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FERC Orders Technical Conference On Seasonal Resource Participation Under PJM Capacity Performance, Declines To Dismiss Complaint Filed By Retail Supplier

February 26, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FERC has directed Commission staff to convene a technical conference to explore issues raised in two complaints against PJM's transition to a 100% "capacity performance" product in its capacity market and the methodology by which load-serving entities’ peak-shaving actions are reflected in capacity procurement targets, as well as two related components of PJM’s resource aggregation rules.

FERC's order addressed two complaints which had been filed against the capacity performance mechanism. One of the complaints was filed jointly by Direct Energy, Old Dominion Electric Cooperative, and American Municipal Power. Another complaint was filed by Advanced Energy Management Alliance

The Direct Energy complaint generally sought to establish a proceeding to allow seasonal resources to participate in the Reliability Pricing Model auctions and to extend the allowance for "base" capacity resources for an additional year to allow for such the introduction of seasonal resources (note, during the pendency of the complaint, the first auction for 100% capacity performance was in fact held)

The Direct Energy complaint alleged that PJM's refusal to allow seasonal resources, such as demand response, in the capacity market contravened the reality of how other resources are treated. The Direct Energy complaint noted that the capacity requirement that resources be capable of "sustained, predictable operation" throughout the year defies reality even for non-seasonal Capacity Performance Resources. For instance, fossil fueled resources take regular planned outages for refurbishment. The Direct Energy complaint argues that such outages are a major factor in PJM’s capacity planning, such as the increased reserve margin going into the winter period to account for higher planned outages. The Direct Energy complaint states that PJM makes accommodation to allow resources with planned outages to avoid penalties, but does not provide similar accommodation to Seasonal Resources, who also are unavailable during certain periods of the year

AEMA's complaint addressed similar matters. In particular, AEMA's complaint sought to rebut PJM's assertion that peak shaving produced similar savings to LSEs that demand response participation in RPM would bring, as such shaving does not reduce the zonal capacity price

"Upon consideration of the Complaints and responses, we find that Complainants raise a number of issues related to the PJM capacity market that warrant further examination. Therefore, we direct Commission staff to establish a technical conference to explore these issues. A separate notice will be issued to establish dates and technical conference details. In order to inform the technical conference discussion, the Commission further directs Commission staff to issue a request for comments on these issues prior to the technical conference," FERC said

"We reject PJM’s request that we summarily dismiss the complaints as collateral attacks on the Capacity Performance orders," FERC said

"Section 206 of the Federal Power Act recognizes that a rate previously found just and reasonable may be found unjust and unreasonable in a later proceeding. Capacity Performance has now been in effect for two years, and the complainants have raised important issues as to whether certain aspects of the construct are performing as well as expected. In particular, complainants present analyses prepared by PJM which call into question the assumption that permitting any stand-alone participation by Seasonal Resources would negatively impact reliability in non-summer months," FERC said

"The technical conference should consider the issues raised by the complaints, including, but not limited to: 1) whether the exclusive use of a year-round capacity product raises customer costs unnecessarily compared to retention of a seasonal capacity product; 2) whether stand-alone participation by Seasonal Resources in non-summer months would jeopardize reliability; 3) whether alternative models, such as establishing distinct summer and winter capacity markets could assure reliability at lower costs; 4) whether, if it is true that nearly all loss of load expectation risk currently exists in 10 summer weeks of the year, there is an alternative distribution of loss of load expectation risk that could meet the 1-in-10 reliability target at a lower total cost; and 5) whether PJM’s load forecast methodology incorporates load-serving entities’ peak-shaving actions in an adequate and timely manner to yield just and reasonable rates for consumers," FERC said

FERC set the refund effective at the earliest date possible, i.e., December 23, 2016 for the ODEC/Direct complaint and January 5, 2017 for the AEMA complaint.

Docket EL17-32 et. al.

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