Stakeholders Opt for Alternative Gas Contingency Plan

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Stakeholders on Thursday approved a plan to compensate generators for costs incurred when they are instructed by PJM to switch fuels or natural gas pipeline during emergency conditions or conservative operations.

After rejecting a Calpine-sponsored proposal previously endorsed by the Market Implementation Committee (MIC), members chose a proposal that looks to the Federal Energy Regulatory Commission (FERC) to determine recoverable costs. The Calpine plan defined a formula to determine the rate.

The issue of compensation was identified at a December 2017 meeting of the Markets and Reliability Committee (MRC) when the group was approving manual changes addressing the impact of gas contingencies on the electric system. PJM began studying such contingencies as part of its “resilience road map” initiative, considering the potential disruption of the electric system during constrained or threatened conditions on the gas infrastructure.

The current governing documents do not cover certain costs that could be incurred by generators complying with PJM’s operating instruction.

The issue was assigned to the MIC, which drafted a problem statement that stated: “A generator should not be forced to choose between incurring unrecoverable costs or potential penalties associated with the Operating Agreement/NERC compliance violations.” The MIC held 10 special sessions to examine the topic.

At the November meeting of the MIC, the only one out of four packages to gain at least 50 percent of the vote was the Calpine proposal. It garnered 75 percent support – and in a non-binding poll, 99 percent of the voting stakeholders said they preferred it over the status quo. (See Members Work Their Way Through Complex Issues at MIC.)

But at Thursday’s MRC meeting, a lively discussion erupted over the appropriateness of adopting a formula rate versus asking FERC to decide on recovery costs. The formula rate approach fell short of the 3.34 threshold needed to pass a sector-weighted vote. It garnered 3.13 approval.

Members representing end-use customers called for a sector-weighted vote on a PJM-crafted alternative, which passed with 3.77 approval. The Members Committee, which met following the MRC, also endorsed the alternative motion with a few clarifications in a sector-weighted vote, with 4.26 in favor.

PJM will be making an associated filing with FERC, asking for an expedited effective date.

A second item to go before both the MRC and the Members Committee on Thursday was a price responsive demand update to capacity performance requirements. Price responsive demand, or PRD, is the ability of consumers to control their energy expenditures by changing their electricity use in response to wholesale electricity prices. The new rules require PRD to reduce load in winter like other Capacity Performance resources, among other updates.

At the MRC, the proposal was endorsed in a sector-weighted vote with 3.72 approval. It was endorsed by the Members Committee in a vote of acclamation, with 15 objections and one abstention.

Also sparking debate at the Members Committee meeting was PJM’s announcement that it plans to withdraw a member-endorsed FERC filing requesting that bilateral counterparties have the option to assume certain financial transmission rights (FTRs) of a defaulting member. FERC issued a deficiency letter to PJM regarding the filing, which was approved at the September Members Committee meeting. (See Defaulted FTR Portfolio to Settlement.)

It was one of several filings made in the wake of the June default by FTR portfolio holder GreenHat.

The deficiency letter questioned PJM’s indemnification provisions related to the FTR positions to be assumed. That hadn’t been a topic of discussion when stakeholders endorsed the filing, said Suzanne Daugherty, senior vice president, CEO and treasurer. Instead of opening the topic for discussion in the docket, she said, PJM thought it better to withdraw the filing and let the stakeholders engage in a conversation as early as the January 2019 MIC meeting.

While PJM is within its rights to withdraw this filing, an advisory vote was called, which passed by acclamation with six members objecting to PJM withdrawing the filing and 11 abstentions.

Left to right: Incoming Members Committee chair, Chuck Dugan, outgoing Members Committee chair Michael Borgatti and PJM President and CEO Andy Ott. Ott lauded Borgatti’s work as MC chair during an issue-laden year.

Also at Thursday’s meetings, PJM President and CEO Andy Ott discussed two letters from the Board of Managers addressing reserve pricing and an expanded process to provide feedback on the independent market monitor. (See Board Directs PJM, Stakeholders on Reserve Pricing and PJM Board Details IMM Evaluation Process; Adds Liaison, Survey.)

Finally, Michael Borgatti of Gabel Associates presided over his final meeting as chairman of the Members Committee, passing the gavel to vice president Chuck Dugan of East Kentucky Power Cooperative for 2019.

The Committee also elected members to various positions.

Steve Lieberman of ODEC, representing the Electric Distributor Sector, succeeds Dugan as vice chair of the Members Committee for 2019.

Elected to the Finance Committee were:

  • End-Use Customer Sector: Erik Heinle, D.C. Office of the People’s Counsel
  • Generation Owner: Jeff Whitehead, Eastern Generation
  • Other Supplier Sector: Marguerite Miller, Credit Suisse
  • Transmission Owner Sector: Jim Davis, Virginia Electric and Power Co.

Sector Whips for 2019 are:

  • Electric Distributor Sector: Adrien Ford, ODEC
  • End-Use Customer Sector: Susan Bruce, PJM Industrial Customer Coalition
  • Generation Owner: Michael Borgatti, Gabel Associates
  • Other Supplier Sector: Marji Philips, Direct Energy Business
  • Transmission Owner Sector: Sharon Midgley, Exelon Business Services

In other business, the MRC:

  • Endorsed revisions to the 2019 Day-Ahead Scheduling Reserve Requirement (one objection, seven abstentions)
  • Deferred consideration of two stakeholder proposals developed by the Credit Subcommittee related to the use of surety bonds as an acceptable form of collateral until the first MRC meeting following issuance of the Board Special Committee report regarding the GreenHat default

First Readings