On November 17, 2017, FERC conditionally accepted a proposal filed by the PJM Interconnection, LLC (“PJM”) to establish pseudo-tie requirements for new external resources desiring to participate in PJM’s forward capacity auction, as well as a transition period to allow existing “pseudo-tie” resources to comply with the new requirements.  PJM’s proposal was given a May 9, 2017 effective date, provided that it submits further compliance filings addressing FERC’s concerns in its order.

PJM’s proposal, which it submitted to FERC on March 9, 2017, follows from a series of previous proposals and FERC orders regarding capacity being imported from external generation resources into the PJM footprint.  Despite two sets of capacity market reforms, approved by FERC in 2014 and 2015, PJM claimed it was still encountering difficulties incorporating more distant external resources into PJM through so-called “pseudo-ties,” which are mechanisms used by one Balancing Authority (“BA”), here PJM, to control generation resources that are physically located in another BA, such as the Midcontinent Independent System Operator, Inc. or New York Independent System Operator, Inc.

On March 9, 2017, PJM proposed this current set of revisions to better facilitate pseudo-tie resources and address associated concerns with modeling, congestion management, planning, and operation.  As PJM noted in its filing, the proposed rules are designed to ensure that external resources providing capacity to PJM load meet the same technical standards and requirements for deliverability as internal resources.  In general, PJM proposed to allow pseudo-tie resources to offer into its capacity auction only if, five days before the auction, they can demonstrate compliance with various requirements, including: electrical distance requirements, proof of certain approvals from the external BA, proof that the resources has arranged for long-term firm point-to-point transmission service, and a commitment that it will adhere to the same must-offer requirements as set under existing Capacity Import Limits.

Various parties intervened in support and opposition to PJM’s proposal.  Opposing parties were primarily concerned that PJM’s requirements would be too burdensome for certain resources, thereby hampering competition.  FERC generally found PJM’s proposal is just and reasonable because it would help ensure that external resources bidding into PJM’s capacity auction are treated comparably to internal resources.  FERC nonetheless directed PJM to correct certain deficiencies in a compliance filing within thirty days of the order.  For example, FERC directed PJM to revise its Open Access Transmission Tariff to include certain definitions and incorporate a minimum impact threshold that was formerly included in its business practice manual.

A copy of FERC’s order can be found here.