On April 6, 2017, Potomac Economics, Ltd. (“Potomac Economics”), the market monitor for the Midcontinent Independent System Operator, Inc. (“MISO”), New York Independent System Operator, Inc. (“NYISO”), and ISO New England Inc., requested that FERC eliminate PJM Interconnection, L.L.C.’s (“PJM”) requirement that external Capacity Performance Resources must be pseudo-tied to PJM.  In doing so, Potomac Economics argued that, among other issues, the requirement has caused congestion management issues for MISO and could impose similar and more significant costs on NYISO.

Currently, all external Capacity Performance Resources selling PJM’s “capacity performance” product must be pseudo-tied to PJM.  In its 2015 filing proposing the capacity performance construct, PJM argued that pseudo-tying – which prescribes various transmission arrangements so that resources in one regional transmission organization (“RTO”) can be controlled by a neighboring system operator – was necessary for PJM to (1) accurately determine whether an external resource met its commitment to deliver energy to PJM from the specific resource committed as a Capacity Performance Resource, (2) ensure that performance assessment evaluations are accurate and that any Non-Performance Charges are applied correctly, and (3) ensure that external resources are treated equally to internal resources.  FERC ultimately approved the pseudo-tie requirement for external Capacity Performance Resources.

In its April 6 complaint, Potomac Economics argued that the decreasing efficiency, increasing costs, and degrading reliability caused by the pseudo-tying requirement outweighs any benefit provided by the requirement.  For instance, Potomac Economics stated that PJM’s pseudo-tying requirement causes MISO to lose dispatch control and operational visibility of plants pseudo-tied to PJM and can lead to “loop flows, ” in which hard-to-control power flows deviate from their contracted transmission paths.  Potomac Economics also claimed that while there have already been economic and reliability costs imposed on MISO, the pseudo-tie requirement “threatens to impose even greater costs on the NYISO if it is applied to New York generation.”  Furthermore, Potomac Economics stated that PJM itself has recognized substantial concerns with its pseudo-tying requirement.  Finally, Potomac Economics highlighted that PJM is the only RTO that uses a pseudo-tying requirement and offered alternative mechanisms used in other RTOs as a means for delivering external capacity to PJM.

For all of the reasons stated in its April 6 complaint, Potomac Economics requested that FERC find that PJM’s pseudo-tie requirement for external Capacity Performance Resources is unjust and unreasonable and order PJM to eliminate the requirement and establish an alternative mechanism in its place.  A copy of the April 6 complaint is available here.