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Board Directs PJM to File Proposals With FERC to Enhance Resource Adequacy

The board of managers of the PJM Interconnection has directed the regional transmission organization to file several enhancements to its capacity market with the Federal Energy Regulatory Commission.

The action comes after an accelerated PJM stakeholder mechanism, known as the Critical Issue Fast Path-Resource Adequacy process, was set in motion in February after PJM members in August voted in favor of seeking reforms to support resource adequacy and grid reliability.

The vote came in response to an analysis in a PJM report, Energy Transition in PJM: Resource Retirements, Replacements & Risks, published in February that warned of possible decreasing reserve margins as the RTO’s resource mix changes due to retiring thermal generation and higher levels of intermittent generation sources.

In a Sept. 27 letter to stakeholders, PJM’s board outlined the proposed market enhancements that will be filed with FERC by Oct. 13.

When PJM’s board initiated the Critical Issue Fast Path-Resource Adequacy process in February, it identified priority capacity market enhancements that would be put in place for the 2025/2026 base residual auction. In June FERC accepted PJM’s proposed delay by one year of its capacity market auction, from June 14, 2023 to June 2024, to allow the Commission time to assess the capacity market enhancements PJM is expected to file.

The prioritized capacity market enhancements PJM identified are:

  • explore how PJM accounts for reliability-related risk;
  • ensure that market-seller offers reflect the risk of capacity obligations;
  • enhance resource accreditation; and
  • better align capacity market and Fixed Resource Requirement rules.

PJM’s board has given the RTO the following guidance with regard to the October filing, including additional changes to PJM’s proposal:

  • Market Structure: Maintain the annual capacity market construct for this filing but indicated interest in further exploring sub-annual designs.
  • Resource Adequacy Risk Modeling: Maintain the Capacity Benefit of Ties while evaluating more accurate ways to account for this benefit.
  • Capacity Performance and Alignment of Risk in the Market Seller Offer Cap: Amend the stop-loss to 1.5 times the relevant base residual auction clearing price.
  • Fixed Resource Requirement Rule Changes and Transition: Adopt a transition for FRR entities to meet the new requirements that better align FRR with committed capacity resources.

The board directed PJM to file the changes to the capacity market with FERC by no later than Oct. 13 in order to be implemented for the 2025/2026 base residual auction.

PJM said it is also considering multiple filings to mitigate the risk of a single component of the filing causing the delay or rejection of the entire suite of enhancements.

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