Problem / Opportunity Statement
Assess the efficacy of RPM and other alternative resource adequacy constructs
for PJM
Problem / Opportunity Statement
The Reliability Pricing Model (RPM) became effective in 2007. The initial version of this resource adequacy construct was the
result of intense multiparty negotiations among the PJM stakeholders and PJM during the settlement process at the Federal
Energy Regulatory Commission. RPM was proceeded by years of contentious stakeholder debate on how best to address the
“missing money” from the energy and ancillary service markets.
Ten years later, RPM has continually changed either in reaction to unforeseen events or as part of perceived design
improvements. Since 2010, there have been 24 significant filings made to modify RPM. According to PJM, the 2016 BRA
was the first BRA with no rule changes from the prior year.
The current version of RPM, Capacity Performance, was particularly stressful to the stakeholder community due to the
inclusion of operational performance requirements, a paradigm shift for seasonal resource participation, and a near complete
unwind of the market mitigation rules surrounding offer caps, all of which were enacted in an expedited timeframe. This
version of RPM is currently before the U.S. Court of Appeals for the District of Columbia Circuit. PJM and stakeholders are
continuing to work on implementation details.
In spite of the changes to RPM that resulted from CP, in 2015, RPM was again challenged by unforeseen events, specifically
the power purchase agreements in Ohio, as some states and load-serving entities attempt to take a more active role in guiding
the resource mix and that others view as out of market threats to RPM. Complaints were filed at both the state and federal
levels, and PJM and affected parties have asked for various levels of relief ranging from imposing the Minimum Offer Price
Rule (MOPR) on existing generation to requiring PJM to make a compliance filing to address this problem, to dismissing the
complaint.
PJM needs a resource adequacy construct that is sufficiently robust to be reasonably able to withstand unforeseen exogenous
events absent significant and reactionary rule changes. Each state has its environmental, political and policy goals that could
impact RPM. Additional significant change is on the horizon with the EPA’s Clean Power Plan. And, it would be naïve to
assume we will have no more unforeseen events.
PJM and the stakeholder community need to embark on a comprehensive and holistic assessment of RPM and alternative
resource adequacy constructs that, in concert with the energy, ancillary services markets and shortage pricing, would be more
resilient in the face of constant change.
PJM © 2015
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