Been seeing a lot of questions about PJM capacity charges lately and I'm wondering if auditors are properly reviewing these line items. For those working in PJM territory (Pennsylvania, Ohio, parts of Illinois, etc.), the capacity charges can be substantial - sometimes $3-5 per kW per month. I've found several cases where the utility applied the wrong capacity tag or used outdated peak load data. Anyone else focusing on these charges or are we mostly just looking at energy and delivery?
PJM capacity charges - are auditors missing these?
Randy, absolutely critical point. Here in Pennsylvania with PPL, I've found capacity charge errors on about 30% of the large commercial accounts I audit. The biggest issue is when they use the wrong coincident peak data for determining the capacity obligation. Last month found a $2,800/month error going back 14 months because they were using 2019 peak data instead of current year.
Sylvia's right - the coincident peak methodology is where most errors occur. Here in Pittsburgh with Duquesne Light, I always verify that they're using the correct 5 coincident peak hours for the capacity year. Also check that any load reductions from demand response programs are properly credited. Found a $15,000 annual error last year where DR credits weren't applied to capacity charges.
This is really helpful. I'm working in Washington state with PSE so we don't deal with PJM, but I'm curious - are these capacity charges part of the delivery rate or are they separate line items? And Randy, do you find that utilities are generally responsive when you challenge these or do they push back?
Willa, they're typically separate line items on the delivery side of the bill, though some utilities bundle them into a single delivery charge. Most utilities are pretty responsive once you provide the documentation showing their error. The key is having the actual PJM data to back up your position. Walt, that's a great point about demand response credits - I need to start checking those more carefully.
Following this thread with interest even though I'm in the Pacific Northwest. Randy, do you have any good resources for understanding how PJM calculates these capacity obligations? I might have some clients expanding into PJM territory and want to be prepared.
Ted, the PJM website has detailed manuals on capacity obligation calculations. Also recommend getting familiar with the Reliability Pricing Model (RPM) auctions since those set the capacity prices. The key metrics to understand are Forecast Pool Requirement (FPR) and each zone's locational adjustments.
Randy, this is exactly the kind of advanced auditing I want to get into. I'm mostly doing basic rate verification now here in Missouri with Ameren, but want to expand into the more complex deregulated market issues. Any advice on building expertise in capacity market mechanics?
Brett, I'd recommend starting with FERC Order 719 and the subsequent capacity market reforms. Also helpful to understand transmission planning and how that affects capacity zones. The money is definitely in these complex deregulated market audits versus basic tariff verification.
One more tip for anyone auditing PJM capacity charges - make sure you understand the Emergency Load Response and Economic Load Response programs. Customers enrolled in these programs should receive capacity credits that offset their obligations. I've found utilities sometimes fail to apply these credits properly.
Walt, great point about the load response programs. Here in West Virginia with AEP, I've seen capacity credit errors on several accounts enrolled in curtailment programs. The documentation requirements are pretty strict but the savings can be significant - sometimes 20-30% reduction in capacity charges.
Just wanted to add that Firstenergy in our territory has been pretty good about correcting capacity charge errors once you provide proper documentation. The key is showing the actual PJM settlement data versus what they billed. Usually takes 2-3 billing cycles to process the adjustment but they've been fair about including interest.