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Market monitor assails PJM effort to excuse capacity shortfalls

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Market monitor assails PJM effort to excuse capacity shortfalls

The 's independentmarket monitor wants FERC to reject the RTO's proposal to excuse capacity performanceresources for certain capacity shortfalls during emergencies. But a group representingpower generators and other suppliers supported the request, saying it would incentivizeflexible units to follow PJM dispatch signals before and during emergencies.

PJM filedthe proposed interim market rule (ER16-1336) with FERC on April 1, which would coverthe 2016-2017 delivery year beginning June 1. Under the proposal, PJM would excuse"dispatchable" capacity performance resources — those running at or abovetheir economic minimum — from shortfalls that occur while units ramp up to maximumoutput during emergency situations.

To determinethat time frame, the PJM would direct resource sellers to calculate their averagehistorical actual ramp rate over at least a three-month period, a figure that PJMand its independent market monitor would verify. For example, PJM said that if a100-MW resource with a 1-MW-per-minute ramp rate is asked to ramp up to full capacitywhile running at only 85 MW, that resource would avoid penalties for the first 15minutes of the performance assessment hour.

"Approvalof this filing will support efficient dispatch by ensuring capacity market sellersnot run contrary to PJM dispatch instructions in an attempt to avoid potential capacityperformance non-performance charges," the grid operator said.

PJM emphasized that the proposal is only an interim solutionto avoid reliability issues in the coming delivery year. The complexity of creatinga ramp rate as a parameter limited schedule value under PJM's operating agreementwould mean the RTO could not complete that task by June 1, the grid operator said.The RTO asked that the tariff revisions be allowed to take effect May 31.

The PJMPower Providers Group backed the proposal, saying it was "necessary" toensure that flexible units are incentivized to run as needed during capacity performanceevents without fear of penalties. The group also pointed to stakeholder approvalof the proposed ramp rate modifications. As of March 31, a 77% supermajority ofPJM's markets and reliability committee voted in favor of the modifications.

But PJM's independent market monitor, Monitoring Analytics, toldFERC that the filing is a "collateral attack on the clear directive" ofthe capacity performance order. "The primary consequence of the interim proposalwould be to create a new excuse for nonperformance in a market designed based onthe core principle of no excuses," the market monitor said. It also would "bluntthe incentives for providing energy and reserves during the hours when they aremost needed."

The market monitor dismissed PJM's assertion that excessive self-schedulingby capacity resources during high load periods would cause system-control issues.In fact, the watchdog countered, nonperformance charges increase the chance thatresource owners will supply adequate generation during high-demand conditions andavoid critical capacity shortages.

PJM's proposal is also "discriminatory" because resourcesthat are online would receive preferential treatment to offline quick-start generation,the market monitor asserted. A unit that is online but needs time to ramp up tofull capacity would be excused from nonperformance charges, while capacity thatcan more quickly ramp up but needs time to turn on would be penalized. The marketmonitor further said the interim rule would "disincent" flexibility becauseunits that have historically been able to ramp up more quickly would be held toa higher standard than those with a slower ramp rate.

Should FERC approve PJM's request, the market monitor asked thecommission to set a fixed sunset date for the tariff. "[I]f self-schedulingand system control is an operational problem that needs to be addressed, PJM shouldbe ordered to develop a long-term solution that includes redefining the triggersfor a performance assessment hour based on an analytical metric," the monitorsaid.