Direct Energy Protests New FERC Capacity Market Rules
December 09,2016
Direct Energy, in a joint filing with Old Dominion Electric Cooperative, filed a protest with FERC asserting that PJM’s recently filed modifications to its capacity market resource aggregation rules do not go far enough to recognize the capacity benefits of seasonal resources, such as demand response, renewables and energy storage.
Similar to relief requested by Direct Energy from the PJM board (which was denied), the protest asks that FERC reject PJM’s proposed changes, and instead extend the Base Capacity product, which was scheduled for elimination in the upcoming capacity auction in the spring of 2017, for an additional delivery year, including an enhanced penalty structure.
Additionally, the protest requests that the Commission open a 206 proceeding to investigate the treatment of seasonal resources in PJM’s capacity market, and specifically order PJM to develop rules to accommodate the participation of Seasonal Resources in its capacity construct.
PJM’s filing is in response to objections from seasonal resource owners and load interests that are concerned with the expiration of the Base Capacity product, a proven capacity option that has allowed Seasonal Resources to offer capacity commitments to PJM during the summer period where the capacity value of such resources, and PJM’s load, is at its peak.
As described by Direct Energy, PJM proposes to enhance resource aggregation rules that allow such summer capacity period resources to “pair” with winter capacity period resources in order to continue participating in the capacity market. The Direct Energy and Old Dominion protest states that the aggregation enhancements do not allow for the meaningful participation of Seasonal Resources, may unduly limit their ability to participate in PJM’s markets, may strand many of those environmentally friendlier assets, and unnecessarily raise costs to consumers. The protest also finds several flaws with PJM’s resource aggregation enhancements that would result in the potential for over procurement of capacity resources in constrained areas of the RTO, erroneously assume resources must be fully available in every day of the delivery year to have capacity value, reduce resource diversity and operational flexibility in PJM, and preclude the participation of certain resource types for the purpose of protecting traditional resource types.
Direct Energy and Old Dominion also highlight that the rule changes proposed by PJM do not go far enough to facilitate the participation of Seasonal Resources, and are therefore inconsistent with recent FERC precedent. In particular, the protest points to a recent Notice of Proposed Ruling (“NOPR”) on Electric Storage Participation in Markets Operated by Regional Transmission System Operators and Independent System Operators (RM16-23), which requires RTOs and ISOs to accommodate resources with “particular physical and/or operational characteristics”, and proposes that RTOs modify their rules to allow these types of resources to participate in energy, ancillary and capacity markets.