MRC, MC Pass Energy Offer Cap Proposal

Capping a complicated stakeholder process, the Members Committee at its October 1 meeting passed by acclamation a proposal to raise the cap on offers in the PJM Energy Market.

Earlier in the day, the MRC overwhelmingly approved the measure in in a sector-weighted 4.3 vote in favor. The MC accepted that vote by acclamation.

PJM will file the Tariff change with the Federal Energy Regulatory Commission shortly.

The proposal raises PJM’s $1,000/megawatt-hour energy offer cap, which was put in place 18 years ago.

Approved proposal:

  •  Incremental energy cost-based offers capped at $2000/MWh and allowed to set price
    • According to Manual 15 and a generator’s fuel cost policy
  • Costs in excess of $2000/MWh recovered through make-whole payments
    • 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

PJM clarified that offers above $2,000 would still be dispatched in merit order. PJM committed to providing a detailed analysis for any offers about $1,000.

The votes were the culmination of a process that saw stakeholders work together to address differences across the various sectors. Direct Energy, ODEC, the Independent Market Monitor and P3 each developed proposals, then worked to fashion the consensus.

“In January, I pleaded [for the stakeholders] to reach a consensus on pocketbook issues,” said PJM CEO Terry Boston. “I’m very pleased with the work done in the stakeholder process.”

Boston added that the size and impact of the vote would “make a great impression” on the FERC and that PJM’s Board of Managers would be pleased. PJM will present the proposal to the board at its October 15 meeting.

In its recent Notice of Proposed Rulemaking on price formation, the FERC indicated that it is going to act on this issue for a long-term solution.

During the Polar Vortex, some generators with a requirement to offer into the energy markets incurred verifiable costs in excess of the energy offer cap. The FERC approved waivers from PJM to address the issue for the remainder of the 2013/14 winter.