By Rory D. Sweeney
PJM is at odds with some stakeholders over whether existing units should be under the same obligation to provide primary frequency response (PFR) that FERC ordered for new units in February.
Sides clashed at last week’s meeting of the Primary Frequency Response Senior Task Force (PFRSTF) over what Order 842 actually requires.
Though it has evolved since Order 842 came out in February, the debate has been raging in PJM since the commission issued a Notice of Proposed Rulemaking on the topic in November 2016. Staff want to require PFR from all units capable of providing it, but some stakeholders believe PJM is overreaching. (See FERC Finalizes Frequency Response Requirement.)
PJM argues it doesn’t preclude being applied to existing units, while generation owners say it doesn’t explicitly order it either. Stakeholders questioned the RTO’s confidence in its stance, given that staff have filed a request with FERC to clarify the order. Jim Burlew, a PJM attorney, said staff is confident but made the request “out of an abundance of caution.” He said the RTO’s position is that FERC felt the issue was addressed by ordering new units to provide PFR because it assumed current units are already providing it.
Staff attempted to counteract an argument that PJM would be shouldering others’ frequency response responsibilities by showing how other balancing authorities are handling FERC’s order. However, the presentation seemed only to strengthen some stakeholders’ belief that it’s unnecessary for existing units to have the capability.
PJM’s presentation showed that surrounding BAs maintain some PFR requirement for existing units, but stakeholders argued those procedures were more collaborative than the RTO’s plan, which includes referrals to FERC’s Office of Enforcement for units that don’t measure up.
“They’re not looking at a FERC hammer” in the other BAs, GT Power Group’s Dave Pratzon said.
AEP Energy, a subsidiary of American Electric Power, presented a proposal that would maintain the status quo for existing units to provide PFR if they are capable. It would also allow for seeking cost-of-service revenues from FERC for providing the service. A PFR performance evaluation like one that PJM has proposed would go into effect in 2021, and there would be a recommendation that transmission owners and the RTO study localized restoration-related issues.
Jim Fletcher with American Municipal Power pointed out that several of the other BAs are regulated utilities that can unilaterally implement changes — unlike PJM, where individual unit owners will need to make economic decisions.
“They seem to have an advantage about how they optimize frequency response,” he said. “I think it’s important that we continue to keep some form of compensation in the mix here as we talk about [implementation].”
Howard Haas with the Independent Market Monitor noted that regulated utilities have a different cost-recovery model than ISO/RTO markets. Regulated utilities have cost-of-service arrangements subject to regulators’ approval or rejection while PJM’s approach uses markets, where recovery is possible but not guaranteed, he said. The Monitor’s position is that units are already compensated to have and provide PFR through PJM markets and that the cost of new entry (CONE) unit includes the costs of having the capability because the service is a requirement of new units.
“PJM’s markets provide opportunities to recover these costs; and if you don’t, you have to make a business decision about whether or not to exit,” Haas said.
A stakeholder who asked not to be identified asked whether PJM was implying that units that can’t provide PFR should retire.
“That’s the IMM’s position. I don’t think PJM has ever said that,” PJM’s Dave Souder said.
However, Haas noted after the meeting that PJM’s proposal for exemptions from offering PFR specifically states that “economics cannot be used as exemption criteria.”
Pratzon called it “a bit of a stretch … to lay a sidebar obligation” of PFR on a resource that was designed and built for “the primary value” of producing energy, but Haas argued that if it’s a rational decision within PJM’s markets for new units, it’s a “rational decision for existing resources as well.”
Where to Recover?
Pratzon noted concerns that recovering the costs of PFR was also affected by another ongoing stakeholder discussion about variable operations and maintenance (VOM) costs. Stakeholders will vote at the April meeting of the Market Implementation Committee on three proposals that revise how cost-based offers can be submitted. (See “Maintenance in Cost-Based Offers,” PJM Market Implementation Committee Briefs: March 7, 2018.)
PJM’s Tom Hauske assured stakeholders that none of the proposals disallows including PFR costs in offers, but Pratzon noted they differ with whether they are recovered through the capacity or energy market.
“Some generators might think they have more certainty recovering [the costs] in [the energy market] than [in the capacity market],” he said.
Pratzon also questioned PJM’s plan to exempt units that have wholesale market participation agreements (WMPAs) rather than interconnection service agreements. WMPAs are for resources that are governed by state tariffs and aren’t under FERC’s jurisdiction.
“By doing what you’re doing, you’re setting up a system where people who are first in get a break that nobody else gets,” he said.
Pratzon also had concerns with parts of PJM’s proposal to assess PFR performance. Staff will be able to perform assessments up to 30 times per year but would aim for two or three events per month. Staff agreed to accommodate an AEP request to make the factors triggering an event less sensitive, which would reduce the number of events to assess, but said they would need at least three quarterly events for the assessment.
Pratzon argued that it was unfair to allow units that lack real-time telemetry capability to submit data from a selected event because they could cherry-pick their best performance.
Units would receive a pass/fail grade, and PJM would discuss the issue with failing units. If units that fail are intentionally not responding, they could be referred to FERC. PJM plans to put the details in its operating manuals so they can be revised as necessary; the requirement to provide PFR will be in its Tariff so units are required to respond.
Stakeholders agreed to update their proposals based on feedback and have them prepared for a nonbinding poll that will be open between April 4 and 11. The results will be reviewed at the task force’s next meeting on April 26.
