Commissioner James Danly Statement
August 15, 2022
Docket Nos. ER22-1200-000, ER22-1200-001
I dissent from this order rejecting PJM Interconnection, L.L.C.’s (PJM) Federal Power Act (FPA) section 205[1] rate proposal to implement “Intelligent Reserve Deployment,” which would have, if accepted, “increase[d] reliability in the PJM region” by protecting PJM against “back-to-back [reliability] events” while simultaneously “better align[ing] prices with actual [emergency] system conditions.”[2] PJM made this proposal after convening a task force to study how to improve performance and pricing during emergency “synchronized reserve deployment (‘spin’) event[s].”[3] The majority rejects it, finding that Intelligent Reserve Deployment’s modeling of the single largest reliability contingency “is likely to result in artificially inflated prices.”[4]
I disagree. PJM easily met its section 205 burden. I see nothing wrong with modeling the single largest reliability contingency during a reserve shortage, for example, when the system is dangerously exposed to a subsequent reliability event. I do not see how modeling the single largest reliability contingency during a reserve shortage “artificially inflate[s] prices.” Reserve shortages and other “synchronized reserve deployment (‘spin’) event[s]”[5] mean the system is severely exposed. It seems prudent to account for the next largest contingency during an emergency.
Indeed, PJM fully explained the purpose of the Intelligent Reserve Deployment, including its effects on reliability and pricing, and how it would be a significant improvement over the existing “all call” messaging that PJM employs during any emergency spin event. The all-call is essentially an email blast.[6] It consists of a communication from PJM to all market participants to “raise to full output.”[7] That is it. An en masse message requesting a raise to full output obviously fails to “offer PJM operators visibility into the expected response either in aggregate, or from any particular resource” and apparently is routinely ignored by resources not subject to non-performance penalties.[8] It does not take an engineer to identify a legitimate reliability risk here.
Today’s order rejects a just and reasonable proposal that would institute a coherent plan to address dispatch and pricing during a reserve deployment in a system emergency. I would not reject a clear reliability enhancement merely because it results in potentially higher (albeit more efficient) prices. FPA section 205 contemplates broad discretion for utilities to grapple with challenges and opportunities as they see fit. This filing easily fits within the range of acceptable filings. And, though it makes no difference to our ultimate analysis under FPA section 205, it is nonetheless worth noting that this proposal also enjoyed a supermajority of stakeholder support with only two protests,[9] so it is the rare regional transmission organization proposal that affects rates yet somehow survived stakeholder scrutiny.
I am not sure what else we expect PJM to propose.[10] But I have a prediction: having rejected this proposal, we at the Commission will enthusiastically join the throngs blaming PJM if, down the road, it suffers a blackout caused by back-to-back reliability events.
For these reasons, I respectfully dissent.
[1] 16 U.S.C. § 824d.
[2] Transmittal Letter at 10-11.
[3] Id. at 1.
[4] PJM Interconnection, L.L.C., 180 FERC ¶ 61,089 at P 47 (2022).
[5] Transmittal Letter at 1. The majority “clarif[ies] that the initiation of a Synchronized Reserve Event does not always denote a reserve shortage.” PJM Interconnection, L.L.C., 180 FERC ¶ 61,089 at P 51, n.120. Indeed, “[s]ynchronized reserve events are emergency procedures triggered by PJM in order to maintain grid reliability” and “can be caused by a variety of conditions, including loss of generation (single large or multiple smaller generators), loss of transmission elements resulting in power import limitations, sudden load influx, and/or system frequency decline due to external factors.” Transmittal Letter at 2 (emphasis added).
[6] See id. at 3-4 (explaining all-call messaging).
[7] Id. at 3.
[8] Id. at 4. The majority dismisses PJM’s reliability concerns by pointing out that the issue of resources ignoring PJM’s “all call” requests “will . . . be addressed within two months from the date of this order.” PJM Interconnection, L.L.C., 180 FERC ¶ 61,089 at P 47, n.112. PJM is aware of that—obviously—yet still proposed Intelligent Reserve Deployment to “increase reliability in the PJM region.” Transmittal Letter at 11-12. I share PJM’s reliability concerns, including for the next two summer months.
[9] See PJM Interconnection, L.L.C., 180 FERC ¶ 61,089 at PP 12, 48 n.115.
[10] See id. at P 51 (opining that “[o]ur findings herein do not foreclose PJM from proposing future improvements to the all-call approach that better align prices with actual emergency conditions.”).