The Members Committee last week gave final approval to rules allowing more generation owners to obtain PJMNet communication links and an initiative to clarify rules on withdrawing from PJM membership.
The members approved a problem statement and issue charge to eliminate conflicts in the Operating Agreement regarding the timelines for withdrawing from membership. The goal is to clarify the steps required to resolve outstanding obligations of the withdrawing member. The work is expected to be completed in about three months.
The Market Implementation Committee last week approved the sunset of the Financial Transmission Rights Task Force, which was created to investigate the causes of modeling differences between the FTR, day-ahead and real-time markets and identify solutions. The task force’s work resulted in Tariff and manual changes that took effect beginning with the August FTR auction. (See MIC OKs Options to Reduce FTR Shortfalls.)
It took three tries Dec. 9 before the Members Committee reached consensus on Tariff changes that will allow PJM operators more flexibility in dispatching demand response.
Under the new rules, resources will be dispatchable in 30 minutes beginning delivery year 2015/16 — down from a current two-hour default — unless they can demonstrate physical reasons for a longer dispatch.
The PJM proposal, backed strongly by transmission owners, failed with a sector-weighted vote of 55%, below the two-thirds threshold. A second proposal, which included an amendment to increase the maximum dispatch time to 120 minutes for state-authorized “mass market” DR programs, gained more support among electric distributors but still fell short at 57%.
The third vote cleared with 70% support despite erosion among transmission owners. It included the first amendment and a second one allowing industrial loads — part of the end-use customer sector — an exemption from the 30-minute requirement if needed to avoid damage to “product or feedstock.” (See Members OK DR Dispatch Rules after Late Amendments.)
Members agreed last week to develop rules for demand response providers requesting maintenance outages. Under the problem statement approved by the Market Implementation Committee, members will develop amendments to Manual 18 regarding eligibility for maintenance outages. The issue charge, which will be brought before the committee next month for approval, would assign the tasks to the Demand Response Subcommittee.
American Electric Power directors elected Nicholas Akins to chair the board effective Jan. 1, adding that role to his titles of president and CEO. Akins, 53, succeeded Michael Morris in those roles in 2011. Morris is to step down from his position as non-executive chairman before Jan. 1
Commonwealth Edison’s smart grid program created about 2,900 full-time equivalent jobs by the end of the third quarter, the utility reported. The total includes more than 900 direct jobs at ComEd and its contractors and an estimated 1,900 indirect positions created.
The grid modernization program started in January 2012 and the company began installing smart meters in September this year, aiming for 60,000 this year and more than 800,000 through 2015.
Pepco Energy Services won a deal to implement a 23-year energy savings performance contract at the U.S. Army Natick (Mass.) Soldier Systems Center. It will allow the center to exceed the Army’s 30% energy reduction goal by 2015.
Electric Light & Power magazine named PPL Corp. its North American utility of the year, PPL’s second such honor since 2008. It’s “unheard of” for a company to win again in such a short time, Editor in Chief Teresa Hansen said, explaining that after trying harder to find other winners the magazine could not deny the choice. “We quickly realized the winner could be no other utility than PPL this year,” she said. “It was that clear.”
Award criteria included customer satisfaction, financial health and storm preparedness, among other metrics. “After Hurricane Sandy, PPL became the model for how to handle big storms and the people affected,” Hansen said, crediting CEO William H. Spence.
Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability Committee Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.
RTO Insider will be in Wilmington covering the discussions and votes. See next week’s newsletter for a full report.
3. PJM Manuals (9:15-9:30)
Manual 3A: Energy Management System (EMS) Model Updates and Quality Assurance (QA)
Impacts: Defines times when interconnection request information will be exchanged and studied; Reinforces JOA requirements to impose the applicable study criteria; Describes Transmission Service Request studies to be performed.
Impact: Changes section 6.3 to increase penalties for resources that fail to provide assigned amounts of Tier 2 Synchronized Reserve. Changes section 5.2.6 to clarify the requirements that must be satisfied in order for wind resources to be eligible to receive Lost Opportunity Cost (LOC) credits.
4. ENERGY MARKET UPLIFT TASK FORCE (EMUSTF) (9:30-9:40)
Members will be asked to approve revisions to the Energy Market Uplift Senior Task Force charter. The MRC created EMUSTF May 30 to develop ways to minimize energy market up-lift charges and methodologies for allocating make-whole payments (See MRC Approvals 5/30/13.)
The proposed changes would incorporate into the charter the scope originally assigned to an MIC subgroup on Day-Ahead Reliability and Reactive Cost Allocation (DARRCA). The DARRCA group met nine times from December 2012 through October 2013 and was creating solution packages when it decided to combine the issues of the group into EMUSTF.
The volume and magnitude of changes PJM is attempting to impose on demand response raise the question of whether the high-flying sector is still a growth business or one in retreat.
Comverge Inc. sees the industry as under an assault that threatens its growth. “The Commission should not allow PJM to use [shortcomings of the capacity auction] as an excuse to impose anticompetitive measures that will very likely arrest any growth in demand resource participation in its capacity market,” the company told the Federal Energy Regulatory Commission in a Dec. 3 filing.
PJM officials insist they are acting only to ensure reliability, fairness and operational flexibility. Generators echo PJM’s concerns, though their own rivalry with DR cannot be denied: With demand flat, DR market share gains come at generators’ expense.
Whatever the motivations, there’s no doubt that if PJM prevails in its plans, demand response will undergo a dizzying number of changes:
The volume of limited DR clearing in the annual capacity auction could be reduced by as much as two-thirds.
Many resources will be required to dispatch in 30 minutes, down from the current two-hour default.
Curtailment Service Providers will be required to provide more detail to support planned resources (and planned resources could be banned altogether, if some generators get their way).
Emergency energy prices would be cut by as much as 39%.
DR received a boost from Congress in the 2005 Energy Policy Act, which barred “unnecessary barriers” to DR participation in energy, capacity and ancillary service markets. The Federal Energy Regulatory Commission’s Order 745 allowed DR payment of full locational marginal prices beginning in April 2012.
But with its growth raising questions about market saturation, and with low gas prices pinching generator margins, DR has found itself increasingly on the defensive.
Both DR offers and cleared MWs declined in ISO New England and PJM’s capacity auctions this year. DR participation also has declined in NYISO.
Demand resources offered declined 27% (and cleared DR dropped 16%) in PJM’s 2013 base capacity auction versus 2012. The Market Monitor said the decline was the result of low prices, while Comverge blamed it on the “chilling effect” of PJM’s new rules requiring more documentation of planned resources.
Demand response’s participation in ISO New England’s forward capacity market declined this year for the first time ever, with cleared offers dropping 24% from 2012.
UBS Investment Research attributed the reduction to the imposition of ‘must offer’ rules similar to those for generators. Former EnerNOC executive Jim Bride also cites the must-offer rules, along with other changes approved by FERC in January (ER12-1627) — what he called “onerous” data requirements and the elimination of the capacity price floor in 2017.
“Many of the players from several years ago have left the market or substantially pulled back,” Bride, now president of Cambridge-based consulting firm Energy Tariff Experts LLC, wrote. “EnerNOC recently significantly reduced its position in the ISO-NE FCM as the market had become unprofitable for all but the largest customers or those with advanced automation.”
DR had shown steady growth in NYISO until recently. “However, changes in market rules to enhance estimates of providers’ ability to deliver demand response during peak conditions have led to a decline in program participation in recent years,” the ISO said in its annual report. “The increased use of demand response resources may also test the ability — and willingness — of some program participants to sustain their commitments.”
The ISO deployed DR on a record six days during the summer of 2012.
Growth Areas
To be sure, DR is not going away. “Regulators are hard pressed to look past this source of cheap demand reduction,” notes UBS.
And there are growth opportunities in other regions, including California, Texas and non-RTO markets. In September, ERCOT changed its rules to allow DR participation in its real-time market. EnerNOC, which has operations in Australia, Canada, the United Kingdom and New Zealand, says the international market will be three times the size of the U.S.
But in more mature markets, DR’s growth, if not over, surely has slowed.
In a report last month, UBS said the PJM changes approved and pending “could continue to pressure DR’s market share, as proposed reforms to both aspects of the market would ratchet up participation requirements.”
Bride sees similar challenges in New England. “I’m pretty sure that DR will thrive again in ISO-NE, but for the average commercial or industrial customer, DR will be on hiatus for a couple of years until these issues get worked out,” he said.
Long-term Outlook
UBS says more independent power producers and utilities could enter the DR industry, which could “limit further pressure on DR participation from a regulatory perspective.” NRG Energy acquired Energy Curtailment Specialists in August. Exelon’s Constellation unit owns a demand response business (formerly CPower).
Much will depend on FERC’s stance on the proposed changes. DR lost a strong supporter with the departure of FERC chairman Jon Wellinghoff and his replacement has not been named.
An early indication could come in the commission’s ruling, due by March 2, on PJM’s increased documentation requirements.
Market leader EnerNOC — influenced perhaps by the fact that it is publicly traded and doesn’t want to voice doubts that could hurt the stock — has taken a less alarmist tack than Comverge in response to the PJM proposals.
“New rules are happening all the time in these competitive wholesale markets. DR is under more and more scrutiny,” EnerNOC CEO Timothy Healy told the Credit Suisse analyst conference earlier this month. “Some days we have some good news on that front — Texas was exactly what we were looking for — then a couple weeks later: PJM.”
“This is a very cost effective resource. It’s a flexible resource,” he continued. “Public utility commissions love demand response. This too will fade and we’ll see that demand response continues its steady march in these markets.”
PJM added an Interregional Data Map to its website last week. The map shows actual and scheduled flow across interfaces along with Locational Marginal Prices. Green and red and arrows indicate whether power flows are economic or uneconomic.
Combined cycle generators’ performance in providing Tier 2 synchronized reserve has fallen by half since 2008, according to a new analysis provided to the Operating Committee last week.
(Source: PJM Interconnection, LLC)
In response to earlier stakeholder questions, PJM staff analyzed SR response rates since 2002 by generator type. They found that combined cycle units, which once had the best performance rates — averaging over 100% for all but one year during 2002-2008 — now is the worst performer, at below 60% (see chart).
PJM’s Tom Hauske, who presented the findings, said there’s “no obvious” explanation for the decline. “I assume it has something to do with how [plant operators] are optimizing their output now and they don’t have as much margin to move” when synch reserve events are called, he said.
While combined cycle rates have declined, the performance of hydro units and combustion turbines has been relatively constant, as have steam units, excluding a two-year jump in performance in 2010-2011.
Retrofits and other planned outages will make it challenging to maintain reserve margins in 2014 and 2015 and PJM will likely need to reschedule some outage requests as a result.
PJM’s Dave Schweizer briefed the Operating Committee last week on planned outages scheduled and anticipated for the two-year period, which will see 46 units totaling 7,725 MW of generation retire and 59 units totaling 25,890 take outages for retrofits.
PJM is awaiting retrofit/retirement decisions from the owners of 21 units totaling 3,456 MW.
The 2015 analysis shows the combination of scheduled and anticipated outages reducing generation below PJM’s targeted 15% reserve margin in May and September 2015, meaning officials will need to reschedule some shutdowns to months with more margin.
Projections also anticipate tight operations in May and September 2014.
“The key takeaway: If you’re a generation owner … please submit these (planned outage) tickets as soon as reasonably possible,” Schweizer said.
