Retail Supplier Offers To Lead Discussions on Raising Offer Cap, Presents Proposal

Favoring a stakeholder-driven solution over a unilateral board-developed solution, Direct Energy Business has offered to lead discussions about raising the PJM energy market offer cap and presented its own proposal

"DE would rather see stakeholders propose something that PJM can support, and not forego the opportunity to shape PJM rules," Direct Energy Business states in presentation materials for today's PJM Market Implementation Committee meeting posted by PJM

"The PJM Board told stakeholders that if we do not do something about this, they will," Direct Energy Business notes in the presentation

Aside from benefiting generators, Direct Energy Business states in the presentation that consumers and LSEs will benefit from an increase in the energy offer cap by reducing unhedgeable uplift and producing rational, transparent pricing

"DE has offered to take lead role in trying to develop compromise proposal; willing to set up meetings outside PJM schedule and within PJM meeting calendar," Direct Energy Business states in the presentation. "We have little time; Board meets in October, which is when it would likely authorize PJM to make filing," Direct Energy Business states in the presentation, stating that any modification will need to be expedited through stakeholder process with a vote at the September Members Committee meeting.

Direct Energy Business indicated that it has spoken with PJM, and PJM will provide education sessions on implications of raising the energy cap, especially with respect to scarcity pricing

Direct Energy Business included the following specific proposal for raising the energy market offer caps (all text quoted verbatim):

Day Ahead Offers:

• Raise caps for cost based offers to [$2700], which reflects highest bids during Polar Vortex ($1800/MWh) x 150% [note: $2700 bracketed in DE's presentation]

-- Alternatively, rerun analysis done 18 years ago with updated inputs

• Only cost based offers may offer in excess of existing price cap

• The 10% adder is capped for bids over $1000 at the higher of 10% or $100-MWh

• Cost offers above the energy cap must be submitted using [cost structure] on file with the Market Monitor

Real Time Offers:

• Market based offers capped at $2700

• Cost based offers are not capped but are subject to verification by the Market Monitor;

• The 10% adder is capped for bids over $1000 at the higher of 10% or $100-MWh

Scarcity pricing penalty factors would have to be adjusted

• Need to ensure that generation dispatched for reserves makes lost opportunity costs, which could be higher than the existing $1000 cap