The Markets & Reliability Committee (MRC) on Thursday endorsed a new mark-to-auction credit component for financial transmission rights (FTRs), clarified market participation rules for distributed energy resources and voted to put the Primary Frequency Response (PFR) Senior Task Force on hiatus for one year.
A decline in market value can be an indicator of increasing FTR risk, but currently there is no provision that provides for a collateral call when an FTR portfolio is deteriorating in value. The new FTR mark-to-auction credit policy component would fill this gap by applying a credit requirement calculated by measuring the difference between purchase price and the most recent market price.
The proposal had received 93 percent support in a vote of the Market Implementation Committee (MIC). (See Members OK New FTR Credit Component.) It was endorsed by the MRC in a vote of acclamation with one objection and zero abstentions.
Provided the measure is endorsed by the Members Committee at its Jan. 24, 2019, meeting, a filing would be made to the Federal Energy Regulatory Commission by Jan. 31, with implementation planned for early April.
The new rule comes in the wake of the June default of FTR trader GreenHat Energy LLC. PJM declared June 21 that GreenHat was in default for not paying its weekly PJM invoice issued June 5. (See PJM Files with FERC to Suspend FTR Liquidation of GreenHat Portfolio.)
Board of Managers member Susan Riley provided an update of the Board review of the default using three external consultants. An independent committee has held more than 30 interviews and expects to have a draft report ready by the end of January that will be issued to membership in early February.
“We feel very strongly the report needs to be unbiased and complete,” Riley said, adding that the committee aims to “understand exactly what happened and make changes to our credit policies and rules so that an event like this does not happen again.”
DER Market Participation Rules
By a unanimous acclamation vote, the MRC endorsed clarifications to market participation rules for distributed energy resources located behind a customer’s meter that participate as demand response to reduce load and as generation for additional power that can be injected with the appropriate interconnection agreement.
Primary Frequency Response Senior Task Force
After no package was endorsed by the Primary Frequency Response Senior Task Force, which has been meeting since July 2017 to evaluate the need for generator PFR requirements in PJM, the committee unanimously endorsed PJM’s request to put the group on hiatus for one year while performance data is gathered. In January 2020, the MRC will be asked to decide whether to sunset or reconvene the task force, based on observed performance trends. (See Members Reject Primary Frequency Response Packages.)
Ott Addresses Stakeholders
PJM President and CEO Andy Ott offered to answer members’ questions about a recent letter from the Board of Managers asking the Energy Price Formation Senior Task Force to revisit its work and come up with a six-point plan to address energy reserve pricing issues by Jan. 31. (See Board Directs PJM, Stakeholders on Reserve Pricing.)
Some members questioned the origin and necessity of the deadline and maintained that the group, which had met 18 times prior to the Board’s edict, was making good progress toward consensus.
Ott pointed out that the Board previously had instructed the task force in an April letter to address certain issues it deemed “low-hanging fruit” for consensus by the third quarter of 2018, and it had not. In the Board’s view, a proposal is long overdue, he said.
“We need comprehensive reform,” Ott said, noting that the Board considered acting independently of stakeholders and filing its own solution at FERC.
“But, the Board feels very strongly that having stakeholder input is vital to having proposals be as good as they can be.”
Complex Issues Elude Consensus
The remainder of the final meeting of 2018 was spent wrestling with issues that had eluded consensus throughout the year.
By a favorable sector-weighted vote of 3.74, members remanded the Must-Offer Exception Process back to the MIC – where it had passed with 79 percent approval – for four more meetings. (See Members Work Their Way Through Complex Issues at MIC.) The issue is set to return to the MRC for a vote or a first reading, depending on whether the proposal is changed, in April.
Similarly, but by a unanimous vote of acclamation, the committee returned an FTR Forfeiture Rule to the MIC before planning to review it again in February.
The rule is designed to deter market participants from using day-ahead virtual transactions to increase the profit of their FTR holdings.
MRC Debates First Readings
The group went on to discuss the merits of proposals from PJM, Monitoring Analytics, the Independent Market Monitor, the D.C. Office of the People’s Counsel and Calpine. (See Energy Price Formation Task Force Fast-Tracks Proposals.)
The MRC also held extensive discussion on proposals addressing the Transmission Replacement Process.
The main proposal is from American Municipal Power/Old Dominion Electric Cooperative, with an alternate by PJM. LS Power offered friendly amendments that will turn into a third proposal if these proposed amendments are not accepted as friendly by the movers of the main motion or alternate motion. (See Transmission Replacement Language Heads to MRC.)
The meeting concluded with an update on PJM resilience initiatives.