PA Environment Digest Blog: PJM Interconnection Formally Files Changes To Electric Capacity Market Rules With FERC Based Largely On Unreliability Of Natural Gas-Fired Power Plants During Winter Storm Elliot

On October 13, the PJM Interconnection formally submitted proposed electric market reforms designed to support reliability of the electric grid now and in the future amid increasingly extreme weather and a changing generation fleet.

One of the most significant changes is "enhance resource accreditation" that would more accurately assess the reliability value of natural gas-fired power plants which accounted for 70% of the power plant outages in PJM during Winter Storm Elliot.

PJM filed its proposal with the Federal Energy Regulatory Commission after more than a year of stakeholder meetings followed by an accelerated and intensive stakeholder process that began in February.

Capacity market enhancements to the PJM Tariff aim for implementation beginning with the 2025/2026 Base Residual Auction (BRA), scheduled for June 2024. The proposed reforms are designed to:

-- Enhance how PJM accounts for generator reliability-related risk in its models and sets procurement targets.

-- Advance an accreditation framework for all resources to reflect the actual capacity value that those resources provide to consumers.

-- Reform certain rules related to the Capacity Performance program, which establishes accountability for generator performance during system emergencies.

-- Improve generator testing, including operational and seasonal requirements.

-- Revise the Market Seller Offer Cap and Minimum Offer Price Rule to better include costs of taking on a capacity obligation and adopt a forward-looking Energy & Ancillary Services Offset.

-- Enhance rules related to a unit-specific Market Seller Offer Cap.

-- Better align Fixed Resource Requirement rules with the capacity market construct.

The proposal reflects stakeholder collaboration that began in October 2021 with the establishment of PJM’s Resource Adequacy Senior Task Force.

Following more than a year of stakeholder meetings, in February of this year, the PJM Board initiated an accelerated Critical Issue Fast Path – Resource Adequacy process that concluded in September with an advisory vote to inform PJM Board action.

“PJM and the PJM Board thank stakeholders for their focused consideration of market reforms designed to support resource adequacy and grid reliability,” said PJM President and CEO Manu Asthana. “The grid is evolving, and our markets must also adapt to facilitate the energy transition without sacrificing reliability.”

“The proposal, while enhancing reliability, would maintain fundamental principles of competition that control costs for consumers as well as incentivize investment in new resources,” said PJM’s Adam Keech, Vice President – Market Design & Economics.

“These proposed capacity market reforms will help PJM do what we do best – operating markets that attract critical investment in the resources we need to keep the lights on,” added Keech. “Maintaining enough resources that can support reliability are crucial to PJM’s ability to serve demand through the transition to a less carbon-intensive grid.”

PJM recognizes stakeholder interest in continuing targeted collaboration on additional market enhancements, including a more granular approach to the capacity market, and will engage with stakeholders in pursuing these areas through various stakeholder venues.

Click Here for the complete announcement.

The PJM Interconnection PJM is a regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia, including Pennsylvania.

Related Articles - PJM Generator Nonperformance:

-- PJM Interconnection Board Proposes Market Reforms Based Largely On Unreliability Of Natural Gas-Fired Power Plants During Winter Storm Elliot [PaEN]

-- Federal Energy Regulatory Commission, NERC Final Report On Winter Storm Elliott Says Legislative Action Needed To Establish Reliability Rules For Natural Gas Infrastructure [PaEN]

-- PJM Interconnection Hears Testimony On Making Electricity Market Reforms To Address Nonperformance Of Natural Gas And Other Generators During Winter Storm Elliot; Transition To Clean Energy [PaEN]

-- PUC Vice Chairman [Now Chair]: During Winter Storm Elliot We Learned Natural Gas Can Be An Intermittent Generator Of Electricity Just Like Renewables [PaEN]

-- PJM Interconnection Reports Higher Percentage Of Natural Gas-Fired Electric Generation Outages Than Originally Thought During Winter Storm Elliott - 70% [PaEN]

-- S&P Global: Federal Inquiry Finds Same 3 Causes Driving U.S. Electric Generation Outages In Extreme Cold - Reliability Of Natural Gas System Remains A Concern [PaEN]

-- Senate Hearing: Wholesale Electricity Prices Too Low To Support Coal, Natural Gas Power Plants In Market; Natural Gas Reliability Issues Will Continue [PaEN]

-- Senate Hearing On Electric Grid Reliability: Natural Gas Continues To Have Reliability Problems; Renewables Aren’t Coming Online Fast Enough; Energy Office To Be Proposed [PaEN]

-- PJM This Week Sends Penalty Assessments Of Up To $2 Billion To Electric Generators That Failed To Perform During December’s Winter Storm Elliot; Natural Gas Power Plants Had 63% Of Outages [PaEN]

-- PJM’s Preliminary Review Of Christmas Storm Electric Generation Failures Shows Natural Gas Units Failed To Provide Power At Over Triple The Rate Of Other Generation [PaEN]

-- PJM Interconnection Files Proposed Winter Storm Elliot Settlement With Nonperforming Electric Generators With FERC, Requests Final Action By Dec. 29 [PaEN]