Price-based Offers > $1,000/MWh Susan Kenney Sr. Consultant, Real-time Market Ops Market Implementation Committee July 11, 2018
Brief History of Energy Market Offer Caps Pre-Feb 2014: All offers capped at $1,000 Jan 2015 Mar 2015 Offers able to be submitted <= $1,800/MWh EL15-31-000 April 12, 2018 Order 831 Effective Cost-based and pricebased offers above $1000 subject to ex-ante validation Feb 2014 Mar 2014 Offers able to be submitted > $1,000/MWh ER14-1145-000 Dec 2015* Cost-based offer able to be submitted <= $2,000/MWh Price-based Offers less than or equal to costbased offer, but no more than $2,000/MWh ER16-76-000 *Solution resulted from extensive Cap Review Senior Task Force discussion 2
Incongruous Governing Documents Operating Agreement permits price-based offers to exceed $1,000/MWh as long as they are less than or equal to a verified cost-based offer Price-based offers permitted to rise to cost-based offers as part of December 2015 filing Manual 11 caps price-based offers at $1,000/MWh Directly conflicts with OA language above Contradictory language introduced with 831 revisions 3
Short-term Approach: Align Manual 11 with Tariff/OA provisions Path Forward Provide ability for price-based offers to exceed $1,000/MWh but be capped at cost-based offer PJM and IMM are not in agreement on short-term price-based offer validation approach Long-term Approach: Implement more robust system controls to improve price-based offer validation Maintains 2015 compromise from Cap Review Senior Task Force PJM and IMM are in agreement on long-term approach 4
Short-term Implementation* All price-based offers capped at $1,000/MWh by default If a cost-based offer is verified to be over $1,000/MWh, price-based offers may: PJM Approach: Price-based Offers may choose to: 1) Switch to Cost 2) Submit price-based offers above $1,000/MWh in line with verified cost-offer MA Approach: Price-based Offers must: 1) Switch to Cost Strongly Suggested *before automated price-based offer validation is implemented 5
Short-term Implementation Details PJM has a process for verifying market-based offers above $1000 in the short-term Market Seller must submit template with intended price-based offer information: Reference cost-based offer Proposed price-based offer curve PJM will verify the intended price-based offer is less than or equal to cost-based offer (including startup and no-load). PJM will override Markets Gateway cap to accept the verified price-based offer Override in effect for one hour Market Seller must update price-based offer no greater than PJM verified offer PJM will manually verify the submitted offer aligns with the offer submitted via the template 6
Short-term Implementation Risk Assessment Manual process is burdensome and not timely: Likelihood of high fuel prices during summer months is low Winter poses the greatest risk of > $1,000/MWh offers (long-term solution targeted by November 1) Market Seller can enter offer in excess of manually verified offer This risk is mitigated since the window of opportunity is time-boxed to one hour and will be cross-checked by PJM before offer becomes effective (T-65 min deadline applies) Risk for non-compliant price-based offer mainly exists if costbased offer is decreased after price-based offer is entered 7
Next Steps MIC endorsement - May 2 MRC endorsement July 26 8
Appendix M-11 Updates Endorsed at May 2 Meeting
M11 - Section 2.3.3 Section 2.3.3: Market Seller Rules October 2017 Approved Language (Remove): Generation resource market based incremental energy offers may not exceed $1,000/MWh. Reinstate Original Price-Based Language: Generation resource market based incremental energy offers may not exceed $1,000/MWh unless cost based incremental energy offer is greater than $1,000/MWh then the market based incremental energy offer is capped at the lesser of the cost based incremental energy offer or $2,000/MWh. 10
Section 2.3.3: Market Seller Rules October 2017 Approved Language (Remove): M11 - Section 2.3.3 cont. If a Market Seller wishes to have its resource evaluated in the Day-Ahead Market or the Real-time Market on an offer above $1000/MWh, the Market Seller must select the Switch to Cost Schedule flag in Markets Gateway. Selecting this flag will make the price-based schedule(s), which is capped at $1000/MWh, unavailable for the entire Operating Day if selected prior to the Operating Day. If selected during the Operating Day, the price-based schedule(s) is unavailable for the remainder of the current Operating Day, beginning with the next operating hour that begins 65 minutes after the selection. The switch to cost selection will ensure that any future commitments for the Operating Day are made on an available cost-based schedule. Once the Switch to Cost Schedule option is selected, the Market Seller will not have the option to resume using the pricebased schedule for the remainder of the Operating Day. The Switch to Cost Schedule option will not automatically carry forward beyond the Operating Day selected. 11
M11 - Section 2.3.3 cont. Section 2.3.3: Market Seller Rules Reinstate Original Switch to Cost Language with a minor correction: Market Sellers can select the Switch to Cost Schedule flag in Markets Gateway (Detail Updates tab) between beginning on the day prior to the operating day until 10:30 and again starting at 18:30 through and 65 minutes prior to the operating hour. Selecting this flag will make the price-based schedule(s) unavailable for the remainder of the operating day selected and will ensure any future commitments for the operating day are made on an available cost-based schedule. Once the Switch to Cost Schedule option is selected, the Market Seller will not have the option to resume using the price-based schedule for the remainder of the operating day. 12
Attachment D Title Adjustment M11 - Attachment D Attachment D: Verification of Cost Offers greater than $1,000/MWh that were not eligible to set LMP Add Language for Price-Based Offers Enable generation resources with market-based offers greater than $1,000/MWh and less than or equal to their cost-based offer to be made whole if the cost-based offer did not pass the offer screening process in time to allow the market-based offer to be greater than $1,000/MWh for all or a portion of the operating day to be paid Operating Reserve credits under certain conditions. A generation resource may be eligible for Day-Ahead Operating Reserve credit if it was scheduled by PJM and the submitted offer s corresponding cost-based offer is verified after the Day-Ahead Market closes A generation resource may be eligible for Balancing Operating Reserve credit if that resource is dispatched by PJM and the resource s submitted offer s corresponding cost-based offer is verified 13
Incongruous Governing Documents OA Schedule 1, Section 1.10.1A(d) Manual 11, Section 2.3.3 14