Energy Reserve Pricing Issue Nearing a Task Force Vote

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The Energy Price Formation Senior Task Force on Thursday will review five finalized proposals regarding energy reserve pricing issues that the PJM Board of Managers has asked stakeholders to address by the end of January.

In addition to PJM, packages are being sponsored by Monitoring Analytics, the independent market monitor; Calpine; Wilson Energy Economics; and the Office of People’s Counsel of Washington, D.C.

Members are expected to vote on the plans either between Thursday’s meeting and the group’s Jan. 23 session or at the Jan. 23 meeting, according to Dave Anders, director – Stakeholder Affairs.

On Jan. 24, the Markets and Reliability Committee is scheduled to vote on the issue. The Members Committee also will weigh in that day so that stakeholder input can be considered by the Board of Managers at its February meeting.

The Energy Price Formation Senior Task Force has worked for a year to identify ways to enhance energy and reserve pricing so that prices accurately reflect the true cost of serving electricity demand and minimize the need for out-of-market uplift payments.

On Dec. 5, the Board asked the group to revisit its work and devise a proposal by Jan. 31. In a letter to stakeholders, Chair Ake Almgren said that absent consensus, the Board would consider filing its own proposal with the Federal Energy Regulatory Commission after that date.

Among the presentations at the group’s Jan. 11 meeting were the results of a PJM simulation showing the effect its proposal would have had during last winter’s cold snap, when uplift spiked to $4.3 million per day.

The simulation results indicated that the market rules being proposed by PJM would have saved $16 million in uplift and produced $250 million in energy and reserve revenue.

PJM noted in a December report that its proposal would result in higher prices during electricity shortages due to an increase in penalty factors. However, accurate shortage pricing is critical in sending appropriate pricing signals, incentivizing resources to follow PJM dispatch instructions and reducing uplift, the report said.