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November 5, 2024

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Exelon to Close Generating Plants if No Rebound Next Year

Exelon logoFacing continued skepticism from Wall Street, Exelon Corp. CEO Christopher Crane said last week that the company would begin shutting down unprofitable power plants if energy prices don’t rebound within a year.

Crane made his comments Wednesday, after the company announced third-quarter operating earnings and a week after Jefferies & Co. downgraded the company to “underperform.”

The company, the largest nuclear power generator in the country, has seen its stock drop more than 20% in the last six months due to weak capacity prices and margins pinched by low natural gas prices and demand growth.

Three Mile Island Nuclear Facility in 2013 (view from Goldsboro, PA; source: Wikimedia Commons)
Three Mile Island Nuclear Facility in 2013 (view from Goldsboro, PA; source: Wikimedia Commons)

Exelon executives have been counseling patience, saying energy prices will revive with the planned retirements of 11,000 MW of coal-fired generation in PJM. Crane said last week there was a limit to the company’s own patience.

“We continue to take a hard look at our assets and determine their economic viability,” Crane said on an analysts call. We will shut down facilities that we do not see on a path to a long-term, sustainable profitability.”

Exelon’s stock rose 1.8% to $28.55 per share following Crane’s comments. It closed yesterday at $28.61.

Analysts say the nuclear plants most at risk of being shuttered are Three Mile Island in Pennsylvania, Clinton in Illinois, Oyster Creek in New Jersey and R.E. Ginna in New York.

Exelon reported operating earnings of $667 million, beating analysts’ estimates. The company was boosted by Commonwealth Edison, which generated operating earnings of $127 million, up 41% percent, as it benefited from Illinois’ 2011 Energy Infrastructure Modernization Act, which provides faster and more frequent returns on utility investments.

At the same time, earnings at Exelon Generation, the company’s merchant business, dropped 10 percent from last year, to $411 million.

Jefferies analyst Paul Freemont cited the unit’s lackluster performance in concluding that the company’s should trade at a discount to the group average price/earnings valuation. “Additionally, the high cash spending of Exelon on nuclear fuel and maintenance results in very little free cash flow generated by the company,” Freemont wrote.

PSEG, PPL Earnings

Also reporting earnings last week were PPL Corp. (PPL), which missed analysts’ expectations, and Public Service Enterprise Group Inc. (PEG), whose results were in line with expectations.

PPL-LogoPPL reported quarterly earnings of $410 million, up $55 million, or 15% from a year ago. For the first nine months of 2013, PPL earned $1.9 billion, versus $2 billion for the first nine months of 2012.

Weakness in the company’s supply, corporate and other segments were partially offset by improvements from its regulated utilities in Kentucky, Pennsylvania and the United Kingdom.

PSEGPublic Service’s results were mixed, with earnings of 77 cents a share meeting analyst expectations and revenues, $2.55 billion, exceeding them.

Earnings Upcoming

PJM Utilities Stock Performance Year to Date - V2

Other PJM utilities will be holding calls to discuss their earnings this week:

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Renewables Study Has Bad News for Coal, Gas Generators

PJM could get 30% of its generation capacity from wind and solar power without harming reliability and while reducing prices, a preliminary study released last week concludes.

But owners of coal and combined cycle generators would face reduced run times and even lower prices than currently – even as their units suffer increased wear and tear from cycling to support renewables’ intermittency.

GE Energy Management, which conducted the study, outlined the preliminary results during a conference call last week. “Even at 30% penetration, results indicate that the PJM system can handle the additional renewable integration with sufficient reserves and transmission build out,” GE said. “…All the simulations of challenging days revealed successful operation of the PJM real-time market.”

Multiple Scenarios

PJM Renewable Integration Study (PRIS) Scenario Definitions (Source: GE Energy Consulting)
PRIS Scenario Definitions (Source: GE Energy Consulting)

The study looked at multiple scenarios for integrating increased wind and solar generation to the PJM grid. GE was charged with examining the operational, planning, and market effects of a large-scale integration of renewable power as well as what PJM will have to do to absorb it.

Current state requirements are expected to increase renewable generation to 14% of capacity, up from the current 2%.

The study estimated that increasing renewable capacity to 20% would require 820 miles of new transmission lines at a cost of $3.8 billion. Electric production costs would be cut by $9 billion annually, a 25% reduction, while carbon pollution would be cut by 80 million tons.

A 30% renewables goal would require 1,182 to 2,946 miles of new transmission costing $5 to $14 billion. Production costs would decrease by $13 billion (35%) per year and carbon emissions would decline by 140 to 200 million tons annually.

Increased Cycling, Reduced Revenue

LMP by PRIS Scenario (Source: GE Energy Consulting)
LMP by PRIS Scenario (Source: GE Energy Consulting)

GE predicts coal and combined cycle generation starts will increase and hours online will decrease, resulting in reduced net revenue and increased forced outage rates.

Combined cycle units perform most of the on/off cycling, seeing a 35% displacement relative to the business as usual scenario. Coal units perform load follow cycling, suffering an 18% displacement. The cost impacts would fall most heavily on combined cycle and supercritical units.

For examples, cycling costs for supercritical coal would increase from $0.66/MWh under the 14% RPS scenario to   $2.22/MWh in the 30% “Low Offshore + Best Onshore” scenario, which envisions 228 GWh of wind and 48 GWh of solar.

Although on/off cycling and load-following ramps do increase emissions over steady state levels, emission levels do not change dramatically with higher levels of renewable generation.

Operational Impacts

Net Effect on Cycling Damage by PRIS Scenario (Source: GE Energy Consulting)
Net Effect on Cycling Damage by PRIS Scenario (Source: GE Energy Consulting)

The study found that higher penetrations of renewable energy would create significantly different operational patterns. “Although there were occasionally periods of reserve shortfalls and new patterns of combustion turbine usage, there were no instances of un-served load,” GE said.

Maximum regulation would increase from 2,000 MW for load only to approximately 3,000 to 4,000 MW in the 30% scenarios when 100,000 MW of new renewable capacity was added.

Diminishing Returns

The analysts concluded that expanding from 20% to 30% renewables “does not appear to be economically attractive.” GE will meet with PJM stakeholders to discuss the final report on Dec. 5.

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State Briefs

Exelon, Groups Agree on Renewables Pact  

Exelon and environmental groups have agreed in principle on a bill that could increase the building of solar projects in Illinois. The bill includes a financing mechanism that could benefit Exelon while increasing costs for its competition.

More: Crain’s Chicago Business

MARYLAND

BGE Rate Proposal Getting Scrutiny

Rate-case fatigue may be setting in as testimony and public hearings get started in the Public Service Commission’s examination of Baltimore Gas & Electric’s request to raise rates for future infrastructure work. On the heels of other rate increases, this one is generating extra controversy.

More: Baltimore Sun

MICHIGAN

Presque Isle Plant (Source: We Energies)
Presque Isle Plant (Source: We Energies)

Keeping Presque Isle Open Stirs Cost Worry

MISO’s determination that We Energies must keep its 430-MW Presque Isle, Mich., plant operating for regional reliability opened a debate about who should pay to keep the plant running. Loss of the coal plant’s main customer, an iron ore mine, prompted WE’s decision to suspend operations.

More: Journal Sentinel

DEQ Fracking Proposal Not Enough: Environmentalists

The Department of Environmental Quality proposed disclosure and monitoring regulations for hydraulic fracturing that is less stringent than legislation Michigan’s Democratic lawmakers have introduced. An industry group said the plan includes common-sense measures, but some environmental groups said it falls far short.

More: MLive

NEW JERSEY

CPV Plant Breaks Ground

Although the legal foundation for its state-sponsored contract has been rejected by a court, Competitive Power Ventures broke ground on its 700-MW natural gas plant in Woodridge, N.J. State-promised ratepayer subsidies may be unnecessary after all, analysts say.

More: NJ Spotlight

PSE&G Challenges Customers’ Intervention in Rate Case

Public Service Electric & Gas wants the Board of Public Utilities to prevent the New Jersey Large Energy Users Coalition’s from intervening in the utility’s infrastructure-improvement case. The coalition opposes PSE&G’s plan, called Energy Strong, whose price tag is $3.9 billion.

More: The Record

NORTH CAROLINA

AG to Appeal Duke Rate Hike, Again

AG Roy Cooper (Source: NC DOJ)
Roy Cooper

North Carolina Attorney General Roy Cooper says he will return to the state Supreme Court a second time to protest Duke Energy’s 7.2% rate increase. The high court sent the increase back to the Utilities Commission once, only to have the commission confirm its original approval. Now Cooper, a likely gubernatorial candidate, wants the court to rule on it again. He is also appealing other rate hikes.

More: News & Observer

OHIO

FE Auction Results Average $50.91/MWh

The Public Utilities Commission approved the results of FirstEnergy’s annual auction for power, in which four suppliers won contracts beginning in June 2014. The one-year product’s average price is $50.91/MWh and the two-year average price $59.99/MWh, the PUC said.

More: Reuters

Calls to Plug Submeter Regulation Gap

State lawmakers called for regulations to prevent “submetering” companies from marking up electric prices for apartment dwellers after a Columbus Dispatch investigation showed what some call price gouging. The Dispatch found that companies are charging premiums of 5% to 40% above regulated prices, often with little disclosure. Submetering markups are illegal in many other states.

More: Columbus Dispatch

PUC Trims AEP ‘Excess Profit’ Refund

American Electric Power must return $6.9 million to ratepayers for what the Public Utility Commission deemed excess 2010 earnings at its former Columbus Southern unit. The refund is about one-quarter of what PUC staff had recommended.

More: Columbus Dispatch

PENNSYLVANIA

Customer Shopping Stagnates

PA PowerSwitchMore than two million Pennsylvania electric customers — about 35% percent of the total — switched suppliers in the two years ending in February but the pace has slowed since then, with only 100,000 more customers signing up with discounters.

Many customers soured on shopping after their suppliers quietly boosted the prices after the terms of their initial agreement ended. Peco Energy Co. has seen a net increase of 5,000 customers since June because Peco’s default price is better than that charged by many competitive suppliers.

More: The Philadelphia Inquirer

Utilities Beef Up Against Weather Hits

More tree trimming, a newly trained emergency response team, stronger poles and two-way texting are among the steps Pennsylvania and New Jersey utilities are taking to prepare for severe weather a year after Hurricane Sandy.

More: The Express-Times

ALJ Backs PPL Line Project

PPL Pocono Fact Selected Route
(Source: PPL)

An administrative law judge has recommended that the Public Utility Commission approve the 58-mile Northeast-Pocono Reliability Project that PPL wants to build from Luzerne to Wayne counties. Critics have raised wilderness, wildlife and zoning concerns.

More: The Scranton Times-Tribune

VIRGINIA

Critics Speak Out Against Cove Point LNG

Environmentalists and a homeowners group described multiple objections to Dominion’s proposed Cove Point LNG export facility at a town hall meeting. The groups are awaiting the Federal Energy Regulatory Commission’s environmental assessment of the project.

More: Southern Maryland Newspapers

WEST VIRGINIA

WV PSC SealPotomac Edison Hears Gripes on Meter Reading

FirstEnergy’s Potomac Edison heard customers air their gripes about the utility’s meter reading and billing at a meeting called by the Public Service Commission.

More: Your4State.com

 

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Company Briefs

Exelon agreed to pay a $500,000 penalty and disgorge about $146,000 in profits to settle a Federal Energy Regulatory Commission’s case alleging that Constellation Energy Commodities Group submitted false information to the California ISO in 2010. FERC alleged Constellation incorrectly designated transactions as “wheeling through” the state although the company lacked a point outside California to deliver the power to. Exelon bought Constellation in 2012.

More: Reuters

PJM’s Ogburn Heads PA Coop

Russ Ogborn, formerly of PJM
Russ Ogborn

Rus Ogburn, former manager of performance compliance at PJM, has returned home to become general manager of Somerset County Rural Electric Cooperative. The Somerset County native was at PJM about 11 years, earning a law degree from Temple University while there. He also holds a B.S. in physics and an M.S. in electrical power engineering.

More: Daily American

Writedowns Dent AEP Earnings

American Electric Power’s third-quarter earnings dropped 11% on writedowns associated mainly with regulatory rulings on a Texas power plant project and the Big Sandy scrubber project in Kentucky. The board of directors nevertheless raised its quarterly dividend by $0.01 to $0.50 per share. The company said it is on track to separate its Ohio generation and wires businesses by the end of the year.

More: Wall Street Journal

Batteries Spark Distributed Solar

NRG Energy and Exelon Corp.’s Constellation unit say interest in combining solar power with battery storage has surged in the year since Hurricane Sandy knocked out power to millions of homes and businesses on the East Coast.

Customers with solar power were frustrated to discover that losing power from local utilities also knocked out the inverters that connect rooftop panels to the grid, leaving them unable to tap the electricity they were producing. Battery storage — which adds more than 20% to the cost of a typical 10-kilowatt solar system for a four-bedroom home — can solve that problem.

More: Bloomberg

Constellation Invests in Zero-Emission Bus Co.

Proterra logo - (Source - Proterra)Constellation joined an Edison International unit in investing in Proterra Inc., a maker of electric buses. The utility companies joined other funders in a $24 million Series C financing round.

More: AltEnergyMag, Dow Jones

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Federal Briefs

Gina McCarthy, EPA Administrator
Gina McCarthy

The Environmental Protection Agency started its 11-city “listening tour” in preparation for writing rules to reduce carbon dioxide emissions from existing power plants. Some lawmakers have asked EPA to add sessions in coal mining states. In an interview with PBS, EPA Administrator Gina McCarthy defended the agency’s plans. “Carbon is a pollutant under the Clean Air Act. We’re doing the same thing for carbon we have done for those other pollutants moving forward,” she said.

More: Reuters, PBS NewsHour

GHG Emissions Down 4.5% in 2012

Greenhouse gas emissions from electricity generation and industrial sources fell 4.5% in 2012 as power production fell slightly from 2011 and natural gas supplanted coal. The Environmental Protection Agency said emissions fell 10% in the two years since the agency began collecting data in 2010. EPA released a map of  emitting facilities’ locations.

More: Washington Post

Legal Glitch Could Be Key to GHG-Rule Challenge

Opponents of the Environmental Protection Agency’s plans to regulate greenhouse gas emissions from  existing power plants may hang a court challenge on contradictory language in the Clean Air Act Amendments of 1990.

The House and Senate drafted contradictory amendments to one section of the law and the discrepancy was never reconciled in conference. Each was intended to ensure that the section — which requires states to develop performance standards for existing sources —  would not duplicate regulations already in place.

More: E&E News

Energy Efficiency Bill Back in Play

After being sidelined by fiscal issues, a bipartisan Senate energy efficiency bill is making progress toward a possible vote. S. 1392, known as the Shaheen-Portman bill after its main sponsors, contains provisions concerning building codes, financing, rebates, labeling and technical assistance.

More: National Journal

Eight States in Pact to Charge Up EVs

Maryland is among eight states joining a coalition aimed at achieving sales of at least 3.3 million zero-emission vehicles by 2025. The states committed to a range of measures including encouraging charging stations and changing building codes to ease electric vehicle ownership.

More: The New York Times

Marcellus Shale (Source: MCO&R at PSU)
Marcellus Shale (Source: MCO&R at PSU)

Marcellus Shale Production Booming

Marcellus Shale natural gas production has reached 12 billion cubic feet a day, more than six times the 2009 production rate, the Energy Information Administration reported. Most of the production from the shale formation is coming from Pennsylvania and West Virginia.

More: Wall Street Journal

Houses Could Save Much More Energy

Increasing residential building air tightness to the International Energy Conservation Code (IECC) standard could save as much as $33 billion a year in energy costs, Lawrence Berkeley National Lab reported. Current weatherization measures can tighten a building about 20% to 30%, but “there’s still quite a bit left on the table,” a Berkeley scientist said.

More: Berkeley National Lab

Browner Says Obama Will Reject Keystone XL

Former White House energy and climate adviser Carol Browner predicts President Obama will reject a permit for the Keystone XL pipeline from Canada’s oil sands.

More: The Hill

Moniz Sees Change in Climate Debate

Energy Secretary Ernest Moniz believes Congress is beyond “whether” to address climate change and is ready to determine “how” to do so.

More: The Hill

Wellinghoff to Join Stoel Rives

Jon Wellinghoff (Source: FERC)
Jon Wellinghoff

Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission since 2009, plans to join the Portland, Ore.-based law firm Stoel Rives when he steps down from the FERC position. He submitted his resignation to the White House in May but has not set a departure date. He will work from the firm’s Washington, D.C., office.

More: Portland Business Journal

Cyber Vulnerabilities Could Crash Grids

Researchers say the communication protocols utilities use to monitor remote operations have vulnerabilities that could allow major system disruptions. Using those vulnerabilities, an attacker at a single, unmanned power substation could inflict a widespread power outage. One expert said the North American Electric Reliability Corp. has not focused its cybersecurity efforts on this kind of software, but should do so.

More: The New York Times

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MRC/Members Committee Approvals

The Markets and Reliability and Members committees approved the following measures with little discussion at their meetings last week.

Markets and Reliability Committee

Installed Reserve Margin

Reason for changes: The IRM, which determines PJM’s capacity targets in the base auction, is revised annually.

Impact: The committee endorsed PJM staff’s recommendation to increase the IRM to 16.2% for delivery year 2014/15 (up from 15.9% in the 2012 analysis) and margins of 15.7% for delivery years 2015 through 2018. The change is a result of the increasing alignment of the RTO’s peak demand with demand outside of the region.

Previous Coverage: Increased Installed Reserve Margin OKd for 2014

Members Committee

Coordinated Transaction Scheduling

The committee approved Tariff and Operating Agreement changes to create the Coordinated Transaction Scheduling (CTS) product.

Reason for changes: CTS is designed to reduce uneconomic power flows between PJM and NYISO.

Impact: The new product will allow traders to submit “price differential” offers that would clear when the price difference between New York and PJM exceeds a threshold set by the bidder. Pending approval by the NYISO board and FERC, CTS will take effect no sooner than September 2014 — later if the Markets and Reliability Committee is not satisfied with the accuracy of the forecasts generated by PJM’s Intermediate Term Security Constrained Economic Dispatch (IT SCED) application.

Previous Coverage: New NYISO Product OKd

Demand Response Registration Process

Members approved Tariff and Operating Agreement revisions to simplify the process for registering demand response customers.

Reason for changes: Current rules require Curtailment Service Providers to submit customer names to both the electric distribution company (EDC) and load serving entity (LSE). The EDC and LSE have 10 days to approve or deny the registration. If either rejects the application — for example because they were mistakenly associated with the customer — the process has to begin from the start.

The change was motivated in part by FERC Order 745, which reduced the LSE’s role in the registration process.

Impact:

Emergency Registration: The LSE will be removed from the review and notification process; EDCs will continue to do reviews under “Relevant Electric Retail Regulatory Authority” rules.

Economic Registration:  The LSE will remain involved but PJM will make administrative changes to simplify the review process. The EDC and LSE review process will be separated to eliminate unnecessary reviews.

Previous Coverage: Simplified DR Registration Process OKd

Synchronized Reserve (SR) Performance

Members approved increased penalties for under-performing Tier 2 synchronized reserve providers. “It better aligns the refund with what the resource earned,” explained Stu Bresler, PJM vice president of market operations.

Reason for changes: The changes are intended to improve performance of SR resources, which currently produce only 75% of promised reserves. The Independent Market Monitor called for changes in the State of the Market report. The current penalties, written when SR calls occurred about every three days, have lost their effectiveness now that calls occur about once every two weeks.

Impact:

  • Remove the “contiguous” hours statement from the same-day penalty.
  • Retroactive obligation to refund the shortfall for all of the hours the resource was assigned over the immediate past interval.
  • Interval duration is the average number of days between events as determined by a review of the last two   years, or number of days since resource last failed to provide the amount of Tier 2 Synch Reserve assigned, whichever is shorter.
  • Eliminates from the penalty calculation the conversion of shortfall MW to MWh.

PJM has committed to providing generators with near real-time feedback on their performance starting in January.

Previous Coverage: OC Hears New Proposal on Synchronized Reserve Penalty; Delays Vote

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Manual Changes – MRC First Read

The Markets and Reliability Committee heard first readings on the manual changes listed below. The committee will be asked to endorse the changes — excluding those for Manual 28, which is already in effect — in November.

Manual 13: Emergency Procedures

Reason for changes: Compliance with reliability standard EOP-004-2 (Event Reporting); change to load forecasting error metrics effective Jan. 1, 2014; general clean up.

Impact: Changes to numerous sections.

Manual 13: Emergency Procedures

Reason for changes: Revisions to 2014 Day-Ahead scheduling reserve (DASR) requirements for East Kentucky Power Cooperative.

Impact: Load forecasting error (LFE) component is 2.12% (down 0.01%); forced outage rate (FOR) component is 4.29% (down 0.37%); Preliminary DASR Requirement is 6.41% (down from 6.91%).

Manual 14A: Generation and Transmission Interconnection Process

Reason for changes:  Implementation of PJM/MISO Joint Common Markets initiatives; adjust terminology in PJM cost allocation rules for new service customers to align with Tariff.

Impact:

  • Adds queue coordination rules to define times when the interconnection request information will be exchanged and studied.
  • Describes Transmission Service Request studies: Initial Study; System Impact Study (during Feasibility Study timeframe); System Impact Study (during System Impact Study timeframe).
  • Reinforces the JOA requirements to impose the applicable study criteria. Rules for reinforcements <$5 Million are modified to align with current practice of requiring the first project which loads a facility over 100% to have cost responsibility.

Manual 14B: PJM Region Transmission Planning Process

Reason for changes: M14B requires imposing historical commercial probability of proposed projects at each phase of study. Past studies identified many reinforcements which were not needed due to drop out of projects from the queue. The processing of project studies in the queue has improved in recent years, which has reduced the size of the backlog.

Impact: Shift factors used in commercial probability to earlier point in process and drop the use of the historical Feasibility Study commercial probability factor. At Feasibility Study phase, use Impact Study commercial probability factor (currently 53%); At Impact Study phase, use 100% commercial probability factor.

See Transmission Studies to Flag Upgrades Earlier

Manual 15: Cost Development Guidelines 

Reason for changes: Problem statement on cyclic peaking and starting factors, referred to Cost Development Subcommittee by the MRC.

Impact: CDS reached consensus on two changes: (1) Resource owners shall use original equipment manufacturer (OEM) values if available and (2) grandfather in OEM values for technologies no longer being built. Adds reference to extended cold start.

Manual 18: PJM Capacity Market

Reason for changes: Conform to other manual language; FERC docket #s ER12-513, ER13-535; ER13-2140; ER13-1023.

Impact: Numerous changes.

Manual 28: Operating Agreement Accounting

Reason for changes: Compliance with FERC final order on Performance Based Regulation, requiring regulating resources to be compensated with the mileage ratio multiplier in the regulation performance credit.

Impact: Implements compensation methodology detailed in PJM’s January 15, 2013 compliance filing:

  • Regulation Credits (Section 4.2) – Remove marginal benefits factor from capability and performance credit calculation. Mileage ratio will be used as the performance multiplier in the regulation performance credit.
  • Regulation Charges (Section 4.3) – Changes include specifics around the regulation obligation.
  • Changes are retroactively effective to the Performance Based Regulation implementation date, Oct. 1, 2012.

Manual 41: Managing Interchange Regional Practices / Regional Transmission and Energy Scheduling Practices

Reason for changes: Chapter 2 of the Regional Transmission and Energy Scheduling Practices document and Manual 41 cover topics related to interchange scheduling with significant overlap.

Impact: Merge the content of M41 and the Regional Practices document and retire M41. Post Regional Practices document on the Manuals page of the PJM website.

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Manual Changes Endorsed

The Markets and Reliability Committee last week endorsed the following manual changes:

Manual 3: Transmission Operations

Reason for changes: Update.

Impact: Adds language regarding approval of emergency rating changes; added applicability for individual generators greater than 20 MVA; clarified reference to voltage coordination; revised outdated references.

Manual 10: Pre-Scheduling Operations

Reason for changes: Annual review.

Impact: Minor updates for clarity; added references to forecasted planned outages and reporting outages on synchronous condensers.

Manual 14B: PJM Region Transmission Planning Process

Reason for changes: Improve the procedure for analyzing and addressing short circuits.

Impact: PJM currently analyzes short circuit cases for the current year +1 and +5. System modifications are difficult for transmission owners to implement with a one-year lead time. The annual Regional Transmission Expansion Plan will analyze short circuit base cases for the current year +2.

Manual 14D: Generator Operational Requirements

Reason for changes: Changes made at RFC request, and for consistency.

Impact: Includes changes to reactive capability testing; replaces outdated references; requires generators operating or scheduled for PJM to operate to notify PJM prior to attempting a restart following a trip or failure to start.

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Capacity Import Limit a Moving Target

PJM’s plans to limit capacity imports seem to be changing almost daily, based on reports provided to stakeholders.

Officials have said they expect to set an overall import limit of less than 11,000 MW in addition to several directional limits.

Officials told the Planning Committee Oct. 18 that they were considering five or more directional limits. (See Import Cap Likely to Settle About 9,000 MW.) But at last week’s Markets and Reliability Committee meeting, PJM staff was again referring to their original plan of three limits: North, West and South.

Stu Bresler, PJM vice president of market operations said there will “probably” be three directional limits and that the west and south limits will “probably interact.”

However many directional limits are ultimately set, their sum is expected to exceed the overall cap. But it will be the overall cap that controls.

Reliability Agreement Amendment

The proposed amendment to the Reliability Assurance Agreement (RAA) states: “PJM shall model increased power transfers from external areas into PJM to determine the transfer level at which one or more reliability criteria is violated on any monitored facilities that have an electrically significant response to such transfers, provided that PJM shall maximize transfers on other facilities not experiencing any reliability criteria violations as appropriate to increase the Capacity Import Limit. The aggregate MW quantity of transfers into PJM at the point where any increase in transfers would violate reliability criteria will establish the Capacity Import Limit.”

“The most economical bids would clear until we hit the limit,” explained Mike Kormos, PJM executive vice president, operations.

Generators with firm transmission that commit to providing capacity in future auctions and have pseudo-ties allowing PJM to control their dispatch would be exempt from the cap.

The MRC will be asked to approve the changes in November.

`Follow-on Discussion’

One issue that won’t be included in the import change is a proposal making external resources that clear subject to a must-offer requirement in subsequent auctions. Andy Ott, PJM executive vice president for markets, said that issue will be part of a “follow-on discussion.”

“This proposal is very narrow,” Ott said. The goal will be to limit PJM’s risk from imports being cut during Transmission Loading Relief procedures, a risk he said is not accounted for in PJM’s Installed Reserve Margin.

At the Oct. 18 meeting, PJM’s Mark Sims told members that the limit will be “slightly lower” than 11,000 and closer to the 8,347 MWs imported on July 16, 2013, the highest import observed in an analysis of three years of historical data.

The Planning Committee approved a problem statement on a proposed cap in response to the May Base Residual Auction, in which more than 7,400 MW of imports cleared.

PJM wants to include the new limit in February when it posts the planning parameters for the 2014 base auction. To meet that schedule, officials plan to present proposed methodology and manual language at the Planning Committee meeting Nov. 7. The MRC will be asked to vote in one of its two November meetings.

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Transmission Owners Assert Jurisdiction on Methodology Issue

Transmission owners said last week that they will address transparency concerns over their load calculations but insisted the issue be resolved by their committee rather than in the Markets and Reliability Committee.

The MRC approved a problem statement in June after industrial customers complained that two-thirds of PJM’s transmission owners have failed to file FERC-approved tariffs disclosing the methodology their electric distribution companies (EDCs) use to allocate costs to load serving entities (LSEs). (See Industrials Call for Transparency in Transmission Owner Calculations.)

At a special MRC meeting Wednesday, members agreed to delay action on the problem statement to allow a response from transmission owners. Meg Sullivan, of Duquesne Light, chair of the Transmission Owners Agreement  Administrative Committee (TOA-AC) told the meeting that the issue was under the jurisdiction of the TO panel and would be on its Nov. 6 meeting agenda.

Proper Forum

“We believe the forum to address the problem statement should be” the TOA-AC, she said. She said the TO panel would seek to “address it to everyone’s satisfaction.”

Attorney Robert Weishaar, who represents the PJM Industrial Customer Coalition, said he was willing to delay further action but not to concede that the TOs’ committee has jurisdiction over calculation of the total hourly energy obligations (THEO), peak load contributions (PLC), and network service peak loads (NSPL).

“I’m certainly willing to have the discussion with the TOs-slash EDCs,” he said, calling it a “practical step forward.

“But some aspects of the problem statement will have to come back to the MRC,” he added.

Weishaar said NSPL calculations are the transmission owners’ jurisdiction, but that other calculations are under MRC’s purview.

Equal Footing

David Scarpignato, representing retail provider Direct Energy, noted that only transmission owners have voting rights within the TOA-AC. “For everyone to have equal footing, it has to be in the stakeholder process,” he said.

But PJM’s Dave Anders, secretary of the MRC, urged a delay in further MRC action to give the TOA-AC “a couple months” to find a solution. He noted that most EDCs are represented in the TOA-AC. “There’s no reason to at least not have that discussion.”

David Pratzon, who represents generators, agreed. “Let’s not have this jurisdictional fight at this time if we don’t need it,” he said.

Weishaar said the lack of transparency undermines accountability, noting that utilities sometimes change methodologies without notice. The calculations are used to allocate energy, capacity, and transmission cost responsibility among LSEs.

Weishaar’s proposal would require Baltimore Gas & Electric, PECO Energy, PPL Electric Utilities, Dominion, Dayton, PEPCO, AEP, Duquesne Light Company, Rockland Electric, and Duke Energy to file Attachments M-1 or M-2 to the PJM OATT disclosing their methodologies. FirstEnergy, Commonwealth Edison, Public Service Electric & Gas, Atlantic City Electric and Delmarva Power & Light have already filed such disclosures, according to Weishaar.