Consensus Near on PJM Energy Market Offer Cap?
The authors of four competing proposals to change the $1,000/MWh energy market offer cap have agreed to put forward one plan for consideration by the PJM Markets and Reliability Committee on Thursday — the last chance stakeholders will have to come to consensus before the Board of Managers takes the issue into its own hands.
The proposal outlined during a special MRC meeting last week would cap cost-based offers at $2,000/MWh and allow them to set LMPs, with market-based offers allowed to equal cost-based. Generators with approved fuel-cost policies claiming costs above $2,000/MWh would be compensated through make-whole payments.
There would be no change to the treatment of the 10% adder, shortage penalty factors and start-up, no-load compensation. Cost-based offers would be considered to include the 10% adder.
The framework was hammered out during a conference call last week attended by Direct Energy, Old Dominion Electric Cooperative, PJM Power Providers Group (P3), the Independent Market Monitor — jokingly dubbed “the four horsemen”— and PJM staff.
“I think it’s fair to say that none of the four proposers who participated in the call felt it was their home run,” said committee secretary Dave Anders. “But it was something they looked at as a bridge that, should the stakeholders come to consensus on it or something close to it, it could work for this winter and until FERC” takes action.
Stakeholders already had been rushing to reach consensus after being told in July at the Liaison Committee meeting that the Board of Managers planned to take up the issue in time for winter.
Then, on Sept. 17, FERC announced its intention to take action on offer caps and other price formation issues. The commission made the statement as it issued a proposed rule requiring RTOs and ISOs to align their settlement and dispatch intervals (RM15-24). It gave no timeline for future action. (See NOPR Requires RTOs Switch to 5-Minute Settlements.)
PJM’s Adrien Ford said the new framework “is something PJM staff can fully support” to the board.
Absent consensus, she said, staff is prepared to recommend a Tariff change similar to the waiver it filed last year, which allowed prices to rise as high as $1,800/MWh. PJM made it through the winter without having to invoke it.