|
|
|
|
|
Proposed Changes to PJM Capacity Market To Cost Over $4 Billion Over Three Years
Proposed changes just to the PJM variable resource requirement (VRR) curve would cost over $4 billion over three years, a coalition of state regulators, consumer advocates, and industrial customers said in a letter to PJM's Board of Managers.
The load interests asked PJM to defer acting on PJM's triennial capacity market review, including changes to the VRR curve, Cost of New Entry, and Energy & Ancillary Services Offset, until such time as the issues can be addressed holistically in concert with other fundamental changes to the capacity market, including the definition of capacity (including creating a new product) and capacity performance requirements.
The load group said that, with respect to VRR changes, PJM Staff has gone beyond even what the Brattle Group has proposed, with a proposed additional rightward curve shift of 1%. "Even using Brattle's unrealistic assumptions that overstate reliability risk, the PJM VRR curve proposal provides an average LOLE of 1-in-16.7, which is far in excess of the average 1-in-10 LOLE standard," the load group said.
"On its own, separate and apart from the Capacity Performance initiative discussed above, the cost impact of PJM's proposed VRR curve is over $4 billion over the next three Delivery Years," the load groups said, pegging increased costs as:
"No analysis has been offered in the Triennial Review process to suggest that PJM's proposed VRR curve changes will bring any savings in the energy market nor, to the extent that any energy market savings were to materialize, the impact on Net CONE and the E&AS offset," the load group said.
"As the Board is aware, PJM plans to a resource adequacy standard of a Loss of Load Expectation of one firm load shed event in 10 years (i.e., 1-in-10 LOLE). Recent Commission precedent confirms the Federal Power Act's just and reasonable standard is satisfied by meeting the chosen reliability standard on average over time. Notwithstanding this recent FERC precedent, PJM's proposed VRR curve in the current Triennial Review process is more aggressive than PJM's own consultant recommends and produces an average LOLE approximating 1-in-16.7, which greatly exceeds the average 1-in-10 LOLE standard – even using Brattle's modeling assumptions that the Load Coalition believes greatly overstate volatility and reliability risk," the load group said.
"Auctions have been, on average, in excess of 6% above the load forecast in place at the start of the actual Delivery Year. This level of over-forecasting would suggest that, whether due to the three-year forward nature of RPM or otherwise, there is, in fact, a significant upward bias in the load forecast. The Load Coalition also suggests that Net CONE is overstated given the empirical data of new entry volume and the continuing use of PJM's current levelization methodology," the load group said.
The load group, "cannot understand PJM Staff's view," to proceed with the triennial review changes while such fundamental market questions such as the definition of capacity and performance rules are being debated, "especially given PJM's recent request that the Federal Energy Regulatory Commission ('Commission') defer action on its Section 206 proceeding on PJM's Capacity Replacement filing in favor of a 'more orderly approach … so that it may consider any Capacity Performance filing which PJM would file in the December time frame.'"
"The Load Coalition views the Triennial Review to be at least as closely linked, if not more so, with the Capacity Performance initiative than the Replacement Capacity effort may be, particularly because PJM's proposed VRR curve shape has been shown individually by PJM's own simulations to procure capacity materially beyond what would be required to meet our resource adequacy objectives."
"It is also reasonable to expect the price tag of exceeding the required average 1-in-10 Loss of Load Expectation ('LOLE') standard will be even more costly from a customer perspective due to the Capacity Performance initiative, a key factor that should be considered by the Board when evaluating the 'value proposition.' Yet, there has been no analysis, not even an acknowledgement from PJM Staff, that the Triennial Review, and, in particular, the VRR curve adjustments are inextricably intertwined with the Capacity Performance initiative. Accordingly, the Board must exercise its judgment to ensure that these significant RPM changes do not proceed without a thorough and modeled assessment and evaluation of how these proposals relate to each other," the load group said.
Click here for the full letter from the load coalition to the PJM Board
The load coalition included the New Jersey BPU, Pennsylvania Consumer Advocate, PJM Industrial Customer Coalition, Duquesne Light, and over a dozen other organizations representing end-users.
ADVERTISEMENT Copyright 2010-
September 4, 2014
Email This Story
Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
2015/2016: $1.4 billion (15% increase in RPM costs)
2016/2017: $1.0 billion (18% increase in RPM costs)
2017/2018: $1.7 billion (23% increase in RPM costs)
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Supply Advisor (Pricing & Portfolio Management) -- Retail Provider -- Houston
• NEW! -- Power and Natural Gas Scheduler L-1 -- Retail Provider -- Texas
• NEW! -- Channel Manager, Residential Field Sales -- Retail Provider
• NEW! -- Manager of Sales and Marketing -- Retail Provider
• NEW! -- Executive Director -- Retail Provider
• NEW! -- Manager, Business Analytics and Development -- Retail Provider
• NEW! -- Energy Sales -- DFW
• NEW! -- Manager of Billing -- Retail Supplier -- New York
• NEW! -- Manager, Billing -- Retail Provider
• NEW! -- Contract and Data Specialist -- Retail Supplier -- New York
• NEW! -- Billing Analyst -- Retail Supplier -- New York
• NEW! -- Energy Sales Executive -- DFW
• NEW! -- Senior Supply Analyst -- Retail Supplier -- Houston
|
|
|
|