PJM to file proposed 5-minute dispatch, pricing changes with FERC

New York — In a rare outcome, PJM Interconnection stakeholders July 23 unanimously approved a proposal to implement short-term market rule changes to better align power price formation with generation resource dispatch, though many market participants want PJM to move ahead with a more holistic approach.

In a sector-weighted vote, PJM Markets and Reliability Committee members approved PJM's five-minute dispatch and pricing short-term proposal with no negative votes from any sector. The rule change package also passed with zero opposed and two abstentions during a PJM Members Committee meeting held directly after the MRC meeting.

The changes are intended to improve the current process under which resources in PJM may be compensated with prices that do not correspond to their dispatch instructions, resulting in pricing and dispatch misalignment. The short-term changes would impact operator actions, such as security-constrained unit commitment (SCED) frequency, inputs, and approval timing.

The proposal will be filed with the Federal Energy Regulatory Commission, and pending approval, would be effective in November, according to a PJM presentation.

Overlapping rule changes

While fully supportive of the short-term changes, there are also medium- and long-term changes that several stakeholders said they would have preferred considered in a single package. PJM's independent market monitor proposed a holistic approach that could fit with two additional market rule changes currently underway.

Specifically, PJM is also working to improve its fast-start pricing rules and the structure of its operational reserve demand curve, or ORDC.

"We were always supportive of the short-term changes but just wanted more," Adrien Ford, director of RTO and regulatory affairs at Old Dominion Electric Cooperative, said during the MRC meeting.

"These are very positive steps forward in terms of aligning dispatch and pricing and will be important in light of fast-start and reserve price formation, which all work together," Ford added.

"It appears the short-term five-minute dispatch and pricing changes are a good step toward improving market transparency, but ultimately fast-start logic and reserve price reform will have more tangible impacts on wholesale power prices and best align dispatch with price formation while minimizing operator intervention," Kieran Kemmerer, power market analyst with S&P Global Platts Analytics, said in an email.

The medium-term solution through which PJM would execute and approve one real-time SCED case for each five-minute dispatch target time has made good progress, Tim Horger, PJM's director of energy market operations, said during the MRC meeting.

PJM actually began implementing that change on June 23 and has observed positive results, Horger said. The grid operator is actively monitoring the results and considering additional tools that may be added for operators, according to the presentation.

However, there is some disagreement with regard to the potential long-term changes intended to improve PJM's dispatch algorithm, which has essentially been in place since its markets were created.

Making that change requires further investigation of impacts to operator behavior and the dispatch process, Horger said, adding "we are fully committed to doing that evaluation."

PJM needs to look at what other regional transmission organizations and/or independent system operators are doing and can come back in September with a more detailed plan, Horger said.

But multiple stakeholders and the IMM have said implementing the long-term change may not require all that much additional work.

Other RTOs, especially the Midcontinent Independent System Operator, Southwest Power Pool, California Independent System Operator and New York ISO already have the features PJM is considering, Catherine Tyler, deputy market monitor at PJM's IMM Monitoring Analytics, said.

The long-term plan appears to be "a bit of overkill," Tyler said, given that only a couple of changes are needed.

Another stakeholder suggested that PJM could get some of the other grid operators to walk through how their software works. "I'm not sure we need to build our own software to simulate those markets," the stakeholder said.