Cost Calculator, Quadrennial Review discussion at MIC


PJM presented the latest updates to the Quadrennial Review at the Sept. 12 meeting of the Market Implementation Committee (MIC). Members will vote on the review at the September Markets & Reliability Committee (MRC) and Members Committee (MC) meetings.

Jeff Bastian, manager – Capacity Market Operations, said there are “slight tweaks” to the gross cost of new entry (CONE) numbers. Bastian said the small changes reflect a newly updated debt-to-equity ratio.

PJM withdrew three previous recommendations related to the methodologies to calculate net CONE and net energy and ancillary services revenue offset. The revisions were intended to lessen year-to-year volatility and produce a number that better reflected the large areas for multi-zone locational delivery areas.

Opportunity Cost Calculator

PJM and Monitoring Analytics, PJM’s independent market monitor, are continuing to engage in discussions on a path forward for opportunity cost calculators.

PJM sent a letter to market sellers on Aug. 7, 2018, following a special meeting of the MIC. In the letter, PJM outlined its position, telling members that it does not recommend alternative methods for calculating this adder (including the Monitoring Analytics calculator) without approval from PJM

Must-Offer Exception Process

To start the first read section, Pat Bruno, senior engineer – Capacity Market Operations, reviewed PJM’s must-offer exception process package. There was also an Exelon proposal (Package B).

Both proposals include clarifying rules to the submission of Reliability Pricing Model must-offer exceptions, as well as a process for generation capacity resources to become energy-only.

The key difference between the two revolves around capacity resource status. PJM’s proposal would require a generation capacity resource to have its capacity resource status removed if it has been granted a Capacity Performance must-offer exception and has not offered into the base residual auction for three consecutive delivery years; the Exelon proposal does not.

The difference sparked a protracted stakeholder discussion on who owns capacity interconnection rights – and for how long. Capacity interconnection rights are the rights to input generation as a generation capacity resource into the transmission system at the point of interconnection where the generating facilities connect to the transmission system.

Other first read presentations

PJM presented a high-level overview of the FTR Forfeiture Rule proposal. Members are encouraged to review the matrix and provide additional packages to:

PJM and Exelon presented proposals from the Credit Subcommittee related to accepting surety bonds as an additional form of collateral. The Exelon presentation  included a primer on surety bonds as well (see appendix).

  • Changes to Manual 11: Energy & Ancillary Services Market Operations and Manual 28: Operating Agreement Accounting related to pseudo tie overlapping congestion
  • Changes to Manual 6: Financial Transmission Rights as part of the Annual Review

Additional Items

PJM presented a proposed solution to the regulation market clearing price spikes issue. Stakeholders were receptive to the idea of working on a solution and will have another chance to discuss at the September MRC.

PJM also gave an update on a potential update to the Day-Ahead Market timeline, given processing improvements that PJM expects. PJM is suggesting it may be able to push the timeline to 11:00 a.m.

Other updates include:


All endorsements and approvals passed by acclamation.

  • Approved: Stakeholder problem statement and issue charge addressing small changes to the fuel cost policy rules and process
  • Endorsed: Clarifying Tariff language on apparent overlapping Reliability Pricing Model credit reduction provisions for qualifying transmission upgrade resources and on milestone certification requirements for certain other resources
  • Endorsed: Language for Manual 11: Energy & Ancillary Services Market Operations for transmission constraint penalty factors. Tariff language is under development and will be presented at the Markets & Reliability and Members committees
  • Endorsed: Language for Manual 11: Energy & Ancillary Services Market Operations on the long-term automated process for price-based offers greater than $1,000/MWh
  • Endorsed: Updates to Manual 15: Cost Development Guidelines as part of the Biennial Review