FERC, capacity market among complex issues at MRC

Stakeholders engaged in robust discussions through a number of issues at a Markets & Reliability Committee meeting Thursday.

They looked at the work of the Capacity Construct/Public Policy Senior Task Force, recent decisions by the Federal Energy Regulatory Commission and the scope of cost containment in Order 1000 planning projects and how that might affect PJM’s Regional Transmission Expansion planning process.

PJM also presented a cold weather update (see separate story) and had a number of first reads (see MRC and Members Committee roundup).

Capacity Construct/Public Policy Senior Task Force

Stu Bresler, senior vice president – Operations and Markets, discussed a potential PJM recommendation to the PJM Board of Managers regarding a FERC filing of a proposal to address state subsidies to capacity resources, including a discussion of the updated PJM proposal.

On Jan. 16, CEO Andy Ott sent a letter informing stakeholders of PJM’s intentions, and PJM posted an updated Capacity Repricing paper. Based on stakeholder feedback, the updated paper offers an expanded definition of the design elements of Capacity Repricing.

Bresler reminded stakeholders that PJM remained unsupportive of the proposal recommended by the task force – the MOPR-Ex proposal. He pointed out that the subsidy issue requires action but the solution needs to accommodate state public policy.

That set the stage for the thorough discussion Thursday, when stakeholders voted on several measures – how to respond to state public policy programs that promote state-specific environmental, social or political objectives focused on generation that participates in PJM’s federally-regulated competitive wholesale electricity markets.

Monitoring Analytics, PJM’s independent market monitor, presented an overview of the proposed Tariff revisions associated with its MOPR-Ex proposal, which had been endorsed by the task force. Stakeholders voted to defer voting on the MOPR-Ex proposal and its revised version until completion of a vote on the PJM proposal.

The PJM proposal failed in a sector-weighted vote with 1.07 in favor. The IMM’s MOPR-Ex proposal then failed in a sector-weighted vote with 1.17 in favor.

Stakeholder sponsors of an alternate motion accepted a stakeholder-proposed friendly amendment to the alternate motion to modify the provisions related to the public entity exemption. There was another friendly amendment to add language that guarded against public power entities formed for the purpose of circumventing the MOPR.

They both failed, falling just short of the 3.34 needed in sector-weighted voting (3.02 and 3.19, respectively).

PJM will inform stakeholders of what action – if any – the PJM Board directs PJM to take.

FERC Resilience Order

Chris O’Hara, vice president and deputy general counsel, addressed FERC’s Jan. 8 order effectively rejecting the Department of Energy’s proposal on grid reliability and resilience pricing.

In the same order, FERC directed regional transmission organizations (RTOs) to provide information on current resilience efforts and what actions FERC and the RTOs need to take on resilience of the bulk power system.

O’Hara said that PJM is considering FERC’s definition of resilience but prefers a more specific group of risks. PJM is looking for stakeholder input on the definition and the risk identification language, as well as on the more open-ended questions.

“If the FERC asks, ‘What are you doing?’ we can give them a report on what we are doing,” said O’Hara. He said PJM is most interested in stakeholder responses to the more open-ended guidance questions – the ones that ask what PJM’s role should be or what PJM (or FERC) should be doing advance resilience.

O’Hara directed stakeholders to the questions highlighted in red in his presentation as those “most amiable to stakeholder input.” Those questions address resilience prospectively.

Stakeholders should send comments to David.Anders@pjm.com before Feb. 9. This topic will be discussed at the Feb. 13 Liaison Committee meeting with the PJM Board, and PJM will host a special MRC meeting Feb. 23 for further discussion, prior to PJM’s submitting the required response to FERC on March 9.

FERC UTC Uplift Decision

Bresler then looked at what PJM might do after FERC rejected PJM’s plan to allocate a portion of uplift costs to up-to congestion transactions.

Uplift payments make an energy supplier whole when the supplier is not sufficiently compensated by market prices. Uplift costs currently are allocated to various market transactions but not up-to-congestion transactions (UTC), which are virtual transactions. PJM proposed in an October filing to allocate a portion of uplift costs to UTCs. The proposal sought to allocate uplift to UTCs in the same manner it is allocated to other virtual transactions.

In rejecting the filing, FERC left open the possibility for PJM to make another Section 205 filing.

Bresler said PJM is looking at a “two-pronged approach,” first requesting rehearing, believing that FERC erred in a couple of ways.

Bresler also said that PJM intends to bring a revised, proposed Section 205 filing to stakeholders as soon as the next meeting of the MRC. The new proposal will substantively result in the same allocation proposed previously but revise the associated Tariff language in order to ensure it clearly articulates that all virtual transactions with the same system impacts are receiving the same allocation.

PJM may also propose to stakeholders that any such FERC filing include an alternative whereby, in the absence of approval of the filed uplift allocation, FERC would approve suspension of the UTC product until such time as an uplift allocation to the product is approved. While PJM remains supportive of virtual transactions and the participation of financial market-participants in its markets, the current inequity needs to be resolved, Bresler said.

Cost Containment

Stakeholders voted by acclamation to send a stakeholder proposal regarding cost containment back to the Planning Committee for further discussion. The PJM proposal, which had been developed in special sessions of the PC, failed with 1.71 of the vote.

Steve Herling, vice president – Planning, voiced concern that the stakeholder proposal did not account for key differences between PJM and other RTOs, especially PJM’s use of the sponsorship model for competitive projects in planning. He also pointed out that PJM’s planning windows are significantly shorter than in other regions.

“We would need to look at further refinement of the entire competitive construct,” he said. “We cannot fit [the proposal’s requirements] into the planning cycle we have. It would require a fairly fundamental reworking of the cycle.

“We cannot proceed by shoehorning this into our current cycle.”