Late Tuesday, the Federal Energy Regulatory Commission approved PJM’s proposal to include Capacity Performance as part of Reliability Pricing Model Base.
Capacity Performance will result in significant reliability benefits for the PJM region by enhancing the incentives for capacity resources to be available when the system needs them most and operate as flexibly as possible.
Mike Kormos, executive vice president – Operations, discussed the FERC order at PJM’s Market Implementation Committee on Wednesday.
“The real purpose of Capacity Performance is keeping electricity reliable,” said Kormos. “It clearly defines obligations of capacity resources and clear performance criteria. It provides enhanced reliability at the lowest feasible cost.
“Reliability cannot be optional.”
With the order, PJM will conduct the annual Reliability Pricing Model Base Residual Auction for the 2018/2019 delivery year the week of Aug. 10, 2015, as previously announced. The auction timeline includes Capacity Performance training, as well as information regarding bid submissions.[NOTE: The third slide in the timeline presentation lists June 17 as the date for the special MRC meeting. That meeting has been rescheduled for the morning of June 18.]
The reasons for improving generator performance are reliability and price. Generator performance in January 2014 highlighted why changes are necessary. On the coldest day of the year, 22 percent of the generation in PJM was unavailable to serve customers.
Although generator performance improved in the winter of 2015, performance was voluntary. Capacity performance will ensure the performance levels needed to maintain reliability.
Capacity Performance will require generators to make significant investments in plant equipment, fuel procurement arrangements, fuel supply infrastructure and other improvements. Generators must be fairly compensated for their investments, which will necessarily result in some level of increase for capacity costs.
The resulting generation fleet will be more capable of operating to meet peak customer demand during challenging weather conditions and in the most economically efficient manner.
The increased capacity costs are expected to be substantially offset by lower energy costs and lower uplift costs, which would result from more efficient use and availability of the generating fleet.