400,000 to $600,000.
PJM will ask the Board of Managers at its Feb. 12 meeting to approve an assessment on members to collect the defaults. The allocations will show up in March bills.
Exempt are associate members, municipal members that have received waivers, Emergency and Economy Load Response and ex-officio members, such as state consumer advocates.
The assessment formula spreads 10% of the default over all non-exempt members — about $250 to $350 per member. The remainder will be assessed based on total gross activity for the month of the default and the two previous months.
While PJM isn’t aware of any of other retailers in financial distress, Daugherty said she couldn’t promise “there’s no one else.”
Most at risk are retailers that sold power on fixed-price contracts, particularly in states that don’t allow suppliers to pass through costs attributable to changes in market rules. In Pennsylvania, “fixed means fixed” for the term of the retail agreement, retailer Ethical Electric said in a protest to the PJM waiver request.
State regulators have warned customers to review their contracts. Many variable-rate plans do not contain price ceilings.
The Retail Electric Supply Association sided with generators supporting PJM’s call for allowing $1,000-plus generation to set clearing prices, saying that its members can hedge energy prices but not uplift costs.
The group includes retailers that are part of larger companies that own generation, including PPL, GDF Suez, AEP and Exelon, whose generation affiliates would benefit from high market clearing prices.
The review of proposed solutions to the Artificial Island transmission stability problem is taking longer than expected and the selection of the winner could be months away, PJM officials told the Transmission Expansion Advisory Committee last week.
An engineering consultant has completed a preliminary constructability review of the 26 potential solutions, which range in cost from $100 million to $1.5 billion.
Eight proposals are among those considered favorites to win the bid, including five that would add a 17-mile 500kv line that parallels an existing 500kv line from Red Lion to Hope Creek.
Three other projects would cross the Delaware River to the Delmarva Peninsula with a 230kv line and run to a new substation or expanded Cedar Creek substation. Two of the proposals would run a submerged line in the river bed and the other would run the line above the water.
Much of the analysis has focused on combining the lower cost proposals with static VAR compensators to provide reactive support. Other factors being considered include the need to obtain right of way, environmental impacts, and the number of planned outages needed during construction.
The front-running proposals range in cost from $110 million to $270 million, and will take from 42 to 111 months. While the relatively modest cost of these projects is an attractive feature for PJM, Paul McGlynn, general manager of system planning, said there is still plenty of evaluation to be done.
“We have focused a lot of our attention on the lower cost projects, but I wouldn’t say others are off the table,” he said.
McGlynn said optimism that PJM staff could make a project recommendation to the PJM board in February has faded.
Artificial Island is the home of the Salem and Hope Creek nuclear plants in Hancocks Bridge, N.J. Five utilities and three independent developers made proposals in PJM’s first competitive transmission project under FERC Order 1000.
PJM provided members a glimpse last week of the new visualization tools that will soon be available to transmission operators as a result of the deployment of synchrophasors.
The Real Time Dynamics Monitoring System will provide wide area situational awareness data to help analyze system performance & events. It will include several measures of grid dynamics, including phase angle differences (grid stress); small signal stability (oscillations & damping); frequency instability; generation-load imbalance; power-angle sensitivity and power-voltage sensitivity.
TOs will be offered training on the tool Feb. 28.
PJM officials said they will consider in the System Operations Subcommittee whether generator owners, which are being required to installed synchrophasors, should also have access to the system.
Members endorsed rules describing when economic demand response is eligible for compensation, over the objections of some demand response providers, who said they are unfair.
The changes to Manual 11: Energy & Ancillary Services Market Operations specify that economic DR will be compensated at full Locational Marginal Pricing for “demand reductions that are executed in response to the real‐time and/or day‐ahead LMP or as dispatched by PJM and that are not implemented as part of normal operations.”
Excluded will be “load reductions from normal operations that would have occurred without PJM dispatch, or that would have occurred absent PJM energy market compensation.”
The changes, meant to clarify rules that took effect in April 2012 to comply with FERC Order 745, won 110 votes in support with 22 no votes and 18 abstentions.
Pete Langbein, of PJM, explained that some electricity customers manage their resources in a sophisticated manner that can lead to inflated settlement costs.
“This is just consistent with the way we’re interpreting the Tariff now,” Langbein said. “This is not crafted to have some mysterious meaning behind it.”
One representative said his clients oppose “PJM speculating” about DR participants’ intent.
Frank Lacey, of curtailment service provider Comverge, set up a hypothetical situation in which a retailer dims its lights or turns off escalators in response to day-ahead pricing. “If that was done for the last 10 years, now that can’t be offered into the energy market as a load reduction” under PJM’s interpretation, he said.
John Webster, of Icetec Energy Services, said the change “introduces a lack of transparency.” He said the new language could be “discriminatory based on the level of [customer] sophistication.”
Despite the reservations, stakeholders endorsed the Manual changes with 83 percent support. It will go to the MRC for consideration later this month.
Flow of Emissions Value (Source: The Brattle Group)
Instead of making individual generators or states meet coming carbon emission limits, The Brattle Group proposed that regional transmission operators such as PJM build the limits into their markets. Brattle and Great River Energy, in Minnesota, have broached the idea, and Brattle is developing details of it, as the Environmental Protection Agency prepares to release carbon regulations expected by June.
EPA has been meeting with many stakeholders to come up with a proposal that is effective and can withstand legal challenges.
Jolted by the armed attack on a Pacific Gas and Electric substation last April, members of Congress are considering making a stronger role for the Federal Energy Regulatory Commission in setting standards for protection of critical grid facilities. The current reliability regime, which governs FERC and the North American Electric Reliability Corp., allows the commission to act on standards submitted by NERC but not to rewrite them or initiate its own standards.
One proposal Congress is discussing would allow FERC to impose interim rules on grid defenses while allowing the industry the opportunity to influence permanent requirements.
The Obama administration is worried that economic problems that may lead to additional nuclear plant closures will hurt the nation’s ability to reach carbon dioxide emission reduction goals. Assistant Energy Secretary Pete Lyons, a former member of the Nuclear Regulatory Commission, said DOE is studying plant retirement scenarios and is “very, very concerned.” (See related story, Exelon Warns of Nuke Closings.)
Environmentalists have mixed emotions about the shuffling of chairmanships in the Senate. Sen. Mary Landrieu, a Democrat from oil- and gas-producing Louisiana, is set to chair the Energy and Natural Resources Committee as Oregon’s Ron Wyden moves to Finance to replace Sen. Max Baucus, the new ambassador to China.
Wyden’s move to Finance gives some wind power interests hope that he can win an extension of the production tax credit. Many Republicans want to address extensions as part of comprehensive tax reform; Wyden said he sees them as “a bridge” to comprehensive action.
The Department of Energy signed off on new energy conservation standards for external power supplies used to charge devices such as laptops and cellphones. The standards will save consumers up to $3.8 billion on top of $42.4 billion in savings estimated by 2032 from standards implemented in 2007, DOE said.
The Environmental Protection Agency intends to update and expand its regulations for radiation from nuclear power plants. In addition to addressing radiation emitted to the air, the new standards will cover ground water protection, radioactive waste disposal and decommissioning old plants, subjects that the current regulations do not address.
FERC Uses Emergency Power To Order Propane Shipments
The Federal Energy Regulatory Commission for the first time used its emergency authority under the Interstate Commerce Act to order priority propane shipments from Mont Belvieu, Texas, to the severely cold and propane-short Midwest and Northeast.
“We’re mindful of the emergency situation that has developed in parts of the country where bitter cold weather has created problems for consumers who need supplies of propane,” Acting FERC Chairman Cheryl LaFleur said. “The problem is acute enough that we feel it is important for us to take this step.”
ITC Bill Would Help Solar Projects Get Tax Credits
Senators Michael Bennet (D-Colo.) and Dean Heller (R-Nev.) have introduced a bill to change the qualification rules for the investment tax credit so that more projects can use it. The bill would allow the credit for projects that are under construction, instead of completed, by Dec. 21, 2016, a change that would aid the solar industry.
Four out of five Reliability Must-Run generation units in the ATSI zone will shut down this year rather than 2015, PJM told the Planning Committee Thursday.
Ashtabula Plant (Source: FirstEnergy)
East Lake 1-3 and Lake Shore 18 will be retired Sept. 15, thanks to transmission upgrades in the area that will help maintain reliability in ATSI. Ashtabula 5, however, will maintain generation for the next 16 months.
Lake Shore 18 unit, which was originally slated to be converted to a synchronous condenser at a cost of $20 million, was scrapped in favor of a $34.7 million SVC project due for completion in June 2015. Paul McGlynn, general manager of system planning, said the SVC project should prove more economical when including maintenance costs for the synchronous condenser.
American Transmission Systems, Inc. provides the bulk of its transmission services in northern Ohio and northwest Pennsylvania.
PJM plans to survey generation owners to determine what can be done to increase resource flexibility.
Adam Keech, manager of wholesale market operations, told the Operating Committee that the survey will “be looking at the decline in generation flexibility in the last five-ten years,” a worrisome trend that recent weather events — and accompanying unforced outages that seriously challenged grid reliability — have brought to the fore.
“We want to know, ‘What are the [barriers] to resource flexibility?’” said Keech. “Is it a case of [older] generators not being able to run as much? Is it market rules or fuel … limitations? It will be a mixed bag of questions for generators.”
Keech said PJM will request feedback by April 1 and evaluate responses during the second quarter of this year. The goal is to offer solutions on how to increase resource flexibility by the end of the year.
