By Christen Smith
FERC handed PJM a mixed ruling Monday on a set of proposed Tariff and Operating Agreement revisions intended to equalize the cost recovery treatment of gas-fired plants with that of other thermal generators.
The commission approved the Tariff changes, agreeing PJM’s existing rules “unduly discriminate” against combined cycle and combustion turbine generators by preventing them from recovering inspection costs as a “maintenance adder” in their energy prices.
Those types of variable costs are considered related specifically to electricity production and should be recoverable in the energy market, the commission said (ER19–210). Many nuclear and fossil generators currently factor these expenses into their avoidable-cost rates in the capacity market.
In approving the Tariff changes, FERC rejected the PJM Independent Market Monitor’s argument that major maintenance costs incurred as a result of electricity production should be recovered in the capacity market because they are not short-run marginal costs. The PJM Load Coalition likewise insisted variable operations and maintenance costs belonged in capacity market offers only.
The commission also dismissed concerns that the changes risked double recovery by generators in both the energy and capacity markets.
“We accept PJM’s Tariff revisions to clarify that all resource types are prohibited from recovering variable maintenance costs that are directly attributable to the production of electricity in their avoidable-cost rate in the capacity market,” the commission wrote.
But FERC found related changes in PJM’s Operating Agreement to be “unjust and unreasonable” because “the definitions of maintenance adders and operating costs fail to provide sufficient clarity with respect to permissible cost components of cost-based energy market offers.”
The commission directed PJM to submit a compliance filing clarifying what maintenance costs sellers can include in their energy market offers. The revised OA must do the following:
- Create a single, properly defined operating cost component.
- Remove “incremental fuel costs” and “other incremental operating costs” from the list of permissible components in a cost-based offer.
- Add a definition for “opportunity costs” and create a new section detailing this component.
- Create a new section for the “application of cost components to three-part cost-based offers.”
- Move definitions for “maintenance adders” and “operating costs” to a new opportunity costs section.
- Expand the list of maintenance costs to include cooling towers, fuel and water pumps, emissions-reduction catalyst equipment, and replacement of filters and cartridges.
- Add sections to memorialize PJM’s process of calculating major maintenance costs based on 10- or 20-year histories.
- Revise the section related to the review of maintenance adders and operating costs to require market sellers to specify the maintenance history years on which their maintenance adders are based.
The Monitor had pushed for the required clarifications.