PJM Reviews Quad Review Proposals

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At a special Market Implementation Committee meeting June 1, PJM continued the stakeholder education process regarding the Quadrennial Review of the variable resource requirement curve parameters used in the Reliability Pricing Model capacity auction.

A variable resource requirement curve is an essential element of the capacity market. It is the demand formula used to set the price paid to market participants for capacity and the amount of capacity for the base residual auction.

PJM is supplementing presentations at the regularly scheduled MIC meetings with several special sessions on the Quadrennial Review, written by The Brattle Group. PJM is required by its Tariff to conduct the Quadrennial Review prior to the May 2019 Reliability Pricing Model Base Residual Auction.

Adam Keech, executive director – Market Operations, gave a brief update on PJM’s recommendation to maintain a simple-cycle combustion turbine as the reference resource, but updating the technology from an F frame to an H frame (adopting the GE Frame Model 7HA).

A reference resource is representative of a peaking unit in the energy market that derives a significant portion of its revenues from the capacity market.

Jeff Bastian, manager – Capacity Market Operations, reviewed preliminary recommendations related to net energy and ancillary services offset determinations. These include maintaining current peak-hour dispatch methods with some modifications and using the median rather than the average of monthly data in order to minimize volatility in the determination of the net cost of new entry.

Monitoring Analytics, PJM’s independent market monitor, presented a thorough review of its Cost of New Entry study results compared to The Brattle Group’s study.

There are three more special MIC meetings on the Quadrennial Review – June 22, July 6 and July 27. PJM must file Tariff changes resulting from the review process with the Federal Energy Regulatory Commission by Oct. 1.