PJM files waiver request with the FERC to delay annual capacity auction

On April 7, PJM asked the Federal Energy Regulatory Commission for a one-time waiver of its tariff, to allow a short delay in the annual capacity auction also known as the Reliability Pricing Model, for the 2018/2019 delivery year.

The delay would allow the FERC time to rule on PJM’s Capacity Performance filing so that, if the filing were approved, the Capacity Performance product would be part of the auction. PJM requested a decision on the waiver request from the FERC by April 24, which is 10 working days before the auction is scheduled to start. Under the original schedule, the auction would have opened May 11, with results posted on May 22.

Capacity Performance significantly changes the rules under which capacity resources are compensated in PJM’s markets and is intended to improve generator performance.

“We’re looking for certainty so we can provide an orderly auction process,” said Andrew Ott, executive vice president – Markets, in a briefing to the Markets Implementation Committee meeting April 8. “With an orderly auction process, we will have sufficient amount of time to conduct the auction. There will be an established period of time allowing the participants to get ready to participate.”

If FERC approves the delay, PJM could potentially conduct the capacity auction in June or July. However, if FERC denies the delay, PJM is prepared to hold its annual capacity auction in May, as originally planned, under existing auction rules. A timeline of the proposed changes was presented at the MIC meeting.

On March 31, the FERC issued a notice seeking more information about PJM’s proposal. The notice included questions on proposed offer cap mechanisms and non-performance charges.

If FERC allows the delay, but later does not approve the Capacity Performance proposal, PJM potentially would hold the auction under existing rules, most likely in July or August.

Unique circumstances

PJM does not take the action lightly, Ott said. PJM has cleared base residual auctions for eight successive years on a 36-month forward basis. Market participants have integrated the auction’s schedule into their business practices and development schedules.

The present circumstances are unusual for the following reasons:

  • Resource performance is critical: it is the means for realizing the reliability that is the purpose of RPM;
  • PJM has shown, and events have underscored, that the current RPM rules do not provide sufficient incentives to ensure that committed resources deliver the performance for which loads are paying;
  • PJM has proposed to correct those current shortcomings and provide the needed incentives through reforms that are substantially similar to those the Commission approved just last year for ISO-New England, for essentially the same purpose;
  • The Commission has not yet accepted the Capacity Performance filing, but it has identified its specific concerns with PJM’s proposal, and PJM is confident that it can successfully address and resolve those specific concerns; and
  • The auction delay would be limited to no longer than three months.