To proactively mitigate against the risk of Member defaults, on Feb. 2 PJM submitted a proposal with the Federal Energy Regulatory Commission to amend PJM’s Tariff to allow the option for a Member to extend the billing schedule from three to nine months for any Non-Performance Charges that will be assessed stemming from the Performance Assessment Intervals during Winter Storm Elliott.
Winter Storm Elliott caused historic arctic weather patterns across the PJM region, driving up electricity demand coupled with high levels of generator outages. PJM on Dec. 23 and Dec. 24 declared a Maximum Generation Emergency for over 23 total hours. The Maximum Generation Emergency action triggers Performance Assessment Intervals (PAIs) under PJM’s Capacity Performance program, during which time Capacity Resources are required to meet their expected capacity commitments.
Resources can be rewarded or penalized based on over-performance or under-performance. Based on overall performance during the 277 separate, 5-minute intervals, PJM estimates that aggregated Non-Performance Charges will range between $1 billion to $2 billion. The magnitude of the total penalties presents cash flow and liquidity concerns for some affected PJM Members, which may ultimately cause potential Member defaults.
The proposed amendment (PDF) will help to mitigate the risk of potential Member defaults, while maximizing the pool of collected Non-Performance Charges related to PJM’s Capacity Performance program, which will be distributed as bonus performance payments to resource owners that over-performed during the event. Members who elect to extend the invoices will be charged interest for months four through nine for charges stemming from Winter Storm Elliott. The interest rate would equal the FERC interest rate effective at the time of election.
PJM is requiring that all Members notify PJM whether they would like to extend their billing timeline to nine months or retain the existing three-month timeline by March 17.
PJM’s FERC filing also seeks to provide PJM with the ability to extend the billing timeline for Non-Performance Charges to up to a maximum of nine monthly bills for any future Performance Assessment Intervals if the default billing timeline for such event would allocate Non-Performance Charges over less than six months.
PJM seeks FERC approval by April 4, 2023 – before PJM plans to issue the first monthly bill that Non-Performance Charges stemming from Winter Storm Elliott would be invoiced – to allow affected Members to elect an extended payment term of three or nine months.