Quick-Fix Transmission Upgrades OK’d

Constraints that can be quickly and cheaply resolved would be included in the Regional Transmission Expansion Plan (RTEP) under a proposal the MRC endorsed Thursday after a lengthy discussion. The proposal was approved over the objections of five members.

The new rules require PJM staff to identify — before posting the planning parameters for each Base Residual Auction — Locational Deliverability Areas in which the Capacity Emergency Transfer Limit is less than 1.15 times the Capacity Emergency Transfer Objective.

Upgrades that raise the ratio above 1.15 would be added to the RTEP if they cost less than $5 million and can be completed within 36 months or prior to June 1 of the Delivery Year. Projects that duplicate upgrades whose cost is already assigned to an interconnection customer would be excluded.

Roy Shanker, representing NextEra and LS Power, said the proposal could result in PJM spending millions on upgrades that produced inconsequential improvements to the system. Shanker said the 1.15 trigger could result in spending to relieve theoretical constraints that don’t actually result in price separation in the auction.

“Where else do we allow spending of $5 million with no evaluation of benefits, the potential for zero benefits, and guaranteed returns to [transmission owners]?” Shanker asked in a presentation analyzing the change.

Marji Philips, of Hess, said Shanker had identified a flaw in the proposal. “I don’t want to pay for something if there’s no benefit.” Philips later voted in favor of the change, however.

Walter Hall, of the Maryland Public Service Commission, said the issue should be sent to the Capacity Senior Task Force for further debate.

Others were not persuaded by Shanker’s argument. “We did not find it compelling and we don’t agree with the math,” said Ed Tatum, of Old Dominion Electric Cooperative.

Bill Schofield, representing the New Jersey Public Power Coalition, noted the volatility of CETL calculations. “We understand that the upgrade might have no immediate impact. But the probability is that it would provide value over its life,” he said. “We weighed the risk… We judged that this is a valid way to save load — consumers — a significant amount of dollars.”

Susan Bruce, representing the PJM industrial Customer Coalition, agreed with Schofield. “We think that the benefit certainly outweighs the cost.”

“This isn’t to block transmission from getting built” but to ensure it’s needed, Shanker responded. He suggested PJM first run the auction and if the results showed a constraint, it re-run the auction assuming a transmission upgrade.

Jason Barker, of Exelon, said his company was “agnostic” until seeing Shanker’s presentation. He suggested PJM conduct a risk-adjusted analysis before approving such upgrades.

PJM officials said those suggestions were not workable.

“We can’t do a cost benefit analysis,” said PJM Executive Vice President for Operations Mike Kormos. “That’s the problem.”

PJM Executive Vice President for Markets Andy Ott said adding the two-step process would extend the auction by at least a week. “It’s just the nature of the complexity of the auction.”

“$5 million is a very small number. [Shanker’s proposal is] so far from practical that we said, `Thanks for your comment. Let’s move on.’”

August 27, 2013

Investors Plan MD Plant, Acquire PA Project

Panda Power Funds, a Texas-based private equity fund, last week announced two big investments in PJM, proposing a 859 MW natural gas-fired power plant in southern Maryland and purchasing rights to a planned 829 MW natural gas generator in rural northern Pennsylvania.

Planned Liberty Power Plant (Source: Panda Power)

The fund announced Aug. 22 that it had completed the acquisition and financing of Moxie Energy’s planned Liberty combined-cycle generating station in Bradford County, Pa. The fund said it is the first new generator developed to take advantage of its proximity to the Marcellus Shale gas formation. Construction will begin immediately, and commercial operations are scheduled to begin by early 2016, the company said.

The announcement came a day after the fund announced plans for the 859 MW Mattawoman generator in Prince George’s County, Md., a suburb of Washington, D.C.

Founded in 2010, the fund has invested in three combined-cycle power plants currently under construction in Texas, and a 20 MW photovoltaic solar farm in Pilesgrove Township, N.J., which was completed in 2011.

Todd W. Carter, president and senior partner, said the Liberty project was one of several opportunities the fund considered in PJM. The Liberty plant will use Siemens’ H-class gas turbines, which claim operating efficiencies of 60% and will be cooled by air rather than water. Panda Power will be the majority owner of the project with Moxie Energy retaining a minority share.

Drawing of Planned Mattawoman Plant (Source: Panda Power)

The Mattawoman plant will use recycled municipal waste water for cooling. Pending approval of the Maryland Public Service Commission, the fund hopes to begin construction by early 2015 with completion by mid-2017.

More: Panda Power Funds, The Washington Post

August 27, 2013

Monitor’s Mid-Year Report: Prices Up, Coal Gains on Gas

Energy prices and coal generation rebounded in the first half of 2013 as natural gas costs increased, PJM’s Market Monitor reported in its mid-year report.

The load-weighted average LMP was $37.96 per MWh, up nearly 22% from the first half of 2012 as natural gas in eastern PJM briefly spiked at more than $6/MMBtu.

Average Day-Ahead LMP 2008-2013 (Source: Monitoring Analytics LLC) — (Source: Monitoring Analytics LLC)

While LMPs were up compared with 2012, and also higher than 2009, they remained lower than 2008, 2010 or 2011.

Fuel Mix

Coal prices were flat in the first half of the year, leading to an 11% increase in generation by coal-fired units and an 18% drop in generation from gas units. Coal units provided 44% of total generation with nuclear units responsible for 35% and gas units almost 16%.

Coal represented 58% of real-time marginal resources in the first half of the year, a slight drop from 2012, while natural gas represented almost one-third of marginal resources, up from 30% in the first six months of 2012. Wind, which was not on the margin in the first two quarters of 2012, represented almost 6% of marginal resources in 2013.

Load

Average real-time load increased by about 2% from the first six months of 2012 while average day-ahead load, increased by almost 12%, driven by the continued growth of up-to congestion transactions.

Hourly Avg. Up to Congestion Bids (Source: Monitoring Analytics LLC) — (Source: Monitoring Analytics LLC)

Virtual bids dropped by one-quarter year-over-year. Physical companies — utilities and customers which primarily take physical positions in PJM markets — increased their share to 75.5%, up from less than 64% in 2012.

Market Competiveness

The monitor’s evaluation of market fundamentals was unchanged from the 2012 report, with only the regulation market results not judged competitive.

The monitor judged the regulation market results “indeterminate.” It found the market structure not competitive because one or more pivotal suppliers failed the three pivotal supplier test in 90% of the hours for the first six months. However, participant behavior was considered competitive due to PJM rules that require competitive offers when the three pivotal supplier test is failed.

PJM made several changes to the regulation market in 2012, including new optimization methods.

“It is too early to reach a definitive conclusion about performance under the new market design because important parts of the design are inefficient and because there is not yet enough information on performance,” the monitor said.

In its response to the 2012 report, released in May, PJM took issue with the monitor’s criticism of the market.

“PJM believes there is ample evidence of competitive market behavior in the regulation market and the IMM conclusion is based on the IMM’s disagreement with opportunity cost calculation rules that were endorsed by members and approved by the FERC.”

Recommendations

In addition to summarizing changes in prices and other metrics, the monitor’s new report called for increased transparency and added several new recommendations on the energy market, operating reserves, demand response, ancillary services and Financial Transmission Rights. (See Market Monitor Recommendations)

The monitor called for additional transparency regarding constraints affecting energy prices, and on unit retirements, “in order to permit new entrants to address reliability issues.”

It also said the market needs better information about the reasons for operating reserve charges. “Data on the units receiving operating reserve credits and the reasons for those credits should be made publicly available to permit better understanding of operating reserve levels and to facilitate competition for providing the same services,” the monitor said.

The monitor also called for action to address what it called the failure of capacity market prices to reflect fundamentals, including “better [Locational Deliverability Definitions], the effectiveness of the transmission.

August 27, 2013

PJM Small Hydro Potential: 1.5 GW

Who says Congress can’t pass energy legislation? Two bills approved with bipartisan support and signed by President Obama this month may open PJM to new generation from a renewable energy source many thought was fully exploited: hydropower.

Non Powered Dams w/Potential Capacity Greater than 1 MW (Source: DOE) — (Source: US Department of Energy)

The legislation streamlines regulations on small hydropower sites, which advocates say could unlock 12 GW of capacity at existing, non-powered, dams — about 1.5 GW of it in PJM.

A 2012 Department of Energy report identified the powering of non-powered dams as low-hanging fruit that could increase current U.S. hydropower capacity — 2,500 dams generating 78 GW — by 15%.

The report identified 80,000 non-powered dams (NPDs) including canal locks and those used to provide water supplies. The top 100 sites could add 8 GW of capacity with the top 10 facilities responsible for 3 GW.

PJM has nearly 150 non-powered dams with potential of at least 1 MW. The top 10 prospects total nearly 500 MW, one-third of PJM’s potential; seven of the top 10 are on the Ohio and Allegheny Rivers in Pennsylvania (see chart below).

Top Non-Powered Dams in PJM (Source: DOE) — (Source: US Department of Energy)

“Many of the monetary costs and environmental impacts of dam construction have already been incurred at NPDs, so adding power to the existing dam structure can often be achieved at lower cost, with less risk, and in a shorter timeframe than development requiring new dam construction,” said the report, done for DOE by the Oak Ridge National Laboratory.

The report did not consider the economic feasibility of developing each site, but added, “The abundance, cost, and environmental favorability of NPDs, combined with the reliability and predictability of hydropower, make these dams a highly attractive source for expanding the nation’s renewable energy supply.”

Two bills signed by President Obama Aug. 9 should make it easier to develop the potential of these sites.

The Hydropower Regulatory Efficiency Act (H.R. 267), amends the Public Utility Regulatory Policies Act of 1978 (PURPA) to exempt dams up to 10 MW from the licensing requirements of the Federal Energy Regulatory Commission (up from 5 MW). It also amends the Federal Power Act to relax regulations on conduit hydropower facilities — manmade water conveyances used for agricultural, municipal, or industrial consumption — of up to 40 MW.

Also under the law, DOE will study ways that existing pumped storage facilities can be upgraded to support intermittent generators and enhance grid reliability.

The second bill, the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act (H.R. 678), authorizes the U.S. Bureau of Reclamation to develop small hydropower projects at existing canals, pipelines and other manmade waterways.

August 27, 2013

Company Briefs

Duke Energy Carolinas reached a settlement with stakeholders on a revised energy efficiency plan that will add programs for multifamily housing and commercial customers.

The agreement with the Environmental Defense Fund and the North Carolina Utilities Commission’s consumer advocates includes a $400,000 bonus if the company increases energy savings by more than 1% in any year.

Under the old program, Duke recovered the costs of the energy savings program as though they were an investment in a power plant. The new plan will use a shared-savings mechanism similar to that used by Dominion North Carolina Power and Duke Energy Progress.

The new offerings will be available in January if the commission, which held a hearing on the proposal Aug. 19, approves.

More: The Charlotte Observer, Charlotte Business Journal

Duke Energy Purchases San Francisco Solar Plant

Duke Energy Renewables has acquired the 4.5 MW Sunset Reservoir Solar Power Project from developer Recurrent Energy. The system’s almost 24,000 solar panels, mounted above the Sunset Reservoir, provides power for municipal facilities through a 25-year power purchase agreement with the San Francisco Public Utilities Commission (SFPUC).

More: Renewable Energy Focus

NRC Meets with Duke on Nuclear Plant Incident

The U.S. Nuclear Regulatory Commission met with Duke Energy Aug. 19 to discuss an October 2012 incident in which the failure of radiator fan belts caused a shutdown of the Robinson nuclear plant’s shutdown diesel generator.

An NRC spokesman said the poorly maintained fan belts could have meant the generator was not available during a loss of offsite power at the plant in Hartsville, S.C. The agency said it will announce any penalties over the incident at a later time.

More: Associated Press

Damage Suit Reinstated vs. NRG Coal Plant

NRG Energy Inc. must defend a lawsuit claiming that ash and contaminants from its coal-fired power plant in Springdale, Pa., damaged nearby properties, an appeals court ruled. The U.S. Appeals Court in Philadelphia reversed a lower-court decision dismissing the suit, rejecting NRG’s claims that the federal Clean Air Act pre-empts state law claims by property owners.

The residents claim that odors produced by the plant, 18 miles northeast of Pittsburgh, made them “prisoners in their own homes” while ash and unburned byproducts settled on their properties.

More: Bloomberg

Covanta Acquires NJ Waste to Energy Plant

Covanta Waste to Energy Facility in Camden, NJ (Source: Covanta Energy) — (Source: Covanta Energy)

Covanta Holding Corp. announced Aug. 19 it has purchased a 21 MW waste to energy plant in Camden, N.J. from a subsidiary of Foster Wheeler AG. The acquisition increased Covanta’s holdings in PJM to 15 generators totaling about 569 MW.

More: Covanta Holding Corp.

August 27, 2013November 2, 2023

State Briefs

ICC OKs Ameren Transmission Line

The Illinois Commerce Commission approved Ameren Transmission’s proposed $1.1 billion 345 kV transmission line across central Illinois.

The 380-mile Illinois Rivers line will run from Quincy to Terre Haute, Ind., with a branch line running north to Ipava. Construction is expected to begin by April 2015 and be completed in 2019.

The commission denied permission to build several new or expanded substations, saying Ameren had failed to prove the need for the facilities.

More: The News-Gazette

Village Officials Urge Rerouting of ComEd Transmission Project

Burlington, Ill., officials urged citizens to oppose Commonwealth Edison’s Prairie Gateway, a proposed 57-mile 345 kV line between the Byron nuclear plant and the Wayne, Ill., substation.

The Burlington village engineer provided officials and residents a briefing on the proposed line last week. “This town needs to make some noise…and encourage ComEd to go around this village,” said Burlington Trustee Mary Kay Wlezen.

Hundreds of people recently attended ComEd open houses on the project in South Elgin and DeKalb. The company is expected to file a request for a certificate of need with the Illinois Commerce Commission by the end of the year.

More: Elgin Courier News, ComEd

NEW JERSEY

Coal Plant Conversion Hinges on Pinelands Pipeline

Plans to convert a 447 MW coal- and oil-fired generator to natural gas hinge on regulators’ approval of a 22-mile gas pipeline through the New Jersey Pinelands. The proposed pipeline, which would run from Millville to Rockland Capital’s BL England electric generation facility near Atlantic City, has won approvals from the U.S. Army Corps of Engineers, the state Department of Environmental Protection and the state Board of Public Utilities.

Its final hurdle is the New Jersey Pinelands Commission, which will consider the proposal at its meeting tomorrow. Opponents say they fear the $90 million pipeline will open the protected region to additional infrastructure development.

More: CBS Philly

OHIO

Ohio Regulator, Foe of Coal Industry, says Gov. Forced Resignation

Environmental groups called on Gov. John Kasich last week to allow a top environmental regulator to keep his job. The Ohio Sierra Club, Ohio Environmental Council and other groups say George Elmaraghy should not have to resign from the Ohio Environmental Protection Agency, where he has served for 39 years.

Elmaraghy, who has headed the agency’s surface-water division since 2005, said that Kasich asked him to resign because of disputes with the coal industry. He said his last day is Sept. 13.

More: The Columbus Dispatch

PENNSYLVANIA

PA, Allegheny County Weigh Drilling in Forests, under Parkland

Opponents of gas drilling delivered more than 12,000 signatures to Pennsylvania Gov. Tom Corbett last week calling for public hearings on a proposal to permit gas exploration in Loyalsock State Forest, where Anadarko Petroleum Corp. and another drilling company own the mineral rights to about 19,000 acres.

More: Williamsport Sun-Gazette

Separately, Allegheny County (Pa.) Council is considering whether to allow gas drilling under county parkland. County officials are weighing an offer to extract natural gas under a county park from wellheads outside the park’s borders. The county could receive $40 million to $96 million under the proposal, the Tribune-Review reported. Opponents say the potential revenue is not worth the risk of polluting the parks.

More: Pittsburgh Tribune-Review

PUC Considers Fines for Electric Retailers

The Pennsylvania Public Utility Commission proposed penalties against two retail electric marketers accused of switching customers’ electricity suppliers without their consent.

IDT Energy, which markets power statewide, will pay a $39,000 fine under a proposed settlement that followed a PUC investigation into 21 consumer complaints against one of the company’s independent sales agents. AP Gas & Electric, which sells in FirstEnergy’s territory will pay $43,200 to settle allegations that it engaged in slamming and violated “Do Not Call” rules.

More: The Morning Call, Fierce Energy

Peco to Fast-Track Smart Meter Installations

The Pennsylvania Public Utility Commission approved Peco’s plan to install smart meters for all 1.6 million customers by 2014, five years earlier than originally planned. The plan will cost $282 million but will save $58 million by eliminating the need to maintain two different meter systems until 2019, Peco said.

More: The Philadelphia Inquirer

Groups ask Court to Stop Delaware Water Gap Power Line

Environmental groups last week asked a federal court judge to block PPL Electric Utilities Corp. from starting work on a transmission line through Delaware Water Gap National Recreation Area. The groups asked for an injunction to prevent construction until a lawsuit they filed in December is resolved.

The project is part of the Susquehanna-Roseland transmission line, a 145-mile span being built by PPL and Public Service Electric and Gas between PPL’s Susquehanna nuclear power plant and PSEG’s Roseland substation near Newark, N.J. PPL plans to begin construction in early September on the 4.3-mile section of the line that runs through the park.

More: The Morning Call

VIRGINIA

VA Hearing Examiner Favors James River Transmission Line

A State Corporation Commission hearing examiner recommended that the panel approve Dominion Virginia Power’s proposed 500 kV line over the James River. The examiner concluded the proposed line from the Surry nuclear power plant to Skiffes Creek is the most cost effective option for correcting reliability violations that will begin to occur in 2015 due to the retirement of Dominion’s Yorktown coal-fired generating plant.

The line is opposed by a number of companies and government officials, who contend it would destroy views and harm tourism in the Williamsburg historic region. James City County had asked to move the line downriver or bury it under the river.

More: The Virginia Gazette, Virginia State Corporation Commission

August 27, 2013

FirstEnergy Issues Coal Plant Layoff Notices as PJM Seeks Delay

FirstEnergy Corp. has begun sending layoff notices to workers at two Southwestern Pennsylvania coal-fired generating plants even as PJM notified the company it won’t complete transmission upgrades in time for the plants’ scheduled Oct. 9 shutdowns.

Mitchell Power Plant (Source: FirstEnergy)

FirstEnergy expects to lay off about 380 workers as a result of the closing the 370 MW Mitchell Power Station and 1,710 MW Hatfield’s Ferry Power Station.

However, PJM asked the company in early August to postpone the shutdown, saying it needed more time to complete transmission upgrades needed to maintain reliability in the plants’ absence.

“We are reviewing their request and will be responding to it,” First Energy spokeswoman Stephanie Thornton told RTO Insider last week. “That’s all I can say at this point.”

PJM’s Tariff requires generators to provide at least 90 days’ notice of plant closings to allow the RTO time to evaluate reliability impacts.

Generators that delay shutdowns for reliability reasons are entitled to compensation to recover operating costs. But the Tariff does not give PJM the power to block a plant shutdown.

PJM spokeswoman Paula DuPont-Kidd said PJM will provide details on the upgrades needed when it completes its review.

Hatfield's Ferry Power Plant (Source: FirstEnergy) — Hatfield’s Ferry Power Plant (Source: FirstEnergy)

FirstEnergy President and CEO Anthony Alexander told analysts on an Aug. 6 earnings call that neither plant cleared the last PJM capacity auction and that some of the individual units hadn’t cleared the auctions for several years. Alexander said the plant closings, which were hastened by environmental regulations, are part of a company-wide cost-cutting plan, which includes an additional 250 layoffs and reductions in medical and other benefits.

FirstEnergy said the two plants represented 10% of its generating capacity but about 30% of its cost to comply with the EPA’s mercury and air toxics standards (MATS). The closure will reduce FirstEnergy’s MATS compliance costs to $650 million from $925 million.

PJM asked FirstEnergy last year to continue operating three Ohio coal-fired power plants slated for closure, the Ashtabula, Lake Shore and Eastlake plants. The company agreed to keep those plants running until early 2015 under “reliability must-run” rules while it installs new transmission lines to maintain reliability.

August 27, 2013

Settlement on FE Coal Plant Still a Bad Deal: Consumer Group

FirstEnergy Corp. reached a settlement last week in a controversial bid to shift a coal-fired generator from its unregulated subsidiary to regulated utility Monongahela Power, but a consumer group says the reduced price is still a bad deal for ratepayers.

Harrison Power Plant (Source: FirstEnergy)

Under the settlement, Mon Power ratepayers would pay Allegheny Energy Supply Company about $800 million for the 80% of the 1,984 MW Harrison plant it doesn’t already own, a reduction from AE’s original asking price of $1.1 billion. The revised deal was signed by the staff of the West Virginia Public Service Commission, the Consumer Advocate Division, the West Virginia Energy Users Group and several trade unions.

FirstEnergy said the deal will provide rate stability by shielding Mon Power customers from “unpredictable spot market prices.” Residential customers would receive a 1.5% rate cut, the company said.

But the West Virginia Citizen Action Group filed a challenge to the settlement Friday, saying the purchase price is still far more than the $554 million value that Allegheny Energy assigned to Harrison before the company’s acquisition by FE in 2011. The acquisition also would leave Mon Power dependent on Harrison and a second coal generator — the 1,107 MW Fort Martin station, which was built five years before Harrison — for 90% of its power.

“West Virginia rate payers will be stuck with obsolete, highly expensive coal-fired electricity long after the market has moved on, thereby locking an already burdened industrial base into the least competitive fuel source on the planet,” CAG’s attorney wrote. The group said it would be cheaper and less risky for ratepayers to purchase power from the PJM market. (See: Natural Gas Group Seeks Voice in West Virginia Coal Plant Acquisition)

On July 31, Virginia regulators cited a lack of fuel diversity for rejecting AEP’s request to transfer a coal-fired plant from an unregulated subsidiary to its Appalachian Power utility.

Byron Harris, director of the West Virginia state Consumer Advocate, acknowledged that the FirstEnergy settlement did not give his office all that it sought. “Any settlement is by its nature a compromise,” he told The State Journal. “There are what we believe are benefits in the settlement.”

The West Virginia commission yesterday ordered parties in the case to agree by Thursday on a hearing date to review the settlement.

More: StopPATH WV, Daily Mail

August 27, 2013

PJM MRC Preview

Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability Committee Thursday. (There is no Members Committee meeting this month.) 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 Tuesday’s newsletter for a full report.

2. PJM Manuals (9:10-9:25)

A. Manual 28: Operating Agreement Accounting

Reason for change: Incorporating changes to lost opportunity cost compensation as approved by FERC.

Impacts:

Changes sections 5.2.6 and 5.2.8 (Operating Reserve & Reactive Services Lost Opportunity Cost Credits) to limit lost opportunity cost compensation to the lesser of a unit’s economic maximum or maximum facility output as approved in FERC Docket ER13-1200.
Section 7.2 (Shortage Pricing) amended to incorporate calculation details for non-synchronized reserve market lost opportunity costs.
Modifies section 5.3 (Operating Reserve) to correct errors and provide clarifications on exempting deviations during shortage conditions and revisions for associating interfaces to the East or West BOR regions.
Modifies sections: 5.2.3 to incorporate details of Lost Opportunity Cost Credit for Synchronous Condensing; 5.2.6 (Wind Lost Opportunity Cost) to align language with Tariff; 17.3 (Allocation of Annual and Monthly FTR Auction Revenues) to correct section reference.

PJM contact: Stan Williams

B. Manual 14B: PJM Region Transmission Planning Process

Reason for changes: Updates to reflect changes from FERC Order 1000, switch to two-year planning cycle and revised benefit/cost test for Market Efficiency projects.

Impact:

Separates Reliability and Market Efficiency into subsections
Adds a new section (2.1.2) to explain two-year planning cycle on Market Efficiency projects.
Changes to reflect Order 1000.
Changes energy market benefit calculation component of benefit/cost ratio for Market Efficiency projects eligible for regional cost allocation. The change in total energy production cost and change in load energy payments (previously weighted .70/.30) will be equally weighted.

PJM contact: Tim Horger

3. CETL Stability– Easily Resolved Constraints (9:25-9:45)

Constraints that can be quickly and cheaply resolved would be included in the Regional Transmission Expansion Plan (RTEP) under a proposal MRC will be asked to endorse.

Impact: Before posting the planning parameters for each Base Residual Auction, PJM staff would be required to identify Locational Deliverability Areas in which the Capacity Emergency Transfer Limit is less than 1.15 times the Capacity Emergency Transfer Objective. Upgrades that raise the ratio above 115% would be added to the RTEP if they:

Cost less than $5 million;
Can be completed within 36 months or prior to June 1 of the Delivery Year; and
Does not duplicate customer-funded upgrades already in the transmission queue (e.g., one whose cost is assigned to an interconnection customer).

4. Parameter limited schedules (pls) revisions (9:45-10:00)

PJM will add new processes for generators seeking exemptions from operating parameters under changes endorsed by the Market Implementation Committee Aug. 7.

Reason for change: PJM’s generation parameters set defaults for different types and sizes of generators. The parameters cover minimum run and down times, maximum daily and weekly starts and turn down ratios (Eco Max/Eco Min). They were initiated in 2008 to ensure lower make whole payments for generators whose entire offers were not covered by Locational Marginal Pricing revenues.

Impact: The proposed change would create three types of exemptions:

Temporary Exception: A one-time exception of 30 days or less.
Period Exception: An exception lasting for at least 31 days but no more than one year during the 12 months between June 1 and May 31.
Persistent Exception: An exception lasting for at least one year.

The changes will require revisions to Attachment K of the OATT, Schedule 1 of the Operating Agreement and section 2.3.4 of Manual 11: Energy & Ancillary Services Market Operations.

Assuming FERC approval, the changes will be effective Oct. 1.

PJM contact: Jacqui Hugee

5. Stakeholder Process on Triennial CONE Review (10:00-10:15)

MRC members will be asked to consider changes to the Cost of New Entry (CONE) triennial review process. CONE values are used in PJM’s Reliability Price Model (RPM) to obtain capacity resources.

Reason for problem statement: PJM and members agreed to explore changes in the review process in a settlement approved by the Federal Energy Regulatory Commission in January (Docket No. ER12-513).

Impact of problem statement: The inquiry will assess the use of the Handy-Whitman Index of public utility construction costs for adjusting CONE and other potential changes.

PJM is required to file Tariff changes with FERC in time for the 2014 triennial review or a status report if stakeholders are unable to reach consensus on changes.

PJM contact: Paul Sotkiewicz

August 27, 2013

Market Monitor’s Recommendations

Below are the new recommendations included in the Market Monitor’s State of the Market report for the first half of 2013.

HIGH PRIORITY

Addresses a market design issue that creates significant market inefficiencies and/or long lasting negative market effects.

Operating Reserve — Reexamine allocation of operating reserve charges to participants to ensure payment by all whose market actions result in the incurrence of such charges:
- Eliminate the use of internal bilateral transactions (IBTs) in the calculation of deviations used to allocate balancing operating reserve charges.
- Reallocate the operating reserve credits paid to units supporting the Con Edison – PSEG wheeling contracts.
FTRs — Fix the Financial Transmission Rights overallocation issue:
- Eliminate cross geographic subsidies.
- Improve transmission outage modeling in the FTR auction models.
- Reduce FTR sales on paths with persistent underfunding including clear rules for what defines persistent underfunding and how the reduction will be applied.

MEDIUM PRIORITY

Addresses a market design issue that creates intermediate market inefficiencies and/or near term negative market effects.

Ancillary Services — Remove the distinction between Tier 1 and Tier 2 synchronized reserve, remove the ability to offer MW of synchronized reserve capability, remove the ability to make reserve unavailable, and automatically dispatch primary reserve co-optimized with energy. In the interim, enforce a must-offer requirement for synchronized reserve based on physical capability and increase penalties for non-compliance during spinning events.

LOW PRIORITY

Addresses a market design issue that creates smaller market inefficiencies and/or more limited market effects.

Energy Market — When generator is offline, treat as load (not negative generation) the energy drawn from PJM by those generators for calculating average hourly real-time and day-ahead load.
Demand Response — Load management resources whose load drop method is designated as “Other” should explicitly record the method of load drop.