By Rich Heidorn Jr.
Generators asked PJM stakeholders last week to consider changes to the RTO’s new Capacity Performance program, saying the rules approved by the Board of Managers without stakeholder consensus are overly punitive.
A group calling itself the “Supplier Coalition” asked the Markets and Reliability Committee to consider two problem statements. One would expand ways for generators to minimize underperformance penalties by netting them against over-performing generators. The second would consider widening the force majeure rules under which generators can escape penalties.
Bob O’Connell, of Main Line Electricity Market Consultants, said the current rules have “ineffective and inefficient options” for generators to manage the risk of underperformance during CP compliance hours. O’Connell said current rules allow companies with multiple generators to offset poor performance with over-performing units under “narrow criteria” but does not allow after-the-fact offsets, such as bilateral trades.
That could force smaller generators to seek mergers, reducing competition, he said. It could also result in “onerous” financing terms for future generators, he said.
Walter Hall of the Maryland Public Service Commission expressed support for O’Connell’s proposal to consider changes, saying it could reduce the risk premiums generators include in their offers. Hall said any changes must be “consistent with the reliability enhancement objectives” of the CP program.
But Market Monitor Joe Bowring said the change could upset the “increased risk, increased reward” bargain at the heart of the CP rules. “It was an explicit part of the design. It was done on purpose,” he said.
Exemption for Transmission Outage
Ken Foladare of Tangibl outlined the second problem statement, which would reconsider PJM’s catastrophic force majeure rules. Foladare said the current rules would penalize generators for nonperformance even if it was impossible to deliver power because of a widespread blackout or a system disturbance.
Foladare’s initiative would consider circumstances for waiving penalties when the nonperformance resulted from a lack of transmission service.
Katie Guerry of EnerNOC said stakeholders should consider any changes to CP rules together in a single committee, such as the former Capacity Senior Task Force.
“We have lots of issues we’d like to see revisited,” agreed Marji Philips of Direct Energy. “The piecemeal approach is not the way to get there.” (See Philips’ op-ed, Why Capacity Performance Isn’t Good for the Markets in the Long Term.)
“Both these [problem statements] suggest that you have created costs for providers … that are not reflected in value,” said Bruce Campbell of EnergyConnect, adding that the proposals were “rammed through the stakeholder process.”
When PJM and stakeholders designed the original capacity market rules, “we spent a lot of time working through the gory details,” Campbell said. “That did not happen in this process.” (See FERC OKs PJM Capacity Performance: What You Need to Know.)
The problem statements will be brought to a vote at the next MRC meeting Oct. 22.
Scenario Analysis
The MRC also was briefed on the scenario analysis PJM is planning to conduct on the recently completed first Base Residual Auction under CP.
The analysis will consider nine scenarios used in each of the last two years and one new one that reruns the results using the variable resource requirement curve shape and gross cost of new entry values used in the 2017/18 BRA. The rules were changed for the 2018/19 BRA following the RTO’s triennial review. (See PJM Board Orders Filing on Capacity Parameter Changes.)
The repeated scenarios include an unconstrained simulation in which locational deliverability area limits are removed and CP supply is both added and removed from the bottom of the supply curve in and outside of MAAC.
