On May 3, 2018, FERC accepted revisions proposed by PJM Interconnection, L.L.C. (“PJM”) to its Open Access Transmission Tariff, Amended and Restated Operating Agreement, and Reliability Assurance Agreement Among Load Serving Entities in the PJM Region, to reflect load reductions from Summer-period Demand Response resources in load forecasts for PJM’s capacity market (“Peak Shaving Adjustment”).

PJM’s Capacity Performance rules require capacity resources purchased by PJM be capable of sustained, predictable operation in case of emergencies.  As a part of those requirements, the capacity resources have been required to either be capable of being a capacity resource year-round, or, if a resource is a sub-annual resource, then that capacity resource must be paired with another resource that is available in the opposite season.  Because there were certain summer-only demand response resources that were unable to make annual commitments, aggregate commercially prior to auction, or meet the enhanced seasonal aggregation rules (“Summer Demand Resources”), PJM established a task force to investigate ways to value such resources.  After shareholder discussion, PJM proposed the Peak-Shaving Adjustment to FERC in December 2018.

In FERC’s May 3 order, it found that the Peak Shaving Adjustment filing was a just and reasonable, and not unduly discriminatory or preferential mechanism for PJM to value the load reductions from the affected Summer Demand Resources.  In reaching this decision, FERC found that the Peak Shaving Adjustment program, which would only allow participation by Summer Demand Resources that are governed by a tariff or order from a Relevant Electric Retail Regulatory Authority (“RERRA”), was not unduly discriminatory.  FERC’s reasoning was that the electric distribution companies with RERRA-sponsored load curtailment programs are not similarly situated to Electric Distribution Companies without such programs.

FERC also accepted PJM’s proposed revision disallowing Summer Demand Resources participating in the Peak Shaving Adjustment program from simultaneously participating in certain other PJM markets, as preventing such multi-market participation is a just and reasonable method of preventing the double-counting of the participating Summer Demand Resources’ MW reductions.  FERC chose to not address the Natural Resources Defense Council’s claim that the Peak Shaving Adjustment filing proves that Summer Demand Resources can be utilized as annual resources, stating that such claims were outside the scope of this proceeding and would be better addressed in alternative proceedings.

A copy of the May 3, 2018 FERC order can be found here.