Pennsylvania PUC wants more limited reliability response from PJM

The Pennsylvania Public Utility Commission says proposed changes by PJM Interconnection go too far beyond the purpose of addressing power generator reliability during extreme weather events like last winter’s “polar vortex.”

On Dec, 12, 2014, PJM filed with the Federal Energy Regulatory Commission a significant redesign of its Reliability Pricing Model (RPM) in response to significant performance issues for generators in the PJM footprint during the 2013-2014 winter period. The Pennsylvania Public Utility Commission (PAPUC) said in a Jan. 19 filing with FERC that it largely supports PJM’s proposals to correct the performance incentive deficiencies that exist in PJM’s current tariff.

“However, the PAPUC opposes other tariff changes unrelated to the generator performance issues,” the filing added. “PJM has developed its RPM carefully over the years in an incremental fashion in response to critical deficiencies in the capacity market. In this case, the issue to be addressed is the lack of performance by a minority of generators not the fundamental operation of a pricing model that has led to relatively stable pricing, market certainty and reliable supplies. Many generators performed as required during last winter’s extreme weather conditions. However, a small, but not insignificant, number of generators did not operate consistent with operational requirements causing PJM’s system to fall short of the necessary reserves to ensure reliable service.

“The PAPUC requests that FERC focus on this key aspect of the filing (generator performance) and reject or modify the other changes to PJM’s tariff filing wherein PJM seeks to unilaterally and, without stakeholder support, alter the provisions of RPM that have developed through much deliberation by FERC, PJM and stakeholders and that contribute to the functioning of healthy wholesale markets.

“The extreme weather events of the 2014/2015 winter caused unprecedented levels of generation failures and potential reliability issues for the PJM system. On January 6-7, 2014, PJM experienced a 22% forced outage rate during an extreme cold weather event with gas supply failure, coal pile freezing and mechanical breakdowns as major contributing factors. The breakdown of forced outages by primary fuel type shows that natural-gas-fired and coal-fired generators accounted for the majority of the unavailable megawatts. PJM needed to bring on 175-200 units (50,000 MW) that had not run in a short period and during extreme cold. The speed and magnitude of the load change coupled with units’ start failures (approximately 45 percent for combustion turbines) and other issues caused by lack of maintenance of these out-of-service units were a major contributing factor to the high outage percentage. After the event, PJM worked with generation owners to further validate the outage reasons.

“Subsequently, PJM initiated a process to develop proposals to reform the capacity market within its Markets and Reliability Committee (MRC). PJM established an Enhanced Liaison Committee (ELC) within the MRC to address generator performance issues. The ELC included traditional PJM stakeholders plus the state commissions. PJM issued a summary of its operational and reliability concerns in its ‘Problem Statement on PJM Capacity Performance Definition’ on August 1, 2014 followed by its initial Capacity Performance Proposal (CPP) on August 20, 2014. After stakeholder meetings and comments, PJM released its ‘PJM Capacity Performance Updated Proposal’ on October 7, 2015. This revised proposal was issued prior to PJM’s response to action items on the initial proposal. A second set of stakeholder comments were filed October 28, 2014. The final opportunity for stakeholder input was at a PJM Board meeting on November 4, 2014 where oral presentations were permitted. PJM’s filing was made on December 12, 2014.”

The commission later added: “PJM asserts that the current RPM market design is not providing sufficient deterrents to poor performance or sufficient incentives for good performance. PJM contends that current RPM rules have not prevented a progressive reduction in the availability of generation resources in PJM. During this past winter’s peak on January 7, 2014, over 40,000 megawatts—22 percent of the generation in the PJM region—was on forced outage and unavailable, largely due to mechanical and fuel supply problems. As PJM states, unauthorized, forced outages included a broad spectrum of causes including mechanical failures and fuel freeze-up issues at older coal steam units, failure of emissions equipment, loss of natural gas supply due to pipeline interruptions, mechanical failures at combustion turbine (CT) units and even operational problems at some nuclear units.

“Because the causation factors are multi-faceted, not just cold-weather related, PJM concludes that any solution to these performance problems must address a broad spectrum of generators. Further, PJM observes that most of these issues could be addressed through investments in weatherization efforts or increased operating budgets. It is also clear that many generators continued to provide reliable service, even under these extreme cold conditions of the past winter. During the worst outage period, 78% of generation in PJM performed adequately, and enabled PJM to avoid losing service to customers. The PAPUC asserts that any permanent solution to generation performance must ensure performance by more than just the majority of generation resources – but it must ensure performance by all generation. Any solution that only incents a portion of generation resources to meet or exceed their performance commitments will not be effective in increasing reliability into the future.”

For example, the PAPUC said that PJM’s proposed modifications to its well-designed and functioning demand response (DR) markets are well beyond the scope of this issue. PJM has not established that its proposed DR market modifications are an improvement over existing DR capacity rules and have not established that its proposals will either enhance reliability or lower costs, the state commission said.

While the PAPUC said it objects to changes in market mitigation provisions, it firmly supports cost allowances for prudent reliability investments and operations in support of reliable delivery to the PJM grid. Specifically, the PAPUC supports the concept of the proposed Avoidable Fuel Availability Expenses (AFAE) category lists including such expenses or costs incurred for: firm gas pipeline transportation; (natural gas storage costs; costs of gas balancing agreements; and costs of gas park and loan services. However, requests for recovery of these costs should be net of any released capacity revenues, asset management revenues or other sales for resale revenues related to these assets for which full cost recovery is sought in BRA cost-based bids, the commission added.

PJM member states also have issues with the sweep of the proposals

The Organization of PJM States Inc. (OPSI) said in its own Jan. 19 comments to FERC: “PJM has proposed extensive and complex changes to RPM that could substantially raise prices to end-users. These proposed amendments arise following a heretofore unused and highly accelerated evaluation process. The proposal currently before the Commission was never presented to stakeholders for review and comment. As a result, sufficient data have not been provided to permit OPSI members and other stakeholders to develop adequately informed positions as to the need for, benefits to load or effectiveness in protecting reliability of, these revisions to RPM. These complex revisions require the scrutiny that can only be afforded by an evidentiary hearing.

“OPSI believes that many of PJM’s more aggressive market redesign proposals should not be considered for adoption until after the implementation of several other near-term programs this winter and the evaluation of their operation has been completed. As PJM has advised OPSI members, these near term initiatives – gas/electric system coordination, gas generating unit commitment practice changes, weatherization and testing of certain generation, targeted winter auctions and other steps – along with existing RPM incentives for new generation development, may prove sufficient to resolve current reliability and operability concerns.

“Market rule changes that impose large pricing burdens on end-users, and that present the potential of unintended results and risks for all market participants, should not be adopted if more focused and limited actions will resolve realistic reliability and operational concerns. RPM is intended to send long-term price signals to resources. Deferring action on changes to these long-term price signals is warranted until PJM can provide stakeholders proper analyses of the effects of such changes and a sufficient time to fully evaluate those analyses to consider the implications on state retail market designs, business plans and other issues.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.