Saturday, August 18, 2018

PJM Stakeholders Search for Capacity Rules FERC Will OK

By Rory D. Sweeney

VALLEY FORGE, Pa. — FERC wants PJM’s capacity rules to be resolved by Jan. 4 and has dispatched staff to help the RTO and its stakeholders adhere to that timeline.

Three FERC representatives attended Thursday’s special session of the Markets and Reliability Committee on responding to the commission’s June 29 ruling rejecting PJM’s “jump ball” capacity filing.

Estes | © RTO Insider

Office of General Counsel attorney Matthew Estes, one of the three FERC representatives, stressed that they were non-decisional and therefore not speaking to or for the commission. He advised all stakeholders to address the commission directly with their interests by filing comments in the docket.

“We’re happy to give our input, but that’s not going to get to the commission,” he said.

He described the representatives’ role as “historians” who could explain what they understand the current situation to be and to provide insight into what stakeholders might consider proposing because it would be “helpful to the commission to have things they can realistically consider.”

FERC rejected both of PJM’s proposals to revise its capacity market (ER18-1314), partially granted a 2016 complaint led by Calpine (EL16-49) and initiated a Section 206 proceeding for a “paper hearing” on an alternative approach in which the RTO would expand its minimum offer price rule (MOPR) to all subsidized resources (EL18-178). (See FERC Orders PJM Capacity Market Revamp.)

Comments prior to the hearing are due on Aug. 28. FERC said that it hoped to issue a final ruling by Jan. 4, 2019, in time for the 2019 Base Residual Auction.

The size of the task led several stakeholders to file for extensions on the Aug. 28 deadline. But PJM staff said they plan to provide comments by the deadline and still accept input from stakeholders. Thursday’s meeting, along with a follow-up scheduled for Aug. 15, are intended for that purpose.

“That doesn’t leave a whole lot of time for extension. I know people want more time,” Estes said.

Keech | © RTO Insider

PJM plans to file a proposal that would follow FERC’s suggestion of combining an expanded MOPR with a unit-specific fixed resource requirement (FRR). The MOPR would have few exceptions and would include units receiving out-of-market payments, such as state subsidies for nuclear units. Such units could then use the FRR option to be removed from the capacity auction, if they can take with them an “appropriate corresponding quantity of load.”

Four Proposals

PJM solicited comments from stakeholders as part of developing its proposal and was surprised to receive four other proposals among the 19 responses. At Thursday’s meeting, representatives of the four proposals outlined their ideas.

Calpine has advocated for a “strong” MOPR with no exceptions, the company’s Sarah Novosel said, but recognizes that other stakeholders don’t agree.

“We’re ready to work on an accommodation, but we think there’s a better accommodation than FRR,” she said, suggesting an approach like ISO-NE’s Competitive Auctions with Sponsored Resources.

LS Power proposed combining the MOPR with a “resource specific requirement” that would be similar to the FRR but remove load based on where the resource’s generation is “electrically delivered” rather than its physical location. It would subject the load and generation that remains in the auction to increased reliability requirements. Those costs would be borne by the resource electing to leave the auction.

Panda Power Funds offered an alternative to FRR that would identify and mitigate subsidized resources and allow those that don’t clear the auction an opportunity to buy capacity commitments in a second auction phase.

Consultants Rob Gramlich of Grid Strategies and James Wilson of Wilson Energy Economics presented a proposal for the Resource Specific FRR developed for the Sierra Club, Natural Resources Defense Council, D.C. Office of the People’s Counsel and American Council on Renewable Energy. They characterized it as “very close” to PJM’s proposal and said it makes the process “as usable as possible” for states. [Editor’s Note: An earlier version of this story incorrectly quoted the consultants as favoring an expanded MOPR.]

Joe Bowring, PJM’s Independent Market Monitor, warned that the unit-specific FRR results in price suppression if the

subsidized resource would not clear in the auction without FRR — and could affect clearing prices either up or down if it would have cleared.

Estes confirmed that FERC had not required an FRR to be part of any proposal, nor has it ruled on whether self-supply units should get a MOPR exemption. He advised stakeholders to file their requests along with substantiation that goes beyond assuming the way things have been traditionally should continue because “FERC found the way it’s always been to not be just and reasonable.”

PJM’s Jen Tribulski agreed with Estes’ analysis on FERC’s FRR proposal.

“We don’t view it as a strict mandate, but we do view it as the commission looks at it as a viable option to accommodate state actions,” she said.

Calpine also agreed.

“I think it’s clear that we at Calpine do not believe that the partial FRR was a mandate, just a suggestion. We think they’re open to other alternatives as well,” Novosel said.

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