Joint Common Market
MISO-PJM Interface Pricing Update
Outline
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Interface Pricing Issue Description
Key Takeaways
Solution Options and Analysis Efforts
Observations
Next Steps
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Issue Statement
PJM’s Path: PJM load center to the seam
Overlap
MISO’s Path: PJM generation center to MISO load center
The overlap leads to
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Duplicative congestion incentive for the transaction
Revenue imbalance leading to uplift costs
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Issue Statement
 This modeling overlap causes two main issues
 Duplicative settlement with the transaction (over & under
payment)
 Revenue imbalance (congestion collected versus
congestion payment)
 There are potential unintended consequences
 Price volatility on M2M constraints will create
uncertainties for Market participants to schedule
efficient transactions
 Price efficiency on Non-M2M constraints
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Key Takeaways
 Since August 2015, MISO and PJM have been working towards
a collaborative approach for interface pricing
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Benchmarked the effectiveness of a collaborative approach using a
marginal zone baseline and other possible solutions
Results prove that the common interface method has merit to resolve
the interface pricing issues
MISO IMM’s Incremental Approach appears to have adverse impact on
PJM M2M constraints
Additional analysis is needed for MISO to fully evaluate the impacts to
the DA and FTR markets
 MISO and PJM will remain status quo in the short term and will
develop long-term recommendation after the analysis is
completed
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Interface Pricing Solution Proposals
Benchmark
MISO IMM’s
Original Proposal
PJM’s Original
Proposal
Marginal Zone to
Centroid to Centroid
Marginal Zone approach Approach
10 bus common
interface definition
Weighted shadow
NMRTO excludes
prices are used from
transaction’s impact
both MISO and PJM
on the constraint
based on historical price
convergence statistics
Commercial flow
proposal
Collaborative
Approach
50 bus & 10 bus
common interface
definition
Modify FTR and DA
limits, if needed, to
reflect transaction’s
impact
PJM’s commitment for
modeling expansion
Modified Collaborative
Approach
10 bus common interface
definition for M2M
constraints and PJM Non
M2M constraints
MISO adopts centroid to
centroid interface definition
for MISO Non M2M
constraints
Modify FTR and DA limits, if
needed, to reflect
transaction’s impact
MISO IMM’s MISO
Incremental
Proposal
MISO adopts centroid to
centroid interface
definition
MISO excludes
transaction’s impact on
PJM constraints
PJM preserves 10 bus
common interface
definition
PJM’s commitment for
modeling expansion
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MISO-PJM Collaboration Timelines
Joint Analysis Results Observation
2/18/2016
Joint Supporting Analysis Wrap Up
1/29/2016
Joint Stakeholder Notification on
Collaborative Approach
11/18/2015
2015
Aug
Sep
Oct
Nov
Dec
2016
Feb
Mar
Apr
May
Jun
2016
Today
Conceptual Design for the Collaborative Approach
50 days
8/24/2015 - 10/30/2015
203 days
PJM Model Expansion for the MISO-PJM Seams
8/24/2015 - 6/1/2016
21 days
62Analysis
days
Scope Development
44Collaboration
days
with MISO IMM
60Coordination
days
for the Joint Analysis Simulation and Results Review
Forward Market Impact Analysis for MISO
11/2/2015 - 11/30/2015
11/10/2015 - 2/3/2016
12/1/2015 - 1/29/2016
2/8/2016 - 4/29/2016
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Overview of the MISO-PJM Coordinated Analysis
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Purpose
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Establish baseline
Accurately evaluate price efficiency for the alternative approaches
Process
 Baseline Development
 Use December 2015 data to derive baselines for all constraint classes in terms of shift
factors and price incentives
 Used Marginal zone approach; Marginal zone is the weighted group of zones with respect to
their contribution to the next marginal MW between MISO and PJM
 Shift Factor Evaluation Analysis
 Reconstruct shift factor of each solution proposals
 Evaluate shift factor impact for all MISO and PJM constraints against the shift factor baseline
 Price Impact Analysis
 Merge historical shadow price data with the reconstructed shift factor data for each solution
proposals
 Evaluate price impact for all MISO and PJM constraints against the price baseline
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Price Incentive Performance by Constraint Class
 Status quo is providing
incentive in the wrong
direction
 MISO Incremental is only
accounting for half the
incentive
 Collaborative/Modified
approaches are providing
a close incentive to the
baseline
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Price Incentive Performance by Constraint Class
 MISO IMM’s Incremental
Approach retains the
overlap in modeling, and
thus does not mitigate the
over incenting issue
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Price Incentive Performance by Constraint Class
 No proposal shows
large price incentives
 All proposed solutions
provide similar
incentives to the
baseline
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Price Incentive Performance by Constraint Class
 All proposed solutions
provide similar
incentives and deltas
from the baseline
incentive
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Next Steps
 Perform the additional analysis
 Expand price incentive analysis to 2015
 Evaluate additional market impacts
 Coordinate and exchange results with MISO
IMM
 Develop recommendation and provide update
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Contact Information
MISO
• Dhiman Chatterjee
• [email protected]
• Beibei Li
• [email protected]
PJM
• Asanga Perera
• [email protected]
• Tim Horger
• [email protected]
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APPENDIX
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History
PJM Published Whitepaper
2/19/2015
Issue Identification by MISO IMM (2012
State of the Market Report)
PJM Implemented
Common Interface
Approach
6/10/2013
Collaborative Package
Development with PJM
8/19/2015
MISO Published Whitepaper
6/1/2014
5/27/2015
2013
2013
2014
First Joint Common Market
Discussion with PJM
Establishment of the
Interface Pricing
Small Group
2015
5/11/2015
6/6/2014
3/21/2013
TODAY
2015
FERC AD 14 Open Docket
12/5/2014
Initial Interface Pricing
Coordination with SPP
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2015 Annual Congestion Funding Impact
Congestions Funding Impact for both MISO
and PJM when compared to Status Quo
Constraint Class
Collaborative
Approach
Modified
Collaborative
Approach
MISO Incremental
MISO Non M2M
$.01 Million
~$0
~$0
MISO M2M
-$0.2 Million
-$0.2 Million
-$0.08 Million
PJM M2M
-$.5 Million
-$.5 Million
$1.2 Million
Overall
-$.69 Million
-$0.7 Million
$1.12 Million
Negative dollar value indicates savings
Positive dollar value indicate costs
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