PJM Sell Back Price Status Quo and Proposed Alternatives

Transcription

1 PJM Sell Back Price Status Quo and Proposed Alternatives IASTF Meeting October 19,

2 Contents Example of Status Quo use of the Updated VRR Curve Decrement in determining the PJM Sell Offer price Comparison of Status Quo to two alternative methods with basis in the Updated VRR Curve Decrement Appendix: Updated summary of IA results 2

3 PJM Sell-Back in IAs Status Quo If the updated RTO Reliability Requirement is lower than the RTO Reliability Requirement used in the BRA, current tariff provisions require PJM to release the difference via a PJM Sell Offer in an IA using a Sell Offer price based on the Updated VRR Curve Decrement Updated VRR Curve Decrement: the portion of the Updated VRR Curve to the left of a vertical line on the x-axis equal to the net Unforced Capacity committed to the PJM Region in all prior auctions conducted for such Delivery Year The sell offer price is based on the portion of the Updated VRR Curve Decrement, extending and ascending to the left from the right-most point on that curve in a MW amount corresponding to PJM Sell Offer MW quantity This approach is illustrated on the following slides using an example where it is assumed that PJM procures UCAP MW in the BRA at 105% of the BRA reliability requirement and the updated reliability requirement is 96% of the BRA reliability requirement (i.e. updated reliability requirement is 4% lower than the BRA reliability requirement) 3

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8 Updated VRR Curve Decrement Both status quo curve and Alternative #1 curve start at the same price point (i.e. the lowest price of the Updated VRR Curve Decrement) As illustrated in example of prior slides, the lowest price point of the Updated VRR Curve Decrement is a function of the MW quantity procured above the BRA reliability requirement and the MW quantity decrease in RTO reliability requirement The price of the lowest price point of the Updated VRR Curve Decrement decreases as the UCAP MW quantity procured in BRA increases and as the difference in UCAP MW between the BRA and updated reliability requirement increases 8

9 Alternative #2 - Starting Price of PJM Sell Offer Curve The PJM Sell Offer MW quantity is based only on the MW decrease in RTO reliability requirement (updated requirement minus BRA requirement) and is unaffected by the MW quantity procured in the BRA relative to the BRA reliability requirement However, the associated sell offer price determined using the Updated VRR Curve Decrement is a function of the MW decrease in RTO reliability requirement and the MW quantity procured in the BRA relative to the BRA reliability requirement An alternative method has been developed to determine a PJM Sell Offer price based solely on the MW decrease in RTO reliability requirement and completely independent of the MW quantity procured in the BRA relative to the BRA reliability requirement This alternative determines both the PJM Sell Offer MW quantity and the PJM Sell Offer price consistently based only on the MW difference between the BRA reliability requirement and the updated reliability requirement 9

10 Alternative #2 - Starting Price of PJM Sell Offer Curve (cont.) Using this alternative, the starting point price of the PJM Sell Offer curve decreases as the updated reliability requirement relative to the BRA reliability decreases but is unaffected by the UCAP MW quantity procured in the BRA relative to the BRA reliability requirement Alternative #2 specifies a starting price of the PJM Sell Offer curve expressed as a percent of the BRA RCP for a range of potential updated reliability requirements expressed as a percent of the BRA reliability requirement: The values of table above were developed as shown in Appendix of this presentation 10

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12 Appendix Development of starting price of PJM Sell Offer curve for Alternative #2 Example: PJM Sell Offer Curves (Status Quo & Alternative #1 and #2) for BRA procured quantity of 102% and updated reliability requirement of 96% Updated summary of IA results 12

13 For each 1% decrease in reliability requirement, the starting price decreases by 14.3% on average 13

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15 Historical IA Results (by IA) 15

16 Historical IA Results (by Delivery Year) 16