Tuesday, March 19, 2019

PJM to Review Impact of State Public Policies on RPM

Capacity (Re)construct?

By Rory D. Sweeney

WILMINGTON, Del. — Following months of debate on the scope of the undertaking, a coalition of load-serving stakeholders won approval at Thursday’s PJM Markets and Reliability Committee meeting to review the capacity market construct.

Overcoming what had appeared to be strong opposition, the problem statement and issue charge were endorsed with a sped-up timetable revised to make potential changes in time for the 2018 Base Residual Auction.

The initiative cites the aborted power purchase agreements for FirstEnergy and American Electric Power in Ohio and the zero-emission credits approved for nuclear plants in Illinois as examples of the impacts public policy initiatives may pose to price formation in the capacity market. It notes a pending complaint by Calpine asking FERC to impose the minimum offer price rule (MOPR) on existing generation. (See FERC Rescinds AEP, FirstEnergy Affiliate-Sales Waivers.)

capacity market pjm rpm

Illinois Statehouse | Illinois Asset Building Group

“The failure to successfully anticipate these occurrences resulted in important policy debates circumventing the PJM stakeholder process and going directly to litigation at FERC,” the problem statement says. “The sponsors of this problem statement believe the stakeholder process forum is the appropriate place for these discussions. It is apparent to the problem statement sponsors that each state may take actions to meet its environmental, political and policy objectives that could affect” the Reliability Pricing Model.

The coalition, which includes Old Dominion Electric Cooperative, American Municipal Power, the Delaware Municipal Electric Corp., the PJM Public Power Coalition and the Public Power Association of New Jersey, has been asking since August for approval to review the RPM.

Focus Tightened

Since then, the measure’s focus has been revised and repeatedly pared down. AMP’s Ed Tatum, the coalition’s spokesman, noted on Thursday that Direct Energy and Dominion Virginia Power have withdrawn as sponsors. As recently as last month’s MRC, stakeholders remained hesitant to investigate the potential impacts of any governmental action on CP, concerned the implications could be too disruptive to the market, which is still digesting the rule changes under Capacity Performance. (See “Stakeholders Remain Skeptical of Campaign to Revisit CP,” PJM Markets and Reliability Committee Briefs.)

The sponsors returned on Thursday focused just on state actions and explained that they had taken pains to limit the scope, despite suggestions to broaden it in certain ways. The effort still nearly faltered, as stakeholders remained concerned it inappropriately targeted states. Bob O’Connell of Panda Power Funds suggested focusing on “out-of-market actions” instead.

“Panda Power Funds has no interest in picking a fight with states. Our biggest focus is on price formation,” he said. “I’m indifferent to who pushes the wheelbarrow with money into the room. I’m just concerned about the money in the room.”

Alex Stern of Public Service Electric and Gas voiced support for O’Connell’s efforts to focus on market design, but Tatum said “out-of-market” doesn’t have a specific definition. Tatum also clarified that the focus had changed to not target the states for taking actions they deem necessary. Others agreed, including Dan Griffiths of the Consumer Advocates of the PJM States (CAPS) and Susan Bruce of the PJM Industrial Customer Coalition, who called it a “rabbit hole.”

External ‘Forces’

John Farber of the Delaware Public Service Commission praised the sponsors’ acknowledgment that state actions can be “manifestations” of external “forces” applying pressure on government, not necessarily internally motivated. Ruth Ann Price, Delaware’s deputy public advocate, was mild in her criticism, merely echoing a request to “soften” the language that had been made by other stakeholders during previous discussions. Tatum responded, as he has in the past, by asking for suggestions.

With the state advocates indicating interest in finding consensus, a small group huddled to craft mutually acceptable language.

In the meantime, Neal Fitch of NRG Energy pointed out that the issue’s scope had been reduced, yet its timeline for results had been extended into late 2018. He said it seemed likely the issue could be resolved in time for the 2018 BRA in April.

A vote on the measure was deferred until after lunch to incorporate the updated language. When it finally came time to vote, the package referred to “state public policy initiatives” and anticipated results by the end of the year. PJM Senior Vice President of Operations and Markets Stu Bresler confirmed this left enough time for it to be incorporated in the planning criteria for the BRA.

EnerNOC’s Katie Guerry questioned the continued focus on state actions, but Price defended the language, saying that local initiatives would not impact PJM’s markets. Despite opposition from most of the Transmission Owner sector, the revised problem statement passed a sector-weighted vote with 3.95 out of 5, with the End Use Customers and Electric Distributors unanimously in support.

The issue charge assigns the initiative to a new Capacity Construct/Public Policy Senior Task Force (CCPPSTF) reporting to the MRC. It will identify the “objectives and characteristics” of a well-functioning capacity market and “identify areas where state actions and the current RPM capacity construct may not be aligned.”

The group will seek to address the conflicts with potential changes to the PJM Operating Agreement, Tariff, Reliability Assurance Agreement and manuals.

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