Reliability Pricing Model Part 2
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Reliability Pricing Model Part 2. Gloria Godson VP, Federal Regulatory Policy. Combined Service Territory. Who is Pepco Holdings, Inc. Transmission & Distribution. Competitive Energy / Other . PHI Investments. Regulated transmission and distribution is PHI’s core business. 2.

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Reliability Pricing Model Part 2

Gloria Godson

VP, Federal Regulatory Policy


Combined Service Territory

Who is Pepco Holdings, Inc.

Transmission & Distribution

Competitive Energy / Other

PHI Investments

Regulated transmission and distribution is PHI’s core business.

2


Pjm s proposal dr operational deployment
PJM’s Proposal: DR Operational Deployment

  • Enhancements to DR obligations

    • Changes to administrative procedures during emergency

    • Revise emergency DR to an economic dispatch approach

  • Changes to notification time requirements for DR

    • Diversify the lead time for notification of DR during emergency

    • Current Emergency DR: 2 hour (~9,000 MWs) and 1 hour (~500 MWs) lead time

  • Allow for DR resources to operate with a dispatchable range

    • Must offer requirement for DR in the Day-Ahead market

  • Address the impact of Limited DR clearing in RPM auctions

    • Cap/Curtail Extended Summer/ Limited DR

    • Revise DR assumptions and modeling in PJM planning studies

  • Whether capacity DR meets the RPM physical reliability requirement


Phi s demand response programs
PHI’s Demand Response Programs

  • PHI’s participation is PJM’s DR market is to implement the public policy objectives of our states and the needs of our customers

  • PHI offers mass-market mostly residential DR programs including Direct Load Control and Peak Energy Savings to our customers

  • We offer the summer extended and limited DR products

  • PHI programs provide RT market offers once an emergency has been declared

  • Peak Energy Savings program pays customers $1.25KWh ($1250)

    • Must have capability to reflect true cost in bids

    • DR customer fatigue from frequent calls

    • Impact Advanced Metering (AMI) value proposition

  • PHI’s program was designed around existing RPM rules and interruption expectations. Every interruption costs PHI $$$

  • Changing the DR operational characteristics and compliance rules will affect PHI’s ability to deliver on our state commitments and product offerings to customers



Phi issues concerns
PHI Issues & Concerns

  • Market Issues

  • Must offer requirement for the Day-Ahead energy market

  • “Parameter Limited Schedules” for DR

  • Compliance issues & concerns

    • How will compliance change?

    • Clear criteria for calling customers

    • Compliance timeline

      • Prospective only

      • Appropriate transition mechanisms

    • DR fatigue - “cycling” period

    • Eliminating emergency declaration

  • Regulatory

    • Regulatory recovery

    • Reduced revenues for customers

    • Impact on utility’s ability to support state public policy objectives

    • Regulatory risk due to penalties if no adjustments are allowed

    • Limitations on participation in incremental auctions


  • Dr operational deployment phi s position
    DR Operational Deployment : PHI’s Position

    • PHI supports changes to notification times for DR:

    • DR buckets with 60 and 120 minutes lead time

  • Trigger:PHI supports having both emergency and economic DR

    • DR programs like PHI’s play a key public policy role and should be carved out:

    • Achieving conservation, changing customer behavior, changing the load profile/curve, shaving the peak and implementing public policy mandates

    • Direct impact on a million customers

    • No flexibility - state mandated

  • Dispatch granularity/Geographic Diversity: dispatch of local regions:

    • PHI supports dispatch granularity but not by zip code or pNode

    • For program purposes, mass market calls must occur by zone e.g. All of PEP, not certain zip codes

  • Penalty structure revision:

    • PHI opposes any rule changes that will impair our ability to transact in the incremental auctions to meet our capacity obligations and manage risk

  • Keep in mind that it was DR that saved the day during hot weather operations in July and September


  • Dr comparability to generation phi s position
    DR Comparability to Generation – PHI’s Position

    • Comparability: Should all capacity resources be paid the same price?

      • PHI supports all capacity resources being paid the market clearing price. Discrimination by resource type is undue discrimination

    • PHI supports the greater participation of cost effective DR products that are functionally comparable to generation

      • Comparability is not equivalency

      • DR is that it can be both load as well as supply

      • PHI can support a must offer requirement provided parties can bid their legitimate costs

    • PHI supports market prices that reflect real system conditions and sends the right price signals

      • PHI opposes using DR as a purely financial product for arbitrage. We believe that the capacity product under the Reliability Pricing Model (RPM) was intended to be a physical product

    • PHI opposes a DR day-ahead “must offer” obligation as it could expose PHI to significant downside market risk with no upside

      • PHI’s mass market DR programs do not pose market power concerns


    Phi recommendations
    PHI Recommendations

    • Rule changes should be prospective only - Starting from 2015/16

      • Include appropriate transition mechanisms and timelines

      • Support state regulatory processes to reconfigure existing programs

    • Mass-market mostly residential programs like PHI's should be carved out of some rules changes <100 kW or similar standard

    • Rules must minimize barriers to entry for residential customers to reduce end use administrative complexity and risk

    • Protect or hold members harmless from the negative impact of market positions taken under existing rules - honor existing commitments

    • Rule revisions must recognize the differences between mass market (residential) and contractual resources

    • Emergency Declaration - the programs have been designed around an emergency implementation. Implementation ahead of an emergency declaration is problematic and may require state tariff changes

    • PJM should not cap the extended summer product or eliminate the limited DR product. PJM must resist the temptation to make major long term changes to solve a short term problem


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