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FERC Denies States' Complaint To Cease Use of Outdated Forecast Model in PJM Capacity Market Which States' Say Costs $600 Million

November 20, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FERC denied a complaint from a coalition of consumer representatives, including the New Jersey Board of Public Utilities and Delaware Public Service Commission, which had requested that FERC direct PJM to update its 2015 PJM Region Peak Load Forecast values, for purposes of the Capacity Performance Transition Incremental Auctions (TAs) and 2015 Base Residual Auction (which have since been held), to reflect the impact of recent enhancements to PJM's load forecasting model that result in an updated load forecast

State regulators had noted that failure to use the updated load forecasting model prior to the 2015 BRA for the 2018/2019 Delivery Year, and the scheduled TAs for the 2016/2017 and 2017/2018 Delivery Years, "will lead to substantial and imprudent over-procurement of capacity, resulting in unjust and unreasonable capacity prices for consumers."

Use of the updated and more accurate load forecasting model in the BRA and TAs would reduce the Peak Load Forecast for the 2016/2017, 2017/2018, and 2018/2019 Delivery Years by approximately 7,000 MWs or more, the state regulators had said

"Such a reduction could result in savings to consumers of more than $600 million, by avoiding the unnecessary incurrence of capacity costs," state regulators had said

FERC ruled that the state regulators failed to meet their burden under section 206 of the FPA to grant the complaint

"Joint Consumers have failed to demonstrate that PJM's current forecasting methodology as applied by PJM is unjust and unreasonable. For example, they failed to show that PJM's 2015 Load Forecast, established using its current load forecasting model, will over-procure capacity to the extent that it renders the resulting rates unjust and unreasonable. While there will inevitably be some difference between PJM's load forecast and the amount of capacity that PJM ultimately needs in a given Delivery Year, the record indicates that PJM has taken steps to ensure the reasonableness of the 2015 Load Forecast, including making a statistical adjustment, based on a percentage of error it had seen in the load forecast over recent years, to account for the effects of energy efficiency programs," FERC said

"The mere fact that PJM is working on a revised forecast methodology does not render the prior one unjust and unreasonable. Rather, while the revised forecast methodology may be an improvement over the current methodology, PJM has demonstrated that the revised methodology is not yet complete. Therefore, until PJM finalizes its enhanced load forecast model, there is no basis for requiring its use," FERC said

FERC also said that its elimination of the 2.5 percent "holdback" in the capacity market, which holds certain demand back from the BRA, was not linked to use of the updated forecast methodology

The issue of whether it is appropriate to remove the 2.5 percent holdback is currently pending on rehearing of the capacity performance proceeding and will be addressed in that proceeding.

Docket No. EL15-83

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