Docket No. ER23-1067-000
I dissent for two reasons. First, PJM’s proposed deadline of March 3, 2023, for an interconnection customer to be eligible for its transition mechanism is not just and reasonable, nor is the majority’s approach to modify that deadline to April 10, 2023. Second, PJM’s proposed accreditation method for Combination Resources, such as solar and storage hybrids, is based on an economically nonsensical assumption that will reduce the capacity ratings for such resources below their true system contributions, and PJM has not offered an adequate justification for that assumption. By crediting resources for a lower amount of capacity than they provide the system, PJM’s proposed method will increase costs for consumers. Rather than accepting PJM’s filing, I would have rejected it with guidance, making clear that modifications to these two features of its proposal could render the proposal just and reasonable.
PJM’s proposed transition mechanism includes an unjust and unreasonable deadline
PJM’s proposed eligibility deadline for its transition mechanism is not just and reasonable because it forces resource owners to immediately make a complex determination regarding whether to apply for increased Capacity Interconnection Rights (CIRs), without adequate time to make an informed decision. PJM has given no reasonable justification for giving resource owners only one opportunity to make this election on such a compressed timeline. The result has been an arbitrary and likely ill-informed mad dash into the interconnection queue: perpetuating just the sort of result that PJM has sought to prevent in its recent interconnection reform proposal,[1] and that the Commission is seeking to move away from in its Notice of Proposed Rulemaking regarding Improvements to Generator Interconnection Procedures and Agreements.[2]
Background on why PJM’s transition mechanism was necessary
PJM’s filing comes after the region’s recent transition to an Effective Load Carrying Capability (ELCC). It aims to address assumptions about deliverability of ELCC resources that, if not modified, may compromise the accuracy of that new approach. As the Independent Market Monitor explains, prior to PJM’s transition to an ELCC capacity accreditation methodology, solar and wind resources in PJM were subjected to derated capacity values “based on an actual or assumed pattern of output during peak summer hours.”[3] PJM then used this derated value to determine the resource’s CIRs as well, such that a 100 MW wind resource, for example, would be granted no more than 13 MW of CIRs.[4] But as the IMM points out, “the problem with that approach is that it ignored the fact that PJM was assuming that all levels of output up to and including the 100 MWh were deliverable and that PJM was counting on all levels of output up to 100 MWh for reliability.”[5] In other words, PJM’s approach to capacity accreditation assumed the resource to be capable of delivering its maximum output during at least some hours, but never called for analysis of the transmission system to back up that conclusion.[6]
Despite this inaccuracy, PJM’s approach reasonably approximated the capacity value of resources because, to a large extent, system headroom facilitating deliverability of those resources in fact existed (and continues to exist).[7] But the parties agree that PJM’s method of capacity accreditation and its approach to CIRs would likely become inaccurate as wind and solar penetration increases.[8] Not only does the ability of such resources to contribute to grid reliability change as their penetration increases, as will be better approximated by PJM’s new ELCC framework,[9] but also the assumption of deliverability becomes less certain.[10]
To address this challenge, PJM proposes to modify its ELCC calculations to cap the output of resources in any given modeled hour at the amount of CIRs they hold, effectively requiring new wind, solar, and Combination Resources to apply for a greater amount of CIRs in the interconnection queue.[11] This approach renders the CIRs held by existing ELCC resources insufficient to deliver their full capacity value. PJM proposes to require these resources to submit new interconnection service requests for additional CIRs to the extent they seek to restore their capacity accreditation to that given under the previously assumed levels of deliverability.[12] Ultimately, PJM’s approach intends to: (1) ensure that the deliverability of ELCC resources is backed up by credible analysis, and (2) facilitate the construction of any network upgrades required in order to provide for that level of deliverability. A significant drawback, however, is that it relies on existing ELCC resources re-entering PJM’s extremely congested interconnection queue in order to be effectuated. Clean Energy Associations contend, and PJM does not rebut, that applications for additional CIRs “will result in any transmission upgrades likely not beginning construction before 2028,” given PJM’s currently congested queue which is not scheduled to even begin processing new applications until 2026.[13]
This means that in the interim, without a transition mechanism, ELCC resources would see their capacity accreditation cut significantly below the amount that reflects their true ability to contribute to system reliability. Wind resources would see a particularly large decrease, given that the prior rules set CIRs using a capacity factor of 13 percent.[14] Moreover, because these resources generally are currently deliverable to load, this accreditation haircut would be significantly below not only the resources’ theoretical ability, but also their actual ability to contribute to system reliability.
PJM’s proposed transition mechanism provides for an annual “transitional system capability study,” which identifies headroom available on PJM’s system for a given Delivery Year,[15] and then allocates that headroom to eligible resources during the transition period on a pro-rata basis.[16] It thereby aims to ensure that while eligible resources wait for their interconnection requests to be processed, the aggregate capacity accredited for such resources can be restored at least to the amount deliverable to load for the relevant Delivery Year. Accordingly, to the extent resources are studied in this manner, PJM avoids requiring customers to procure more capacity than necessary and sending inaccurate price signals, by avoiding capacity values lower than the true grid reliability contribution of eligible resources.[17] But PJM proposes that to be eligible for this allocation of headroom in any Delivery Year, a resource owner must submit a request for additional CIRs into the interconnection queue prior to March 3, 2023.[18]
Notably, while this approach affords owners of existing ELCC resources some relief to the extent they are eligible for the transition mechanism, PJM’s overall proposal may still be significantly worse for them than if they had been able to request CIRs up to their maximum facility output at the time they originally interconnected to the system. To the extent the grid had adequate capacity to accommodate such resources at that point in time, requests for a greater amount of CIRs may have been effectuated without triggering significant network upgrades. But if the grid becomes significantly more constrained while their interconnection requests are pending, then the relevant studies may reveal that substantial network upgrades are required in order to facilitate the requested level of deliverability.[19] In other words, owners of existing ELCC resources whose requests for a higher amount of CIRs could have already been processed at low cost find themselves sent to the back of a slow-moving line that will take years, fighting to purchase at a potentially much higher price the same capacity deliverability they could’ve already gotten, or arguably have already purchased.[20] So ELCC owners who requested the full amount of CIRs they were originally eligible for have a reasonable argument that far from a handout, the transition mechanism is the minimum required in order to avoid an unjust and unreasonable result that would strip them of deserved capacity compensation while they wait for the interconnection process to play out.[21] Had these ELCC resources simply been permitted to request CIRs up to their full deliverability at the time they interconnected, they could be eligible for their full capacity throughout this period, without any haircut.
PJM’s proposed deadline for transition mechanism eligibility is unjust and unreasonable
PJM’s proposed deadline, pursuant to which an existing ELCC resource must submit an interconnection request by March 3, 2023, to be eligible for the transition mechanism for any Delivery Year, is not just and reasonable. The order recognizes that “parties must request waiver when they seek to make filings effective . . . prior to the 61st day after the date of the filing,” and accordingly modifies this deadline to April 10, 2023.[22] But neither PJM’s approach nor the majority’s modification of it affords resource owners a reasonable amount of time in order to make the complex decision of determining how many additional CIRs, if any, to request.
That decision requires a resource owner to “weigh the potential increase in capacity revenues” associated with holding additional CIRs against “potential network upgrades costs,”[23] which each depend on complex and uncertain predictions of future system conditions. Moreover, Clean Energy Associations allege that “[t]here is significant ambiguity around what a complete interconnection filing for the increased injection rights may require, and significant aspects of the transition process have yet to be detailed and defined.”[24]
The Commission recently rejected an interconnection process deadline that similarly failed to afford market actors a reasonable amount of time to make complex commercial decisions. In Tri State Generation and Transmission Ass’n, Inc., the Commission rejected a proposal by Tri State to condition eligibility for a transitional serial study process on a customer’s demonstration of commercial readiness 10 days after the proposed Tariff’s effective date.[25] The Commission rejected the proposal because “[a]n interconnection customer needs adequate time to meet these significant requirements, including such potentially complex issues as securing financing and negotiating Site Control with multiple landowners.”[26] Here, PJM’s proposed deadline was before the relevant effective date, and even the Commission’s modified deadline falls on that effective date, leaving market participants only the weekend to determine a course of action after learning that PJM’s Tariff proposal has been accepted as just and reasonable.[27]
Predictably, PJM’s proposal has induced a mad rush of interconnection requests to be submitted prior to the deadline. PJM reports that it has “received over 400 requests for transitional system capability studies.”[28] While PJM points to this as evidence that “PJM Members are well apprised of the significance of this deadline and are acting accordingly,” we have no reason to believe that market actors have been able to process the information required to submit requests representing an accurate determination of the amount of additional CIRs needed to maximize their economic value. To the contrary, the business associations representing those resource owners tell us that they have neither the information nor the time required to make “thoughtful, informed investment decisions.”[29] Nor do we have any data on the number of additional market participants who may have submitted requests for additional CIRs if they only had more time for analysis (i.e. how the number of requests might have been different had PJM set a reasonable eligibility deadline). By my estimation, the response may well have been exactly what the Commission is elsewhere seeking to prevent in the Notice of Proposed Rulemaking regarding Improvements to Generator Interconnection Procedures and Agreements:[30] a rush of speculative requests that may later be altered and in turn complicate PJM’s analysis of its interconnection queue.[31]
The Order’s acceptance of PJM’s tariff proposal is particularly troubling because it establishes a precedent that undermines the Commission’s authority. Because PJM’s proposed deadline fell before its proposed effective date, market participants were forced to take significant commercial actions assuming that PJM’s approach would govern, without the benefit of a Commission order finding it to be just and reasonable. Rewarding this approach allows regulated entities to strong-arm market participants into compliance actions prior to a Commission determination, meaning that proposed rules that are not just and reasonable or are unduly discriminatory will shape commercial decisions before the Commission can opine on them. While an order ultimately rejecting a proposal as not just and reasonable or unduly discriminatory would give market participants some relief from having to comply with a rule that does not past muster under the Federal Power Act, it would not return to them the time and money spent complying with the proposed unjust and unreasonable or unduly discriminatory rule in advance of the Commission’s determination.[32]
While there may be circumstances where the Commission can accept a tariff that imposes deadlines on market participants as early as the effective date of the proposed tariff, such deadlines should be justified by some compelling rationale. Indeed, in evaluating the proposed implementation timelines for new capacity market rules, the Commission’s task is often to balance competing concerns.[33] A need for more accurate prices or improvements to ensure reliability, for example, is to be weighed against participants’ ability to understand new rules and make decisions based on them.[34] Here, however, there was no compelling reason for PJM to force ELCC resources to comply with such an immediate deadline in order to be eligible for the transition mechanism in any Delivery Year.
PJM’s articulated rationale behind its proposed deadline is that March 3, 2023, “represents the absolute latest that PJM staff estimate they will be able to begin transitional system capability studies in anticipation of the June 2023 [Base Residual Auction (BRA)].”[35] But PJM’s rationale is not valid as applied to the Commission-imposed deadline of April 10, as by PJM’s logic the new deadline is not adequately far in advance of the auction in order to facilitate the required study. Moreover, PJM has proposed to delay its next auction, further undermining any rationale for such an immediate deadline.[36]
PJM’s deadline also makes little sense because it determines eligibility for all future Delivery Years, not just the next auction. As National Grid Renewables explains, “[e]ven if the March 3 deadline was necessary to ensure completion of the initial transitional study in advance of the June 2023 BRA,” (a rationale which no longer applies in light of the Commission’s modification of that deadline), “PJM has failed to provide any justification for why this deadline is appropriate for evaluating the eligibility of customers to participate in studies conducted prior to BRAs in later years.”[37] In other words, PJM has not articulated any reason why resources must be given only a one-time opportunity to submit such requests in order to be eligible for any future auction, especially when the deadline for such submissions occurred so soon after PJM submitted its proposal and even as modified, falls exactly on its effective date. Had PJM given resources additional opportunities to become eligible, they could make more reasoned and informed decisions given that failure to submit a request in advance of the June 2023 BRA would only cost a resource credit in one Delivery Year, as opposed to rendering them ineligible for every single year of the transition.
For example, as the Clean Energy Associations have suggested, because “PJM will be conducting studies before each BRA regardless,” it could provide an option whereby in advance of each auction customers could “be given the opportunity to apply” for the transition mechanism “after they submit the queue position for the higher CIRs.”[38] Or if PJM desired and could justify a specific date after which no more requests may be submitted, it could have chosen a date in advance of a subsequent auction, after which eligibility would no longer be granted for future years.[39] Because the transition mechanism allocates only available headroom regardless of the number of resources that are eligible, there is no reliability rationale for limiting eligibility in future Delivery Years to only those who have applied by April 10.
Given PJM’s failure to offer any compelling reason why ELCC resource owners must be forced on such a tight timeline into a one-time election to submit an interconnection request in order to be eligible for the transition mechanism for all future auctions, the weighing of interests that the Commission engages in when determining whether to approve such a deadline has weight on only one side of the scale: in favor of allowing more time. PJM’s 23-day window to act during the pendency of the filing forced significant investment decisions to be made without the benefit of the complex analysis that should better inform them, and affording a few short days after the acceptance of the filing is not enough to remedy that deficiency. As such, PJM’s proposed deadline, whether modified by the Commission or not, is not just and reasonable.
PJM has not demonstrated that its proposed accreditation method for Combination Resources is just and reasonable
PJM’s proposed method for accrediting Combination Resources, such as resources that combine both a solar and a storage component, is based on an irrational assumption unlikely to ever play out in practice. Specifically, PJM “proposes to cap the modeled output of the Variable Resource portion of a Combination Resource’s actual output in its ELCC calculation at the Combination Resource’s Deliverable MW minus the Effective Nameplate Capacity of the Limited Duration component.”[40] In other words, PJM’s approach essentially assumes that a resource owner will, in all instances, set aside CIRs equal to the full capacity of a combination resource’s storage component, and then curtail the variable component of the resource to avoid ever impinging on that amount set aside.[41] In essence, the resource owner is assumed to inject from the storage component in a manner that perfectly eliminates the ability of the variable component to inject, when in fact the resource owner likely invested in a storage component to do the opposite: “to help to firm up any variability of the renewable component.”[42] PJM has failed to demonstrate its proposal to be just and reasonable because this patently inaccurate assumption arbitrarily lowers the capacity accreditation of Combination Resources, forcing customers to buy more capacity than is truly necessary to serve the system. PJM has failed to articulate any adequate justification for modeling resources in this fashion.
Assume, for instance, a resource with 125 MW of solar production capability and 50 MW of energy storage capacity, and which holds 80 MW of CIRs. Under PJM’s proposal, as I understand it, the solar array’s modeled output in each hour in the capacity accreditation calculation would be capped at 30 MW (the result of subtracting the 50 MW of storage from the 80 MW of CIRs), regardless of whether the storage component is modeled to be charging, discharging, or idle in that same hour (and thus not using the CIRs assigned to it). On a sunny afternoon, such a Combination Resource might be capable of generating 120 MW from the solar component, such that it could send a full 80 MW to the grid and still use 40 MW to charge the storage component. But in valuing the capacity of the solar component of the resource, PJM’s assumptions nevertheless dictate it a maximum capacity credit of 30 MW in any given hour.
PJM’s principal reason for applying this economically irrational assumption is that PJM’s current modeling approach to ELCC accreditation otherwise looks at the components of a Combination Resource separately.[43] Because of this choice in modeling methodology, PJM states that if it did not cap the production of the variable component, its accreditation formula “would risk over-counting the output of the Variable Resource component, and risk having the combined output of both Combination Resource components . . . exceed the Combination Resource’s CIRs and/or winter deliverability MW.”[44]
To be clear, however, this claim by PJM does not suggest that a more optimized method would risk compromising grid reliability. So although the majority characterizes PJM’s approach as conservative,[45] it is conservative only in the sense that it undercounts what Combination Resources are capable of delivering given PJM’s choice not to more accurately model the sharing of CIRs across the two components of a Combination Resource, but not because such undercounting is necessary to reasonably ensure reliability.
Nor has PJM made out a coherent case that its approach is needed to account for uncertainty about the resource owner’s actual behavior during the real-time operations time frame. The majority vaguely alludes to “uncertainties affecting how a Combination Resource would operate in real time and PJM’s relatively limited operational experience with these resources” as justification for PJM’s approach.[46] But neither PJM nor the Order explains why operational uncertainties render PJM’s economically irrational assumption reasonable. PJM’s contention that it “does not know the precise hours in which [a] Limited Duration Resource may produce energy in advance,”[47] if interpreted as referring to the potential real-time behavior of market participants, is not a reason why it cannot assign, for modeling purposes, logical rather than illogical hours of production to the storage component of a Combination Resource.
PJM gives not a single example where its assumption would be necessary or even beneficial. And a simple thought exercise suggests that PJM’s approach is not warranted. Take an example where capacity demand nearly exceeds supply, but adequate grid capacity remains to render the resource deliverable. In that case, subject to resource specific (e.g., non-grid) constraints, a resource with 125 MW of solar and 50 MW of storage might inject 170 MW into the system, despite only holding 80 MW of CIRs. In such a case, the resource’s true reliability value would exceed the modeled capacity value. While it would be true that the resource owner would have exceeded its CIRs, that would be beneficial for the system without harming any other market participants (whose own resources were also deliverable in that example). And take the alternative case where the system is similarly stressed, but grid constraints are also present such that each resource is limited to its CIRs. In that case, it would be illogical for the resource owner to curtail the solar portion of the facility and inject using the storage. Rather, the resource owner would be expected to use the solar portion of the facility up to the full CIR limit, and use the remainder of its production to charge the storage component. In other words, PJM’s proposed assumptions will have borne out to be false, whereas an approach that optimizes a Combination Resource’s production would have borne out to be accurate.
Importantly, the risk of over-crediting is not a real-time operations concern, but rather is endogenous to PJM’s model. Because the model doesn’t contemplate the components of a Combination Resource together, such that it can track the assumed production of each component in a given hour, PJM simplifies by derating the variable component. But to employ a more accurate assumption, PJM would need only to know the modeled production of a given resource component in a given hour not the ultimate behavior of market participants that may occur in real time. PJM has not articulated any reason why it could not simply track that modeled production across the different components of a Combination Resource.
In other words, modeling resources separately is PJM’s choice, and PJM has not presented any reasons why the components of a Combination Resource could not be modeled together, as a starting point. For example, as the protesters suggest, PJM could modify its ELCC model to include assumptions that account for the optimization of the combination of the renewable and storage components of a hybrid resource.[48] This is not to suggest that PJM’s approach is unreasonable due to the presence of other reasonable methods. Rather, PJM had the burden to articulate why its approach is just and reasonable. Given that its assumption quite clearly does not align with anticipated resource behavior, PJM had an obligation to explain why it nevertheless applied that assumption.[49] Relying exclusively on the limits of the modeling method PJM currently employs is not an adequate justification when that modeling method can easily be changed. PJM is tying its own hands behind its back and then telling us it’s impossible to take a shot. It may well be the case that, for purposes of this next auction, PJM’s choice was an appropriate simplification, due to the difficulties of modifying its existing ELCC accreditation method on a short timeline. But PJM has failed to make any such claim or offer a concrete plan memorialized in the tariff by which its inaccurate assumption will be corrected after a transitional period using the incorrect values.[50]
Stepping out of the weeds of PJM’s model, I believe the Commission had a duty to require a real explanation from PJM given that its proposal, on its face, will result in over-procurement of capacity and thereby increase costs to customers. By under-counting the capacity contribution of Combination Resources, PJM’s proposal presents the same “three significant harms” that led the Commission to accept proposals reining in over-broad capacity market mitigation rules: “over-procurement of capacity, inflated capacity market prices, and inefficient price signals from the capacity market.”[51] Without explanation of why these harms are truly necessary in PJM’s ELCC capacity accreditation of Combination Resources, there is nothing to balance them against and the Commission cannot justifiably accept the proposal as just and reasonable.
For these reasons, I respectfully dissent.
________________________
Allison Clements
Commissioner
[1] See PJM Interconnection, L.L.C., 181 FERC ¶ 61,162, at PP 5, 30 (2022) (approving PJM’s interconnection proposal that, among other challenges, sought to address the fact that “the volume of New Service Requests has more than tripled in the past three years,” and included a “large number of speculative projects”).
[2] 179 FERC ¶ 61,194 (2022).
[3] IMM Answer at 1.
[4] See PJM Transmittal at 4-5 nn. 10 and 12 (“Historically, new wind and solar resources’ initial CIRs were set utilizing the class average capacity factors of 13% and 38% respectively, unless a higher capacity factor was requested and adequate analysis was provided to validate the higher factor.”).
[5] IMM Answer at 2.
[6] The IMM argues that “[t]he CIR value” for such a resource “should have been and should be 100 MW.” IMM Answer at 2. NRDC argues that PJM’s definition of CIRs was linked to capacity and not energy (meaning that 13 MW of CIRs for a wind resource did not need to be adjusted up to 100 MW in PJM’s prior framework to guarantee deliverability), but agrees that PJM’s analysis did not properly study deliverability. See NRDC Protest at 9-11 (arguing that PJM’s proposal “Redefines the Capacity Interconnection Rights Currently Held by ELCC Resources”).
[7] See PJM Answer at 7 (discussing a recent study finding deliverability issues for only 5 MW of existing ELCC resources); NRDC Protest at 13 (same).
[8] See supra n. 6.
[9] See PJM Interconnection, L.L.C., 176 FERC ¶ 61,056 (2021) (approving PJM’s ELCC methodology).
[10] PJM projects that the grid will become significantly more constrained over time, finding that “an approximate $2 billion” in transmission upgrades “would be required to support full future accreditation of future ELCC resources.” PJM Answer at 12 (emphasis in original).
[11] See Order at PP 12-20 (describing PJM’s new approach to CIRs in ELCC calculations).
[12] See id. at PP 21-22 (describing PJM’s proposed transition mechanism)
[13] CEA Protest at 4.
[14] Transmittal at 4 n. 10. In other words, under PJM’s proposal, the ELCC analysis of such a resource would be based on a maximum deliverability of 13 MW, rather than 100 MW, as was previously assumed. To achieve the same level of deliverability as was assumed under the prior rules, and therefore achieve full ELCC credit, the resource would need to apply for an additional 87 MWs of CIRs.
[15] See id. at 18-19.
[16] Order at P 31.
[17] See New York Independent System Operator, 179 FERC ¶ 61,102, at P 39 (2022) (discussing the harms of under-counting available capacity).
[18] Transmittal at 18.
[19] The findings of the transmission studies discussed in the pleadings support a conclusion that, even with the transition mechanism, ELCC resources are in a much worse position than if they could have submitted requests for CIRs up to maximum facility output when they first interconnected. See PJM Answer at 11-12 (discussing a study finding that “a $7 million increase in transmission upgrades would be required to support full accreditation of existing ELCC Resources,” as well as a study finding “than an approximate $2 billion increase [in transmission infrastructure] would be required to support full future accreditation of future ELCC Resources”).
[20] NRDC argues that under PJM’s prior regime, “a resource holding 1 MW of CIRs ha[d] the right to input generation as a 1 MW Capacity Resource.” NRDC Answer at 9. In other words, they argue that while CIRs were incorrectly studied, a 13 MW wind resource held a right to its full capacity deliverability, even though that required the resource to inject 100 MW at some points in time. See id. at 8 (“CIR requirements have not been incorrectly set, they have been incorrectly studied.”) (emphasis in the original).
[21] Indeed, PJM might have alternatively accomplished a transition by grandfathering existing resources at assumed deliverability levels reflecting their full ELCC accreditation, and/or establishing a process to build any needed transmission outside of the interconnection queue. As the Commission recently articulated, “[t]he Commission will consider disruptions to parties’ ‘settled expectations’ in determining whether a proposal is just and reasonable,” and considers a “‘balancing of interests’ or ‘balancing of equities’ in determining the appropriate outcome.” PJM Interconnection, L.L.C., 182 FERC ¶ 61,109, at P 175 (2023). NRDC compellingly argues that PJM previously addressed inaccurate deliverability assumptions for thermal resources quite differently, by updating its assumptions and requiring load to pay for transmission upgrades needed to maintain deliverability under those new assumptions. See NRDC Protest at 11-15; NRDC Answer. Having determined PJM’s proposed transition mechanism to be unjust and unreasonable on narrower grounds, I do not take a position in this separate statement on NRDC’s claim that this differential treatment amounts to undue discrimination under the Federal Power Act.
[22] See Order at P 38.
[23] CEA Protest at 3.
[24] Id.
[25] 173 FERC ¶ 61,015, at PP 68, 71 (2020).
[26] Id. at P 71.
[27] Indeed, because it would not be reasonable to expect a resource owner to predict the outcome dictated by the Commission’s order (an April 10 deadline for interconnection requests), in practical terms this order affords resource owners little greater notice than PJM’s original proposal. With this order issuing late on April 7, ELCC resource owners will have the rest of the (for some, holiday) weekend to prepare an interconnection request in advance of the April 10 deadline.
[28] PJM Answer at 8.
[29] CEA Protest at 3-4.
[30] 179 FERC ¶ 61,194 (2022).
[31] See id. at P 103 (seeking “to discourage speculative interconnection requests”).
[32] I recognize that a similar dynamic may play out in circumstances where a compelling rationale supports a rule that requires compliance actions on its effective date. But there is no need to permit utilities this behavior in circumstances like this one where no such rationale exists.
[33] See PJM Interconnection, L.L.C., 117 FERC ¶ 61,331, at P 73 (2006) (“The adoption of a transition period must strike a reasonable balance between the need to implement RPM to generate relevant prices, and the provision of some period to enable parties to understand and make adjustments to the new market.”), order on reh’g, PJM Interconnection, L.L.C., 119 FERC ¶ 61,318 (2007); Midcontinent Independent System Operator, 180 FERC ¶ 61,141, at PP 248-249 (2022) (“The transition period appropriately balances the need to implement the SAC methodology with the recognition that resource owners and LSEs may need to adjust their operations—including outage timing—and their contractual arrangements to maximize their potential SAC values.”); PJM Interconnection, L.L.C., 155 FERC ¶ 61,157, at PP 150-151 (2016) (accepting a phase-in of PJM’s capacity performance requirements as just and reasonable because the benefits of providing relevant entities adequate time to adjust Fixed Resource Requirement plans based on the new rules were weighed in conjunction with the interest in applying the requirements in an even-handed manner).
[34] Id.
[35] PJM Answer at 6. (PJM’s June 2023 BRA, as referred to by PJM, corresponds to the 2025/2026 Delivery Year).
[36] See NG Renewables Protest at 2; PJM, Potential revised RPM auction schedule, presented at MC Special Session (April 4, 2023), available at item-01---1-potential-revised-rpm-auction-schedule---presentation.ashx (pjm.com).
[37] NG Renewables Protest at 3.
[38] CEA Protest at 4.
[39] While PJM was not compelled to follow any particular just and reasonable approach, it did have an obligation to justify its own proposed deadline.
[40] Order at P 18.
[41] As explained further below, PJM does not strictly assume curtailment per se, as nothing in the operations time frame limits a resource to injecting no more than its allocated CIRs into the system if the grid is not congested. But PJM proposes to derate the capacity of the Combination Resource as though the variable component had been curtailed, since the resource cannot get any capacity credit beyond what is leftover after the storage capacity is subtracted from its CIRs. PJM notes that its proposal does not preclude charging of the storage resource if the owner is using a “closed loop” system, see PJM Answer at 16, but this does not change the fact that the resource’s variable component would never be modeled in a manner that allows that component to make full use of the resource’s CIRs, as is expected to occur in practice.
[42] CEA Protest at 10.
[43] See Order at P 52 (Protesters “fail to acknowledge that PJM’s ELCC analysis models the components of the Combination Resource separately”).
[44] PJM Answer at 13-14.
[45] See Order at P 53 (“[W]e find PJM’s approach just and reasonable because it conservatively assumes that the Limited Duration Resource component of a Combination Resource may ultimately be needed during the most stressed periods.”).
[46] Order at P 54.
[47] PJM Answer at 16 (emphasis in original).
[48] For example, PJM could assume that the Combination Resource owner would always maximize the output of its renewable component up to the CIR limit to the extent that the renewable component is producing, and re-assign the production of the storage component to the extent it is coincident with those hours to the highest value hours given that constraint.
[49] Thus, while the Order is correct that the Commission need not opine on whether alternative proposals are just and reasonable, see Order at P 54, the existence of alternatives is probative insofar as the presence of such alternatives call into question PJM’s explanation for why its proposal is just and reasonable. In this circumstance, it is telling that PJM does not rebut the assertions that the inaccuracy in its model could be corrected.
[50] Likewise, PJM does not claim that software constraints or other modeling barriers prevent it from tracking the modeled production of the variable component of a Combination Resource, then modeling the production of the storage component in a fashion that recognizes that production. To the contrary, PJM acknowledges that improvements to cure its inaccurate assumption “may be feasible.” PJM Answer at 16.
[51] New York Independent System Operator, 179 FERC ¶ 61,102, at P 39 (2022).