1. OPSI Panel: LMP Pricing Improvements
Direct Energy, LLC
Scarp (David Scarpignato)

2. LMP vs. Uplift Why? : Competition in the hope of:
Market Efficiency
Transparency
Transfer generation risks to private investors rather than ratepayers
Need for Competitive Retail Provider if Wholesale Deregulated
Compete for cheapest Supply rather than cronyism or self-dealing
Sophisticated risk hedging strategies to deal with volatility and cash flow
Uplift Hinders Markets and Competition at Retail Level
Competitive retail providers depend on competitive wholesale markets
Competitive retail providers are harmed by out-of-market (Uplift)
Uplift is unhedgeable and harms the competitive LSE business model
Severe out-of-market costs could eliminate retail competitors

3. Out-of-Market/LMP Costs on Extreme Days
“Free Market” price formation (LMP) seems to fall apart under "Extreme" days
Interchange Volatility
Need to know what interchange will be to dispatch correctly
8,000 MW unexpected interchange plummeted PJM prices (polar vortex) and created uplift
Wrong internal commitments (DR and generation) if anticipate incorrect interchange
Need to encourage forward interchange scheduling on Extreme days
Limit real-time interchange transactions since internal commitment decisions already made

4. Generation Failures on Extreme Days
Creates need for excess commitments
Need to capture out-of market excess commitments
Price through carrying excess reserves
Reserves are joint-optimized with LMP
Send market signal to those causing need for excess commitment (generators that fail to start)
About 32,000 MW of generators failed on January 7th (22% of resources)
Charging load fails to signal generators to perform better
Excess Reserves (Commitments) should be charged to deviations

5. Solutions to Reactive Uplift
Units brought on for (voltage support) are paid as uplift
Need to build transmission to fix chronic operational issues regarding voltage.
A $50,000 capacitor bank makes more sense than paying a generator $1,000,000 a in uplift
Single generator with market power to solve reactive problem areas is poor construct

6. MVA Rather Than MW Based LMP
Paying of units for constrained economic dispatch, REGARDLESS of constraint belongs in LMP
LMP is supposed to be a “constrained economic dispatch” and not “THERMALLY constrained economic dispatch”
Need to include reactive (MVAR) in addition to real power (MW) as part of LMP
When unit brought on for reactive (voltage support) it is currently paid as uplift
Do Constrained Economic Dispatch using MVA instead of MW.
Computing power is greater today
EMS systems are advanced and can even do optimized MVAR flow
Cost-capping for resource concentration associated with reactive issues - in additions to today's based on thermal