PROJECT NO. 54335
9 January 2023
Most of the specific questions posed in the Commission’s Request are related specifically to the performance credit mechanism (PCM), but subsequent discussion in a variety of forums has made clear that there is not agreement on the problem to be solved. [...] Using values from the E3 Report dividing the expected cost increase by the improved reliability, as measured by reduction in expected unserved energy (EUE) indicates the value of improved reliability from FRM, LSE-RO and PCM to be roughly $37K per megawatt hour (MWh) and the backstop reliability service (BRS) to be roughly $29K per MWh.5 These values are within estimated ranges of the value of los. [...] Structuring the Commission's deliberations around the appropriate value to place on system reliability is likely to lead to a more productive outcome than the current strategy, which seems to be one of reliability (or at least the appearance of reliability) at all costs. [...] If recommending a different standard, at what level should the standard be set (e.g., how many MWh of EUE per year)? The most important aspect of creating a new market design element intended to improve reliability is to define the reliability standard to be achieved. [...] Depending on how the BRS is used, there may also be concerns regarding the effects of transmission constraints on the selection or deployment of the service.