On December 30, 2019, FERC accepted, subject to further compliance, revisions to PJM Interconnection, L.L.C.’s (“PJM”) Price Responsive Demand (“PRD”) program to align the program’s rules and requirements with those applicable to supply-side “Capacity Performance Resources” participating in PJM’s capacity market. PJM previously submitted PRD revisions in February 2019, but FERC rejected PJM’s filing in a June 2019 order, on the basis that PJM’s proposed method for calculating the Nominal PRD Value—i.e., the MW amount to be curtailed—was inconsistent with the manner in which PJM calculated a Load Serving Entity’s (“LSE”) capacity supply obligation (see July 18, 2019 edition of the WER). FERC’s December 30 order accepted PJM’s proposal to maintain the existing Nominal PRD Value calculation based on a LSE’s capacity obligation, which is itself derived from the LSE’s annual coincident peak demand. In response to a protest from PJM’s Independent Market Monitor (“IMM”), FERC also required PJM to clarify on compliance that an LSE is not eligible to receive certain bonus payments for load reductions during system emergencies when the prevailing LMP has not reached the applicable trigger price.

PJM’s PRD program provides LSEs the opportunity to reduce their bills for energy and capacity by curtailing consumption by a certain MW amount (the Nominal PRD Value) in emergency conditions and when the locational marginal price (“LMP”) exceeds a trigger price. LSEs can also commit to curtail load during PJM’s annual peak, which generally occurs in the summer. As LSEs make load reduction commitments, the PRD program reduces the amount of capacity they are required to purchase, resulting in reduced energy bills.

PJM re-submitted proposed revisions to its PRD program in October 2019. In that filing, PJM explained that while PRD resources can offset the amount of required capacity resources on a one-to-one basis, the existing PRD rules do not impose the same requirements as the rules for capacity resources. PJM thus proposed to make specific changes to the PRD program to better align it with the rules and requirements applicable to capacity resources. Among other things, PJM proposed to make PRD providers eligible for bonus payments for load reductions during system emergencies if the reduction exceeds the MW value committed to be reduced. PJM also addressed FERC’s concerns in the June 2019 order related to PRD pricing by maintaining the existing pricing mechanism based on an LSE’s capacity obligation derived from its annual coincident peak demand.

FERC accepted PJM’s proposals, but in response to a protest filed by PJM’s IMM, required PJM to make tariff revisions to clarify that an LSE is not eligible to receive bonus payments for load reductions during system emergencies when the prevailing LMP has not reached the applicable trigger price.

FERC’s December 30 order is available here.