By Christen Smith
CAMBRIDGE, Md. — Most of PJM’s recent market rule changes — including those still pending before FERC — came and went too quickly for the liking of advocate groups, though their desire for deceleration stops at an overhaul of financial transmission rights.
“Getting oversight is critical,” said Ruth Ann Price, Delaware Deputy Public Advocate, during the Public Interest & Environmental Organizations User Group’s meeting with the RTO last week. “PJM must decide with some urgency whether it wants to create a department internally [to oversee] FTRs or have this function go outside to a third party.”
Restructuring FTR rules remains a paramount stakeholder task after an independent probe identified the shortcomings in PJM’s market design and internal culture that allowed a small trading shop, GreenHat Energy, to amass the largest portfolio of FTRs in PJM history without the collateral to back it up. (See Report: ‘Naive’ PJM Underestimated GreenHat Risks.) The 890 million MWh default could wind up costing PJM more than $430 million, former CFO Suzanne Daugherty told stakeholders in January. (See PJM: FERC Order Could Boost GreenHat Default by $300M.)
“This is something that is totally out of the realm of consumers, but yet and still, they will pay the burden of this debacle,” Price said. “For PJM to continue this market, there need to be cultural changes in PJM that understand the oversight necessary.”
Price emphasized the need to fill Daughtery’s vacant CFO position and find a qualified chief risk officer — as recommended in the GreenHat report — sooner rather than later, preferably before the August capacity auction. She also encouraged PJM to expand the Independent Market Monitor’s authority to include regulation and monitoring of FTRs.
CEO Andy Ott said during his keynote address at PJM’s Annual Meeting last week that he continues working hard to implement staffing changes as quickly as possible, though finding qualified candidates to manage the RTO’s FTR market rule changes takes time.
The Consumer Advocates of PJM States advised the RTO to “follow the money” as it navigates transmission planning and the anticipated wave of new projects in the coming decades.
“We appreciate the commitment to ensuring competition on the market side,” said Mike Gahimer of the Indiana Office of Utility Consumer Counselor. “We’d like for that same focus to occur on the transmission side.”
Advocates agree that while PJM lacks jurisdiction over supplemental projects — those proposed by transmission owners and identified as not necessary for reliability, operational performance or economic criteria — the growing share of such projects also lacks federal and state oversight.
The transparency of PJM transmission planning has long been a topic of debate among stakeholders, with several expressing concern that the ballooning share of supplementals — $5.7 billion in 2018, according to CAPS — may displace the priority of baseline projects, which only totaled just over $2 billion that same year. PJM is currently in the midst of a special Planning Committee process to revise existing manual language that details the intersection of these projects. (See “RTEP Removal Language Vote Deferred, Again,” PJM MRC/MC Briefs: April 25, 2019.)
“What PJM is saying is, ‘Trust us we got this’,” Gahimer said. “I’m more of a trust-then-verify guy, and I don’t think PJM has got this.”
PJM Should Prioritize Costs, Too
Advocates want PJM to care about project costs as much as they do, said Erik Heinle of the D.C. Office of the People’s Counsel.
“PJM has an obligation to be honest and transparent about the potential costs of any initiative at the beginning and throughout the stakeholder process,” he said, noting that inaccurate modeling and a failure to recognize the interplay of markets often leaves consumers paying twice.
The rushing to file market changes — including proposals for fuel cost policy, distributed energy resources, storage and black start resources — leaves some stakeholder groups unable to analyze the true impact of the proposals and provide valuable feedback.
“Adequate stakeholder review is not just a courtesy, but ensures the impacts of changes are fully vetted and lessens the chances of design flaws,” he said.
The advocates proposed the formation of a Strategic Planning Committee to meet four or six times a year to better inform the transmission planning process and ensure that costs and market impacts are fully understood.