MRC discusses energy cap proposals at special session

PJM’s Markets and Reliability Committee held a special session September 24 to discuss the framework for a consensus energy cap proposal before presenting at the October 1 MRC and Members Committee meetings.

While there have been stakeholder energy cap proposals discussed previously, a potential catalyst for consensus was a recent announcement by the Federal Energy Regulatory Commission that it expects to undertake action regarding price formation topics – including offer price caps – in the future. The FERC did not give a timetable for possible decisions, however.

The meeting was the latest one in a series of stakeholder sessions to develop proposals addressing raising PJM’s $1,000/megawatt-hour energy offer cap, which was put in place 18 years ago.

The PJM Board requested that the stakeholders develop a consensus solution in advance of the October board meeting.

After a special MRC session on September 9, there were four separate proposals to raise the energy offer caps. Between that meeting and Thursday’s meeting, proposers of four packages discussed developing the framework for the consensus.  There will be further opportunity to discuss the framework at the MC webinar on September 28.

At the MRC, three of the four proposers – Direct Energy, ODEC and the Independent Market Monitor – said they would take their proposals off the table at the MRC, should the consensus proposal pass. The fourth proposer – the P3 group – could not do that at the meeting, as representatives needed to discuss it with group members.

Stakeholder framework proposal:

  •  Incremental energy cost-based offers capped at $2000/MWh and allowed to set price
  • Costs in excess of $2000/MWh recovered through make-whole payments (also according to Manual 15 and the generator’s fuel cost policy)
  • Market-based offers for individual units allowed to rise with their cost-based offers
  • No changes in the following:
    • 10 percent adder
    • Shortage penalty factors
    • Startup, no-load compensation

If there is not a consensus following the October 1 MRC and MC, PJM staff stated they will recommend that the board direct a filing under section 206 to address the energy offer cap. Any filing would likely cover a one-to-two winter period, given the FERC’s indication that it plans to address the energy offer cap issue.

For a solution to be in place for January 1, 2016, PJM would need to file the tariff change with the FERC by November 1.