PJM pushes plant payment reforms as RTOs file resilience comments at FERC
Rejected by FERC at the beginning of January, the DOE’s Notice of Proposed Rulemaking (NOPR) would have provided cost recovery to merchant coal and nuclear plants on the grounds that they are essential to system resilience — broadly, the grid’s availability to “bounce back” from outages.
FERC threw out that argument on Jan. 8, but acknowledged that the concept of grid resilience is important and that some generators may not be compensated properly today for those attributes. The agency asked grid operators to file comments within 60 days with strategies to identify, define and value those aspects of resilience.
The operators responded with detailed filings on March 9, largely telling FERC they can handle resilience issues within their own stakeholder processes. But PJM, the nation’s largest electricity market, stood apart with its request for FERC to direct compensation changes for generators.
Among a litany of recommendations, PJM asked FERC to direct it and other grid operators to file “any proposed market reforms and related compensation mechanisms to address resilience concerns” between nine and 12 months after FERC issues a final order in the resilience docket. FERC regulators have indicated they want to expedite evaluation of the docket, potentially issuing final directives to grid operators within a year.
Additionally, PJM asked FERC to permit “non-market operations” during emergencies, including “provisions for cost-based compensation” when markets fail or plants are directed to take emergency actions. That authority does not exist under current PJM rules.
In its filing, PJM indicated that it has already begun identifying potential reforms to plant compensation, including changes to its operating reserves market, black start requirements, energy market price formation and integration of distributed energy resources. Giving the grid operator a deadline, PJM wrote, would “help ensure focus on these issues in the stakeholder process.”
Those recommendations are likely to attract scrutiny in the power sector. Even before the filings, many sector observers voiced concerns that PJM’s resilience plans, combined with ongoing efforts to reform plant compensation, could amount to a “stealth NOPR” — a backdoor bailout of coal and nuclear plants.
While PJM’s plans to reform plant compensation predate the DOE NOPR, the grid operator’s Friday filing links them to the resilience docket, asking FERC to use an expedited docket to speed up evaluation of the reforms.
“In a sense, it seems as if PJM is trying to move pricing reforms, which include energy price formation, shortage pricing, and black start pricing, for example, into the resilience docket,” Robbie Orvis, policy director at Energy Innovation, said in an email. “This puts the cart before the horse; FERC and the RTOs have yet to fully define resilience and identify elements worth compensating, which should both take place before any market modification or new product is developed.”