On April 29, 2013, FERC accepted PJM Interconnection, L.L.C.’s (“PJM”) proposed Open Access Transmission Tariff revisions aimed at incentivizing the participation of an efficient mix of demand resource (“DR”) products in the PJM capacity auction.  PJM’s tariff revisions set up an additional test to establish the Limited DR Reliability Target for certain types of DR capacity products.  PJM’s Limited DR Reliability Target prompts payment of higher prices to less-restricted resources, and aims to increase the level of less-restricted resources that are committed in the auction.  PJM’s proposed test would help to ensure that less–restricted resources are available when needed, and that the more restricted resources are not over-committed in the capacity market; such over-commitment has previously caused reliability concerns in PJM.

Under PJM’s tariff and the Reliability Pricing Model (“RPM”) capacity market rules, there are three DR products that can participate in the RPM capacity auction: (1) Annual DR; (2) Extended Summer DR; and (3) Limited DR.  Each product has limits on the hours of the day when it must be available, with Limited DR as the most restricted.  PJM’s Tariff currently employs two tests to set a “maximum amount of Limited Demand Resources determined by PJM to be consistent with the maintenance of reliability…”  According to PJM’s filing, the Limited DR Reliability Target helps PJM determine the level of Limited DR products that would cause PJM to pay higher prices to less restricted resources, to “induce” commitment of those less restricted resources and lower PJM’s reliance on Limited DRs.

PJM’s tariff revisions include an establishment of a third test to determine the Limited DR Reliability Target, to ensure that the “probability of requiring an interruption of longer than six hours is minimal.”  The Commission found that PJM’s additional test would “enhance” PJM’s evaluation of the Limited DR Reliability Target and “minimize” the risk of potential reliability concerns from relying on the Limited DR, a resource is not required to respond after six hours of interruption.

A copy of the Commission’s Order is available here.