FERC Requires Interim Measure in Approving PLC Methodology for PJM Capacity Demand Response Measurement

FERC accepted, subject to additional compliance filings and creation of an interim measure, PJM's proposal that, for a load reduction to be recognized as having satisfied its capacity commitment, the load reduction must result in a metered load that is less than the customer's Peak Load Contribution (PLC).

While the Guaranteed Load Drop (GLD) option remains in the tariff, GLD Capacity Demand Response (DR) resources will be required to drop below PLC during an emergency.

"Given the structure of PJM's current RPM mechanism and load forecasting methodology, we find that the reliability concerns giving rise to PJM's filing have been sufficiently supported by PJM," FERC said. "For example, if PJM were not able to base compliance on the PLC, end-use customers that are providing Capacity DR [demand response] would not be required to perform in the delivery year in a manner consistent with PJM's capacity objectives in the RPM auctions."

"When resources do not drop below their historical PLC, there is more load on the PJM system than was anticipated when capacity resources were procured in the capacity auctions. Additional capacity resources could well be required to meet this load, thus leaving less capacity available to meet other customers' loads. In this respect, the system reserve margin potentially could be eroded, thus putting PJM at risk of violating reliability criteria, potentially necessitating increased capacity procurement at associated costs," FERC added.

While FERC accepted PJM's proposed PLC baseline metric as just and reasonable, the Commission conditioned acceptance on the development of an interim mechanism that accounts for commitments previously made by curtailment service providers (CSPs).

"Because PJM utilizes an auction three years in advance, CSPs may have made some commitments based on an assumption that they could count reductions from actual load levels above the PLC as part of their performance. While PJM proposed a 1.25 multiplier on the PLC as an interim mechanism to apply only through the 2011-12 delivery year, we find PJM has not demonstrated that this interim mechanism is just and reasonable. Given the evidence supplied in the proceeding, it appears that the 1.25 multiplier may not provide sufficient protection for those who may have previously committed resources," FERC said.

While FERC did not prescribe a specific level for a multiplier, FERC did say that the interim measure should be in place through the 2014-15 delivery year.

Additionally, FERC said that PJM has not explained how the PLC metric will continue to permit aggregation of demand response capacity, and how penalties will be assessed for the under-compliance of aggregated customers. PJM shall address aggregation issues in a 60-day compliance filing.

Furthermore, FERC directed PJM to clarify how Capacity demand response resources will receive energy market payments for reductions above the PLC.

The matter is Docket ER11-3322.