PJM POWER PROVIDERS GROUP (P3) CRIES “FOUL” TO FERC ON PJM’s DECEMBER 2022 CAPACITY AUCTION
- Jan 21, 2023 7:09 pm GMT
The PJM Power Providers Group (P3) has filed a protest with the Federal Energy Regulatory Commission (FERC), over issues it believes have interfered with the proper administration of PJM Interconnection’s December, 2022 Capacity Auction, known as its Base Residual Auction (BRA). P3 members own a combined 67,000+ MWs of generation assets and produce enough power to supply over 50 million homes in the PJM region, covering 13 states and the District of Columbia, the largest electricity market in North America.
P3 asserts “PJM’s proposals in these proceedings invite the Commission to look past PJM’s violation of its own Tariff, ignore nearly a century’s worth of precedent on the filed rate doctrine, jettison the Commission’s commitment to market integrity, and adopt a proposed Tariff change for which PJM has carried none of its statutory responsibilities and which will not even address the issue that gave rise to these proceedings.” The Group sums it up saying “PJM has hit a Grand Slam of bad ideas.” The protest is supported by affidavits from former FERC Chairman Joseph T. Kelliher, and Roy J. Shanker Ph.D. of Cornerstone Research, whose bio says he has served as a testifying and consulting expert in numerous cases before the FERC on a broad range of electric market transactions.
PJM held its annual capacity auction from December 7 to December 13, 2022. Under its tariff, it is required to announce the auction results “as soon thereafter as possible” after completion and a review of market power but according to P3, “PJM has possessed—but refused to post—the final results of that Tariff-dictated process since December 19, 2022.” To be a bit more specific, P3 is saying that once PJM had the auction results in hand, it didn’t like them, and has delayed releasing them while it sought to retroactively change and apply rules that directly contravene the Tariff: “retroactive ratemaking.” The group asserts that the underlying reason for this is that “PJM filings mischaracterize and omit numerous material facts regarding the Tariff, the steps PJM took in applying it for the December 2022 BRA, and the extent to which PJM had—or at least should have had—advance notice that the clearing price for the Delmarva Power & Light – South Locational Deliverability Area (LDA) would rise to the level produced by the December 2022 BRA.” And P3 also says that PJM has failed to meet its obligations to ensure its rates are just and reasonable under Sections 205 (rate change) or 206 (replacement rate) of the Federal Power Act.
All of this seems to arise from how PJM determines the various LDA Reliability Requirements that its algorithm uses to determine rates. Each LDA Reliability Requirement is based on PJM’s calculation of the Capacity Export Transfer Objective (CETO) for that particular LDA. PJM’s CETO calculations require it to make forecasts regarding the generation resources that PJM expects to exist in an LDA within the planning horizon at issue. This is important because most generators are required to offer capacity into the market unless they qualify for an exemption—the “must offer” obligation. So PJM must make assumptions about how much generation will exist in that LDA, and therefore how much capacity will be needed to support the load from imports from outside the LDA. Those assumptions directly affect the price signal that the RPM results will provide generators in the LDA.
But in this case, says P3, PJM already had the results of a sensitivity study from July 2022 showing that if 260 MW of generation that was expected to participate in the BRA did not actually participate, the clearing price for the DPL-South LDA would reach the cap of $431.26 per MW-day. But even with that knowledge, says P3, PJM made no adjustments.
Moreover, P3 says PJM had previously announced that it would post the results on December 20th but failed to do so, and that constitutes a clear violation of its Tariff. It notes that while clearing prices may be revised after an auction, that is only under two conditions, neither of which was met. It says further that PJM does not challenge its own calculation of the LDA Reliability Requirement or the RPM must-offer exemption for Planned Generation Capacity Resources and Intermittent Resources, but that it simply doesn’t like the result that applying those rules produced for the DPL-South LDA in the auction. So, says P3, PJM is now seeking approval to implement new non-rate terms of the filed rate, retroactively apply the filed rate with the new non-rate terms, and produce new clearing prices for the December 2022 BRA.
P3’s consultant Dr. Shanker asserts that PJM’s proposed solution does not address the issue that gave rise to PJM’s filings for a “solution” and do not show the existing Tariff is unjust and unreasonable or that applying the current Tariff under the specific circumstances PJM alleges to be problematic have a “problematic” financial impact. P3’s protest finally cites Dr. Shanker as proposing a “simpler and more effective solution:” “If PJM wishes to improve the accuracy of the LDA Reliability Requirements that it uses as auction parameters, PJM could impose a deadline, in advance of the BRA, by which any resource that is exempt from the RPM must-offer obligation would be required to exercise that option and notify PJM of its decision. PJM could incorporate that information into its LDA Reliability Requirement calculations, thus eliminating the forecast risk that animated these proceedings, while permitting resources that are exempt from the RPM must-offer obligation to retain their option not to participate in the BRA.”
For a full copy of P3’s Protest click: https://www.p3powergroup.com/siteFiles/News/B2EC383226C0DF3F6F7D2674D90BB227.pdf
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