United States: FERC Orders Technical Conference On Seasonal Resources Participating In PJM's RPM Capacity Market

Last Updated: March 8 2018
Article by Russell Kooistra and Christopher Zentz

On February 23, 2018, FERC approved PJM Interconnection, L.L.C.'s ("PJM") changes to its tariff and Reliability Assurance Agreement ("RAA") to revise Reliability Pricing Model ("RPM") capacity market rules in order to accommodate greater participation from seasonal resources. Specifically, FERC approved changes related to: (1) resource aggregation for submitting combined capacity market sell offers; (2) granting winter-period interconnection rights; and (3) demand response resource measurement and verification for seasonal resources. However, FERC separately responded to complaints that the RPM does not adequately accommodate seasonal resources by directing FERC staff to establish a technical conference to explore whether further changes are needed to permit seasonal resource participation.

In its filing, PJM explained that it recently modified its RPM rules to eliminate multiple capacity products and transition to a single annual product, referred to as Capacity Performance. Because the Capacity Performance product involves stringent performance requirements year-round, PJM explained that its proposed changes to the RPM rules were intended to accommodate certain seasonal resources that would be unable to comply with the Capacity Performance requirements. First, PJM proposed to permit aggregation of resources across deliverability areas and to establish a new mechanism, RPM Aggregation, which could be used to offer Capacity Performance Resources. PJM explained that the aggregation rule changes would remove barriers to otherwise logical aggregations of seasonal resources, such as wind generation in one part of PJM with solar generation in another part of PJM. Second, PJM proposed to evaluate winter deliverability and winter-period Capacity Interconnection Rights for intermittent wind resources and environmentally-limited resources. In doing so, PJM noted that previous studies were based on a summer-peak case, which resulted in interconnection rights based on a lower capacity for resources with greater winter capacity, such as wind resources. Lastly, PJM proposed to add a metric for demand response based on a winter–peak demand response.

FERC accepted all of PJM's tariff revisions as proposed. FERC found that the resource aggregation revisions represented improvements to the aggregation offer mechanism, and may permit greater participation in the RPM market by seasonal resources. FERC also agreed that wind resources and environmentally-limited resources were uniquely situated with respect to the difference between winter and summer capabilities, and that PJM's proposal to grant certain winter-period interconnection rights to accommodate resources with greater winter capabilities was warranted. Lastly, FERC found that PJM's proposed demand response revisions provided a just and reasonable measurement of winter performance for demand response resources with capacity commitments.

In a separate proceeding, Old Dominion Electric Cooperative, Direct Energy Business, LLC, and American Municipal Power, Inc. (collectively, "ODEC") and Advanced Energy Management Alliance ("AEMA") filed separate complaints regarding how PJM's RPM rules apply to seasonal resources. Among other things, ODEC requested that FERC take action to allow seasonal resources to participate in the RPM auction and determine that the PJM tariff and RAA are no longer just and reasonable. In addition, AEMA requested that FERC direct PJM to continue to permit the Base Capacity Resources – a sub-annual product that PJM eliminated before its March 2017 RPM auction – to continue to participate in the RPM market until PJM develops an RPM participation model that adequately accommodates seasonal resources.

FERC responded to ODEC and AMEA's complaints by directing FERC staff to establish a technical conference to explore various issues raised by both. Among other issues, FERC stated that the technical conference should address whether:

  • the use of a year-round capacity product raises costs unnecessarily compared to retaining a seasonal product;
  • standalone participation by seasonal resources in non-summer months would jeopardize reliability;
  • alternative mechanisms, such as establishing separate summer and winter capacity markets, could assure reliability at lower costs;
  • there is an alternative distribution of loss of load expectation risk that could meet the 1-in-10 reliability target at a lower cost if nearly all loss of load expectation risk exists in 10 summer weeks of the year; and
  • PJM's load forecast methodology incorporates load-serving entities' peak-shaving actions in an adequate and timely manner.

FERC staff will issue a notice specifying the date and time of the technical conference.

A copy of FERC's order addressing PJM's revisions to the RPM rules is available here. A copy of FERC's order on the complaints and establishing a technical conference is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Russell Kooistra
Christopher Zentz
 
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