Gas contingency costs dominate MIC meeting

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PJM and stakeholders looked at possible solutions for generation owners to recover costs associated with gas contingency switching at the Oct. 10 Markets Implementation Committee meeting. The proposals were developed in special Market Implementation Committee sessions.

PJM may issue an operating instruction for a generator to switch to an alternate fuel or fuel source to maintain reliability as a result of the potential impact on the grid (as determined by PJM’s gas infrastructure contingency analysis).

After endorsing gas contingency operational actions at the December 2017 Markets & Reliability Committee meeting, stakeholders realized that complying with the PJM operating instructions might result in a generator incurring unrecoverable costs, since some of these costs are not covered in the PJM governing documents.

Rich Brown, manager – System Operator Training, presented the first read of the gas contingency costs proposals.

The solution developed in the special sessions includes changing PJM’s governing documents (Tariff, Operating Agreement and manuals) to make costs associated with fuel switching eligible for compensation. The two packages (Slides 8 and 9) largely agree on eligible costs; however, some differences remain.

Stakeholders pointed out several times that this is a complex topic with, in the words of one, “lots of dollars at stake.” After the Polar Vortex, many generators had costs they were not able to recover.

There had been suggestions about a simpler solution involving just Tariff revisions but Brown pointed out that while these options were discussed in the MIC special sessions, they have not been proposed as solutions at this time. He did note that PJM and stakeholders continue to work on some details of the proposals.

The stakeholder input from Wednesday will be reviewed at the final special MIC on the topic on Oct. 30, with the intention of bringing the issue back to a November MIC vote.

Other Committee Business

Lisa Drauschak, executive director – Corporate Finance and Risk Management, gave an overview of lessons learned from the GreenHat default and an update from the special workshop on financial transmission rights.

At the workshop, PJM staff and subject matter experts discussed the factors that contribute to financial transmission right portfolio volatility and potential solutions going forward. Drauschak said the Oct. 23 meeting of the Credit Subcommittee will continue to examine both topics.

Stakeholders endorsed both Credit Subcommittee proposals on the inclusion of surety bonds as an additional form of collateral. Both the stakeholder-developed package and the Exelon proposal received greater than 50 percent of the vote and will move to the Markets & Reliability Committee meeting on Oct. 25. The PJM package will be the main motion at the MRC and the Exelon proposal will be the alternate motion.

In response to stakeholder questions, Exelon said that surety bonds are similar in strength to letters of credit and provide members with the opportunity for cost savings and portfolio diversification. Exelon’s proposal includes allowing surety bonds to be used as credit for financial transmission rights as well as other market purposes and includes higher caps than the other stakeholder proposal.

Laura Walter, senior lead economist – Advanced Analytics, presented the proposal on the electric storage resources stemming from FERC Order 841. The compliance filing is due by Dec. 3, 2018.

Electric storage resources (ESRs) are those capable of receiving electric energy from the grid and storing it for later injection back to the grid and are connected at transmission, at distribution or behind a customer meter.

The ESRs exclude demand response but include pumped hydro and batteries. Of the 5,300 megawatts of ESR at PJM, 96 percent is pumped hydro. In the PJM proposal, ESRs will be modeled as one continuous resource. PJM will not, however, make commitment decisions in the ESR model and nor manage state of charge.

At stakeholder behest, the endorsement vote for the Must Offer Exception Process was moved to November. PJM updated its proposal after the September MIC and stakeholders requested more time to examine the changes.

The changes center on the capacity interconnection rights and the ability of the owner of a generation unit losing its capacity resource status to submit a request to PJM and the independent market monitor (prior to the effective date of the status change) that the unit remain a capacity resource and offer in future Reliability Pricing Model auctions.

The request must include supporting data and documentation explaining the circumstances that have changed for the unit that now allow it to meet the performance requirements of a capacity performance resource, and the unit must be offered in the next applicable auction.

In other business, stakeholders heard stakeholder and PJM presentations on revising the financial transmission rights impact test for the financial transmission rights forfeiture rule. Members are encouraged to review the matrix and provide additional proposals to FTRGroup@pjm.com.

PJM also presented a first read of the Day-ahead Market timeline update and progress in the Bright Ideas initiative, which tracks and reviews process improvement recommendations from members. Several of the improvements have been, or are going to be, implemented, including the addition of generation deactivations to the PJM system map.

Endorsements

  • Changes to Manual 11 related to pseudo tie overlapping congestion
  • Changes to Manual 28 related to pseudo tie overlapping congestion
  • Changes to Manual 6 (annual review)