PJM Stakeholders Weigh 4 Options on Offer Cap; No Agreement in Sight
VALLEY FORGE, Pa. — Members debated four potential changes to the $1,000/MWh energy offer cap last week at a specially called meeting of the Markets and Reliability Committee, failing to agree on any one — or even which should be the main and alternate proposals.
Further discussion was deferred until Sept. 24, giving stakeholders only a few weeks to reach consensus before the Board of Managers takes the matter into its own hands before winter.
The proposals were presented by Direct Energy, Old Dominion Electric Cooperative, the Independent Market Monitor and — for the first time — Calpine and the PJM Power Providers Group (P3).
Supporters of an increase in the cap say it is necessary to ensure that gas-fired generators can recover their costs when fuel prices spike during periods of extreme temperatures, such as the 2014 polar vortex.
Direct Energy had kicked off the latest effort to reach agreement in July with its plan to raise the cap to $2,700/MWh for cost-based day-ahead offers and price-based real-time offers. The number is 50% more than the highest offers reported by PJM last winter. PJM said that it would support the Direct Energy proposal. (See PJM Stakeholders Struggle for Consensus on Offer Cap.)
Joe Wadsworth of Vitol reiterated his concern about potential unintended consequences inherent in applying different rules to the day-ahead and real-time markets. “We could be artificially creating arbitrage opportunities,” he said, adding that such a scenario might invite increased scrutiny from FERC enforcement.
“We need to ensure the day-ahead and real-time market parameters are the same whenever we can,” he said.
Jim Jablonski, of the Public Power Association of New Jersey, said that whatever the proposed offer cap is, it’s critical it be able to be supported by data. “We can’t get to FERC and say, ‘Oh, we just doubled the old one.’”