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PJM Proposes Changes to the Load Serving Entity Capacity Obligation Allocation As Part of Performance Proposal

December 15, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

PJM is seeking to modify how it allocates the responsibility for capacity charges to load serving entities as part of its capacity performance proposal

Major tenets of the final capacity performance proposal, including a revised transition mechanism that relies on RMR contracts and no new incremental capacity market procurements for 2015/16, were discussed in our story earlier this month (click here).

PJM has now made its capacity performance filing with FERC, and the filing includes a change in how the capacity responsibility is assigned to LSEs.

Currently, PJM determines an overall capacity obligation for each Zone based on the Zone's share of the PJM Region's forecasted summer peak, and then the Electric Distribution Company in the Zone determines each LSE's share of the most recent zonal weather-adjusted summer peak. PJM's market rules prescribe that each LSE's capacity obligation is based on "the weather adjusted coincident summer peak" of the LSE's loads in the summer before the Delivery Year, but do not otherwise dictate how the EDC must determine each LSE's coincident summer peak. The current RPM rules do not require any consideration of winter peaks.

PJM said that as a result, the emergency hours for which new capacity performance resources will be procured, and for which they will be incented to perform, will not match the hours used to determine LSE responsibility to pay for those capacity resources

To that end, PJM is seeking to add winter peak hours and Performance Assessment Hours to the summer peak hours currently used to determine LSE capacity obligations.

Specifically, PJM will determine the Zonal Obligation Peak Load by deriving the average zonal load at the time of: (i) the four highest summer peak hours experienced by the PJM Region, (ii) the single highest winter peak hour for the PJM Region, and (iii), for each day containing Performance Assessment Hours, the hour with the highest PJM Region load level in that day.

The hours described in (i)-(iii) above will be compiled for the twelve-month period ending October 31 of the calendar year preceding the most recent Auction for the relevant Delivery Year. Thus, for example, the data used to determine the Zonal OPL to allocate capacity costs for the 2018/2019 Delivery Year will be the peak loads experienced during the period from November 1, 2016 through October 31, 2017. This data would be the most recent data available before the Third (and final) Incremental Auction (held in February 2018) for the 2018/2019 Delivery Year.

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