Thursday, February 21, 2019

MISO Board, Monitor Seek Response to PJM M2M Missteps

By Amanda Durish Cook

CARMEL, Ind. — The MISO Board of Directors last week learned about the recent discovery that PJM had been committing two market-to-market errors that have likely cost MISO millions of dollars over a period of years.

They also heard that MISO may have little recourse to recover those losses.

At issue was PJM’s longtime practice of overstating its own transmission loading relief (TLR) because of a calculation error and its failure to order mandated tests required to define M2M constraints between the two RTOs. (See MISO Monitor Blames PJM for Market-to-Market Errors.)

MISO board PJM market-to-market M2M

Patton | © RTO Insider

During a Dec. 5 meeting of the board’s Markets Committee, Independent Market Monitor David Patton said MISO has anted up millions in unnecessary congestion costs stemming from PJM’s mistakes.

The untested M2M constraints led to $84 million worth of congestion in 2016 and $187 million in 2017, Patton said, adding a disclaimer that his firm probably couldn’t perfectly duplicate the constraint test that the RTOs perform, and that they may show different congestion values. Delays in defining constraints resulted in $44 million worth of congestion last year and $25 million this year.

“If they don’t define the constraint, they basically get to a free pass to use the transmission system,” Patton told the board.

Patton said one flowgate that wasn’t tested or defined as M2M led to $43 million in congestion in September alone.

“A unit was running, overloading the constraint, and we did not tell PJM to back it down,” Patton said. “We need to be vigilant. … We don’t always ask our neighbors to test the constraints.”

Willful Neglect?

Patton said PJM’s failure to order these tests was deliberate: “In our mind, this is a pretty gross violation of the Tariff, particularly since they knew they weren’t doing the test.”

Director Baljit Dail asked how Patton could be sure PJM knowingly neglected the test.

MISO board PJM market-to-market M2M

Rainwater | © RTO Insider

Patton said at the beginning of the RTOs’ M2M process nearly a decade ago, PJM was aware it needed to devise a new constraint model that included an actual representation of MISO system outages with shift factors, but it failed to create such a model. “They never did it, and they knew they didn’t do it.” Patton said.

“I’ll hold the rest of my questions for closed session,” Dail replied, referring to a closed session on the matter following the board’s open meeting.

“What is it that we can do as a board?” Director Thomas Rainwater asked.

Patton said there weren’t many options available to the board. It could urge enforcement by FERC, “which to be honest, hasn’t been very active in enforcement on violations of RTOs.”

MISO board PJM market-to-market M2M

Doying (left) and MISO Executive Director of Strategy Shawn McFarlane | © RTO Insider

“I don’t think there’s a lot you can do other than telling PJM how serious you think this is,” Patton said. He also said MISO stakeholders could pursue resettlement of prices related to the TLR miscalculations, although no precedent exists for such resettlements. PJM has been overstating its TLR response since 2009, “inappropriately” raising the relief obligation of MISO and other balancing authorities, Patton said.

Patton said it’s up to stakeholders to decide whether to pursue TLR resettlement at FERC.

“We’ve certainly resettled for less,” Patton said.

“These are serious issues with big dollar amounts,” Director Barbara Krumsiek said.

MISO Executive Vice President of Operations Richard Doying said strategies for resettlement would “certainly be a closed discussion item.”

PJM Responds

PJM Chief Communications Officer Susan Buehler told RTO Insider that PJM acknowledges it had “an internal process issue regarding the flowgate tests as well as a calculation error with respect to relief obligations,” but it disagreed that the issues amounted to a Tariff violation. She also said the MISO Monitor is possibly overstating the monetary impacts.

“PJM has corrected both issues and is evaluating the potential impacts, but at this time we do not believe the impacts are what the MISO IMM has indicated,” Buehler said.

She also said the congestion impacts and monetary values the Monitor has disclosed are projections and not solely a consequence of PJM’s “internal process issues” and “potential M2M inefficiencies” with constraints. PJM cannot confirm Patton’s numbers, she said.

JOA with TVA

Patton also urged the board to consider entering a joint operating agreement with the Tennessee Valley Authority over the TLR issue. MISO discovered PJM’s incorrect TLR values while investigating a northeastern Tennessee constraint, and Patton said TVA often calls TLRs on its 500-kV Volunteer-Phipps Bend line, which leads to price increases in the Midwest and corresponding reductions in the South. The TLR constraint contributed to higher prices during a late September emergency event, Patton said.

He said MISO has incurred 100 dispatch violations of its own constraints in responding to the competing dispatch effects of the Volunteer-Phipps Bend constraint.

“We’ll violate our own constraints in order to provide TLR to TVA,” Patton said. He also said TVA’s generation is almost always more effective and economic for managing a TVA constraint than MISO’s.

Patton originally complained about the excessive amount of relief MISO is asked to provide the Volunteer-Phipps Bend more than two years ago. (See External Constraint Vexing MISO, Market Monitor Says.) Now he thinks the RTO could lower its transmission constraint demand curve for TLR requests to avoid incurring costs to provide “very small amounts of relief.” He said MISO should instead pay TVA for economic relief on constraints pursuant to a JOA.

Doying said MISO is not in 100% agreement with the Monitor’s suggestions. “We value the reliability of our neighbor’s systems as much as we value the reliability of our own,” Doying said.

However, Doying said MISO is currently drafting a narrow JOA with TVA that would govern certain flowgates. He said MISO has had similar agreement with TVA in the past.

Patton also noted that TVA at times orders TLRs on Volunteer-Phipps Bend as a proxy to obtain relief on a nearby 161-kV constraint, and he questioned the efficiency of TVA’s process.

Director Paul Bonavia asked MISO executives if it was appropriate under NERC rules to use the 500-kV line as a proxy for a 161-kV line. Doying said the practice doesn’t violate NERC policies.

MISO General Counsel Andre Porter then reminded the board that further discussion was best left for a closed session.

“We’re not going to solve all of this today, but we’ll grapple with it, get it on the table,” Bonavia said. “How do we approach the resettlement issue. … How do we help our neighbors without being overzealous?”

“I do think we have a lot of issues to untangle with PJM and TVA,” Doying said.