PJM has filed comments opposing FERC's proposal to require that each regional transmission organization (RTO) and independent system operator (ISO) that currently allocates the costs of real-time uplift due to deviations shall allocate such real-time uplift costs, "only to those market participants whose transactions are reasonably expected to have caused the real-time uplift costs."

See this story for more details on FERC's proposal

"In PJM’s view, the Commission’s proposed rules do not actually achieve the goal of allocating uplift based on cost causation because such a goal is unachievable at the level of granularity proposed by the Commission. In this sense, and as explained below, the premise of the NOPR that uplift can be allocated to deviations that cause uplift and that 'helpful' versus 'harmful' actions can be easily identified and incentivized through cost allocation does not recognize the intertwined and complex nature of uplift, which makes the identification of the specific cause of costs elusive and ultimately impossible," PJM said in its comments

In particular, PJM said that the NOPR incorrectly assumes that the allocation of uplift can be used to influence specific market behavior

"From an RTO/ISO perspective, there is no way to determine with certainty which specific deviations generate uplift before or after the market has cleared.8 Because this cannot be determined with any degree of certainty, constructing an allocation methodology that discourages such transactions is impossible. In order to achieve the Commission’s goals, a market participant would need to know which types of transactions will cause uplift at the time they transact in the market. However, from a market participant’s perspective, uplift is random. Neither they, nor the RTO/ISO, can determine the amount of uplift they will be allocated until after the market has cleared and the profits and losses of all market transactions are calculated. Nor can the market participant or RTO/ISO determine whether a specific transaction contributed to the creation of uplift given the complexity of the market. Accordingly, by the time a market participant is allocated uplift, it is too late for it to take action that would have reduced uplift," PJM said

"[I]t is difficult for PJM to envision how the Commission’s proposed uplift allocation, or any allocation methodology, can achieve the Commission’s intended goals of apportioning uplift based on cost-causation principles or induce market participants to behave in a manner that would result in a lower uplift allocation to them," PJM said

PJM further said that changing the determination of uplift allocation from daily to hourly will increase volatility, but will not provide actionable incentives.

PJM noted that in the NOPR, the Commission proposed to split uplift costs into at least two categories: (1) a system-wide capacity category and (2) a congestion management category. The NOPR states that the Commission’s intention is to allocate the costs to the market participant that caused the uplift. "However, in order to achieve Commission’s intended goal, it would be necessary to clearly define why a specific transaction is collecting uplift (i.e. capacity or transmission) and then determine which transaction caused that uplift," PJM noted

"It is PJM’s opinion separation of uplift into these two categories would be an arbitrary determination because all market transactions ultimately impact how PJM maintains power balance and controls transmission constraints," PJM said

"PJM believes the Commission’s proposed uplift allocation methodology will add significant complexity and arbitrariness while moving no closer to the Commission’s intended goal of allocating uplift based on cost causation principles. Rather than mandating this new uplift allocation methodology, the Commission should continue to focus its efforts on minimizing the total amount of uplift, as this goal provides a far more substantial benefit to all market participants," PJM said

Link to PJM comments

Tags:
PJM   Uplift   FERC   Wholesale  

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