PJM Board Won’t Take Holistic Approach to Capacity Market, Approves More Piecemeal Changes
September 11,2014
In keeping with the fine tradition of the capacity market, the PJM Board of Managers told stakeholders yesterday that, despite objections from load interests, it is going to proceed with piecemeal changes to the Reliability Pricing Model, even as PJM contemplates a dramatic overhaul of fundamental market principles, by modifying the definition of capacity, and introducing new performance metrics.
Specifically, the Board will not put the brakes on a triennial review process which is used for modification of major inputs to capacity pricing, including the demand curve (Variable Resource Requirement) and Cost of New Entry. Load had asked that any changes under the triennial review process be shelved until clarity is achieved on broader, and separate, PJM market changes, such as a new definition/category for capacity, and performance rules
While the Board is tweaking Staff's proposed changes under the triennial review (such as by keeping a historic Energy & Ancillary Services offset and adopting slightly different inputs for CONE), the Board said that it won't defer making the sought changes because, "Given the importance of the RPM parameters in maintaining investment in infrastructure to sustain reliability over the long term, the Board believes updates to these parameters are required."
Load groups have said that the changes will cost load $4 billion over 3 years, and questioned how PJM could adopt changes to the market under the triennial review (which is changing to a four-year review after this year, meaning the changes adopted will be in place for even longer) when the VRR curve adjustments under the triennial review are, "inextricably intertwined with the Capacity Performance initiative."
Load asked that, "the Board must exercise its judgment to ensure that these significant RPM changes do not proceed without a thorough and modeled assessment and evaluation of how these proposals relate to each other," but, not surprisingly, the Board flatly declined.