On January 23, 2020, FERC concluded that a “pricing and dispatch mismatch problem” needs to be resolved before PJM Interconnection, L.L.C. (“PJM”) can revise the fast-start provisions in its Tariff, as previously directed by FERC on April 18, 2019. Because PJM currently has a stakeholder process addressing the pricing and dispatch mismatch, FERC placed PJM’s fast-start pricing filing in abeyance until July 31, 2020 to allow PJM and its stakeholders the opportunity to fully consider any necessary changes.
FERC began investigating PJM’s practices regarding the pricing of fast-start resources in 2017. On April 18, 2019, after a paper hearing, FERC found PJM’s fast-start pricing practices unjust and unreasonable because they did not allow prices to reflect the marginal cost of serving load (see April 24, 2019 edition of the WER). FERC directed PJM to make a variety of changes to its Tariff, which FERC stated would result in just and reasonable rates. PJM made its compliance filing on August 30, 2019.
Although FERC summarized PJM’s proposed fast-track revisions, it did not address them substantively. Instead, FERC explained that filed comments on PJM’s compliance filing had identified PJM’s current practice of computing dispatch instructions using a different market interval than it uses to calculate prices. More specifically, FERC noted that PJM may be dispatching resources roughly 10 minutes out, while immediately assigning the price associated with that future dispatch interval to the current interval. As such, FERC concluded that resources may not be compensated with prices that correspond to their dispatch instructions, and hence, there is a pricing and dispatch mismatch problem.
According to FERC, PJM may not be able to implement some of the fast-start changes it directed in a way that is just and reasonable without first resolving its pricing and dispatch misalignment problem. If fast-start resources could be compensated with a price from a different market interval, FERC reasoned, prices may not accurately reflect the marginal cost of serving load. FERC also noted that implementing the fast-start changes could exacerbate the pricing and dispatch mismatch because lost opportunity payments, which were directed by FERC, might not correctly compensate opportunity costs. Thus, FERC opted to hold the fast-start pricing compliance filing in abeyance until July 31, 2020.
A copy of the order is available here.