MRC Endorses FTR Reforms, Fuel Security Plan, Cost Commitment Changes

Chief Risk Officer also presents best practices proposal for further improvements


The Markets & Reliability Committee on Dec. 19 endorsed changes to the Financial Transmission Rights (FTR) auction process designed to mitigate risk of participant default.

The proposal increases the frequency of long-term FTR auctions to five times per year from three. The rationale is that more frequent auctions will provide an increased level of protection from a potential default by not allowing positions to grow or deteriorate over time without posting additional collateral. The plan also reduces the residual capability available in each round to 20 percent from 33.33 percent.

In addition, the recommendation addresses the structure of the balance of planning period FTR auctions, changing the available periods from the subsequent three individual future months – or a remaining full quarter – to any individual month remaining in the planning period.

The package, endorsed by an acclamation vote with seven objections, now heads to the Members Committee for consideration at its Jan. 23 meeting.

The recommendation is the first to come out of the Financial Risk Mitigation Senior Task Force (FRMSTF) charged with identifying credit policy and market rule reforms and devising a plan for their implementation to be submitted to the PJM Board of Managers.

Simple Change, Significant Difference

Tim Horger, Director of Energy Market Operations, said the changes are simple but will make a significant difference by maximizing pricing information and providing a more granular model.

PJM Interim President and CEO Sue Riley thanked members for supporting the changes, assuring them they will have further say in related reforms under a new task force created to undertake a comprehensive review of FTR market design. That task force, reporting to the Market Implementation Committee, is expected to begin its work in early 2020 and take about a year to complete its study.

Chief Risk Officer Nigeria Poole Bloczynski provided an update on the FRMSTF’s progress, as well as Tariff changes regarding market participant risk evaluation and enhancement that will be brought back to the Markets & Reliability Committee in January. (Those changes may be found under Item 8 in the meeting materials.)

PJM to Continue to Monitor Fuel Security

In other business, the Markets & Reliability Committee approved a recommendation from the Fuel Security Senior Task Force for PJM to continue monitoring the PJM system and report to a stakeholder group no less frequently than every 18 months.

Members approved the approach in a sector-weighted vote of 4.5 out of 5.

Horger shared highlights of the task force’s work since it convened in April to explore whether market, operational or planning changes are needed to ensure the future availability of fuel and sets of resources on the grid.

The 2018 study stress-tested the system using more than 300 scenarios. The findings showed that the grid can withstand an extended period of stress while remaining reliable and fuel secure. However, there were combinations of extreme conditions under which the system could be subject to disruptions.

The group took the study’s analysis further, adding 56 sensitivities and, in the end, calculating risk for 4,720,380 scenarios.

Mike Bryson, Senior Vice President of Operations,said PJM will continue to pursue a number of things to track fuel security issues, including continuing to work with individual generators, looking at how plant retirements may affect future years and analyzing whether the energy goals of individual states will affect future operations.

PJM also is in the midst of Phase 3 of examining fuel security issues, which involves working with federal and state agencies alongside other industry sectors to address any specific concerns, such as physical and cybersecurity risks.

In an acclamation vote with three objections, the committee then voted to sunset the Fuel Security Senior Task Force.

Cost Commitment Manual Changes Endorsed

The Markets & Reliability Committee also endorsed a new fee structure for proposed transmission projects and a comparative framework related to new cost commitment guidelines endorsed by the committee in May 2018. (See “Cost Caps Pass MRC by Big Margin”.)

The fee structure was endorsed in an acclamation vote with one objection. After extended discussion over the role of the Independent Market Monitor in the competitive transmission planning evaluation process, the changes to Manual 14F: Competitive Planning Process were endorsed in a sector-weighted vote with 3.92 support out of 5. A threshold of 3.33 was needed to pass.

“We always welcome another view,” Riley said during the discussion. “Our intent is not for the market monitor to have an oversight role in this process that PJM is doing, but merely to allow for independent analysis.”

The independent market monitor, she said, “is not going to have approval authority over these projects, whether they go forward or not.”

DER Ride-Through Guideline Finalized

The Markets & Reliability Committee also endorsed as part of its consent agenda revisions to Manual 14D: Generator Operational Requirements to add guidance associated with distributed energy resource ride-through.

For the grid to remain reliable, the key performance requirements for DER are frequency and voltage ride-through. Ride-through requires resources to stay connected to the system for a very short period of time in the event of a wide area disturbance, rather than trip offline and potentially exacerbate abnormal conditions.

Through its DER Ride-Through Task Force, PJM produced a voluntary minimum guideline.