Gas Prices Spike in Second Cold Snap
Plunging temperatures sent natural gas spot prices soaring again this week, prompting PJM to seek approval from federal regulators to lift the $1,000/MWh price cap on generation.
Natural gas prices for generators in PJM peaked at $140/mmBtu Tuesday, pushing operating costs for generators above the price cap.
As a result, PJM officials told members they will ask the Federal Energy Regulatory Commission to allow the RTO to waive the price cap for the remainder of the winter.
Demand Response Dispatched
PJM called on about 150 MW of emergency demand response Wednesday night, and about 500 MW Thursday morning and afternoon. DR was called again this morning. About three-dozen Post Contingency Local Load Relief Warnings — advance notice to a transmission owner of the potential for manual load dump in their area – have been issued since Tuesday.
Adam Keech, PJM director of wholesale market operations, said the RTO called on DR because of concerns about generation lost to breakdowns, fuel shortages and environmental restrictions.
PJM had “thousands of megawatts” of generation trip Tuesday night, particularly in the Baltimore area, Keech told stakeholders at a meeting of the Energy Market Up-lift Senior Task Force Thursday.
With reserves tight, “if you have any [generator] problems you’re going to get into trouble in a hurry,” he said.
All generation capacity resources that do not qualify to take a forced outage under PJM’s rules are required to submit an offer into the day-ahead market subject to the system offer cap of $1,000/MWh. Non-capacity resources may submit emergency offers in excess of the system offer price cap.
PJM’s FERC filing will seek a retroactive waiver of the system offer cap to make whole generation resources that can document costs exceeding $1,000. Keech said the waiver would apply to generation dispatched this week but would not affect dispatches from the polar vortex in early January. The waiver would seek permission to reimburse affected resources through uplift payments (Balancing Operating Reserve).
“PJM has consulted with counsel and believes the anticipated retroactive waiver request will likely be accepted by the FERC,” PJM said in a notice to members.
In addition, PJM will seek to lift the cap going forward for cost-based offers from generation resources through March 1, 2014. Such resources would be eligible to set Locational Marginal Prices, Keech said. “That’s the intent in having them submit [prices above $1,000] as an offer rather than making them whole” afterward, Keech said.
The waiver will not affect DR, which is limited to $1,800 ($1,000 plus two times the penalty factor).
Spot gas prices in the Northeast and Mid-Atlantic this week exceeded the heights of early January, Natural Gas Intelligence reported. The high on Transco Zone 6 non-N.Y. hit $140/mmBtu Tuesday. Prices for delivery today were $87.13, a drop of $34.09.
Below is a chronology of operator actions in response to this week’s cold.
Load had a “pretty steep pickup” Wednesday morning, Keech said, but the snow that blanketed the area Tuesday provided some relief as closed schools and offices dampened demand.
PJM dispatched demand response and issued a Maximum Emergency Generation Action — dispatching generation above the maximum economic level and warning that off system energy sales may be recalled — at 14:00 Wednesday for the BGE transmission zone, adding the BA/PEP area of PEPCO for transmission contingency control at 17:20.
At 19:30, a Maximum Emergency Generation Alert was called for the AP and Dominion control zones.
Shortly after 20:00, the RTO issued a Voltage Reduction Alert for the PEPCO and BGE transmission zones for Thursday due to fears that operating reserves might fall below the Synchronized Reserve requirement.
Prices hit $1,800 in the areas where DR was dispatched, Keech said.
About 04:30, operators called demand response and issued a Maximum Emergency Generation Action in the Mid-Atlantic, Dominion and AP control zones. Twenty minutes later, PJM issued a request for emergency energy from 05:30 through 07:30.
Load, expected to hit 135,500 MW, came in about 2,000 MW below that, and the DR was not needed, Keech said.
PJM also issued a public appeal for energy conservation Thursday evening and Friday morning.
Operators issued another Maximum Emergency Generation Action at 14:00 for transmission contingency control in Mid-Atlantic, Dominion and FE-South/APS.
DR was dispatched in the AP and Dominion control zones, BGE and PEPCO transmission zones.
Load peaked at 134,988 MW at 8 p.m.
A Maximum Emergency Generation Action was issued and a call for short and long lead-time DR was issued at 04:30 in the AP and Dominion control zones. Load peaked this morning at 138,522 — above the forecast of 138,289 MW — with available economic capacity of 157,477 MW.
After a brief warm-up this weekend, more arctic cold is expected throughout the PJM footprint next week.
Cleveland and Columbus, Ohio are expecting lows at or below zero Monday through Wednesday, with a possible low of -16 in Columbus Monday. Up to 4 inches of snow is expected to fall Saturday.
Below zero lows are also forecast Monday and Tuesday for Chicago.
Philadelphia is forecast to be below freezing for virtually all of the next seven days, with only a high of 34 Monday breaking the streak. Lows below 10 degrees are forecast on several days and the area may receive another inch or two of snow Saturday.
Lows in Washington, D.C. will be in the teens most of the next week.
RTO Insider will update this story with the FERC filing and other operational developments as they become available.