Consistency of Energy-Related Opportunity Cost Calculations

Consistency of Energy-Related Opportunity Cost Calculations Bhavana Keshavamurthy Market Implementation Committee 03/14/2012 PJM 2012 www.pjm.com 1 P a g e

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Overview The definition of Lost Opportunity Cost (LOC) according to the PJM dictionary is "The difference in net compensation from the Energy Market between what a unit receives when providing regulation or synchronized reserve and what it would have received for providing energy output. xiii While this definition provides a broad based description of LOC, the implementation of LOC is different across the different PJM Markets. This document aims at summarizing the commonalities and differences between LOC calculations in the different markets. This document will focus on these main areas: How energy lost opportunity cost values are calculated in reserve markets where LOC is a component of the clearing price Day-ahead Scheduling Reserve (DASR) Synchronized Reserve (SR) Regulation (Reg) How generation owners are compensated for LOC after the fact The most common instance when LOC is incurred by a generation resource is when its output is reduced from an otherwise economic output so that it can provide an ancillary service such as Synchronized Reserves or Regulation. For dispatchable generation resources, PJM s LOC calculation is an integration of the area between the LMP and the applicable offer curve over the output range of the reduction. The goal of this LOC calculation is to accurately capture the revenue that a generation resource has foregone in the energy market by producing less MWs in order to provide some type of reserve service. Dispatchable generators participating in the energy markets have a dispatchable range associated with it. The dispatchable range is the span between the Economic Min and the Economic Max of the unit. The maximum amount of MW that a unit can clear for reserves, the ASMWLMIT, depends upon the unit s output capability, ramp rate and the reserve product. If the market is a 30 minute product like DASR, or, a 10 minute product like the Synchronized Reserve, the ASMWLIMIT can vary. This document focuses on both LOC calculations where the LOC is calculated as a component of the clearing price and 'after the fact' LOC calculations. Also, this document is only intended to discuss the various LOC calculations for generation resources, only. Currently the PJM Tariff stipulates that LOC for demand resources is $0.00. PJM 2012 www.pjm.com 3 P a g e

$/MWh LMP LOC Marginal Cost MW Final Dispatch Point Economic Dispatch Point As we see in the example above, the unit is being held back for reserves and compensated for LOC. So the unit would have gone to the economic dispatch point and been compensated for those MW at the LMP if the unit was not committed for reserves. But since the unit is being held back to the final dispatch point by PJM in order to supply reserves, PJM makes the unit whole to the green area above marked LOC. NOTE: LOC is only calculated over the dispatchable energy range of the unit. In DASR for example, reserve commitments are made up to the Emergency Max of the unit which may be higher than Economic Max. However, there is no LOC incurred beyond the Economic Max of the unit. Day Ahead Scheduling Reserve (DASR) Market The Day Ahead Scheduling Reserve (DASR) Market is an offer based market that procures 30 minutes supplemental reserves. The goal of the market is to schedule enough reserve that meets the reserve requirements stipulated by reliability standards (BAL-002-RFC-02). The reserves enable the system to operate reliably and economically while providing protection against load variations, forecast error and equipment failures. The DASR clearing price is set equal to the total price of the highest cost Day-ahead Scheduling Reserve resource necessary to meet the remaining requirement. DASR clearing price ($/MWh) = resource DASR offer + resource DASR opportunity costs. xiv PJM 2012 www.pjm.com 4 P a g e

DASR LOC Calculation Example Let us consider the following scenario for a unit that is eligible for DASR. The unit is being dispatched to 300MW (DA Final Energy Dispatch point) and the DA LMP is $100. Based on the offer curve and the unit's cost at economic max ($80/MWh), we can calculate that the unit would have been dispatched to economic max had it not been committed for reserves. Therefore, the DA Energy Reference MW in this case is the unit's economic max which is 400MW. Offer Curve MW Price 100 50 200 60 300 70 400 80 450 80 Emergency Max [MW] 450 Economic Max [MW] 400 ASMWLMIT [MW] 150 DA LMP [$/MWh] 100 DA Energy Dispatch [MW] 300 DASR Committed [MW] 150 DA Energy Reference MW 400 DASR Example: PJM 2012 www.pjm.com 5 P a g e

The LOC for this unit can be determined by calculating the area between the DA LMP and offer curve for the region bound by the DA Final Energy Dispatch point and the DA Energy Reference MW. This represented by the shaded area in red in the figure above. This shaded area can calculated using geometrical calculations. The shaded red area can be divided into two areas, LOC A which is the rectangular green portion and LOC B which is the triangular orange portion as shown in the figure below. LOC A LOC B LOC calculation: LOC A (Rectangular Green Portion) = [DA LMP - Cost @ DA Energy Reference MW] * [DA Energy Reference MW - DA Final Dispatch] LOC A = [$100 -$ 80] * [400MW 300MW]=$20*100MW LOC A=$2000 LOC B (Triangular Orange Portion) =.5 * [Cost @ DA Energy Reference MW - Marginal Cost @ DA Final Dispatch] * [DA Energy Reference MW - DA Final Dispatch] LOC B =0.5 * [$80 - $70] * [400MW 300MW]=0.5*$10*100MW=$500 LOC B=$500 Total LOC = LOC A + LOC B = $2000 + $500= $2500 Total LOC=$2500 LOC [$/MWh of DASR] = Total LOC / DASR Committed = $2500/150MWh=$16.67/MWh DASR Rank Price = DASR Offer Price + LOC = DASR Offer price + $16.67 PJM 2012 www.pjm.com 6 P a g e

Synchronized Reserve (SR) The Synchronized reserve market is an offer based market that clears resources that can be converted fully into energy within 10 minutes or customer load that can be removed from the system within 10 minutes of the request from the PJM dispatcher, and must be provided by equipment electrically synchronized to the system. These resources provide a quick boost of generation (or load reduction) to the system to recover ACE after a resource loss, large tie errors, and under frequency conditions. Synchronized Reserve and Regulation products are currently co-optimized using the SPREGO software. Total price includes Synchronized offer + estimated lost opportunity cost (plus energy usage + startup costs, if any, for condensers only). Resource total price ($/MWh) = Resource synchronized reserve offer + estimated resource lost opportunity cost per MWh of capability + energy use per MWh of capability. xv SR LOC Calculation Example Let us consider the following scenario for a unit that is eligible for SR. The Forecasted SPREGO LMP is $75. Based on the offer curve, we can calculate that the unit would have been dispatched to 350MW had it not been committed for reserves. However, the unit is being dispatched to 300MW (Final Energy Dispatch point) and is clearing 50MW of SR. Offer Curve MW Price 100 50 200 60 300 70 400 80 450 80 Emergency Max [MW] 450 Economic Max [MW] 350 Tier 2 Offer MW 50 SPREGO Forecasted LMP 75 Energy Dispatch [MW] 300 SR committed [MW] 50 Energy Reference MW 350 The LOC for this unit can be determined by calculating the area between the LMP and offer curve for the region bound by the Final Energy Dispatch point and the Energy Reference MW. The triangular blue area represents the LOC in this scenario. PJM 2012 www.pjm.com 7 P a g e

SR Example: LOC. LOC calculation: LOC (Triangular Blue Portion) =.5 * [Cost @ Energy Reference MW - Marginal Cost @ Final Dispatch] * [Energy Reference MW - Final Dispatch] LOC B = 0.5 * [$75 -$ 70] * [350MW 300MW] = 0.5*$5*50MW Total LOC =$125 LOC [$/MWh of SR] = Total LOC / SR Committed = $125 / 50MW= $2.50/MWh SR Rank Price = SR Offer Price + LOC= SR Offer Price+ $2.50 Regulation Regulation is an ancillary service that corrects for short-term changes in electricity usage that might affect the stability of the power system. It matches generation and load and adjusts generation output to maintain the desired frequency. Regulation market is an offer based market and is co-optimized with synchronized reserve. Total price includes regulation offer + estimated opportunity cost Resource total price ($/MWh) = Resource regulation offer + estimated resource opportunity cost per MWh of capability. xvi PJM 2012 www.pjm.com 8 P a g e

Regulation lost opportunity cost calculations are more complex than for other markets. In regulation, LOC can occur both when a unit is lowered and raised to provide regulation. For a unit to be able to regulate, it has to be dispatched within its regulation range. So if the unit is at its maximum output, it will have to be lowered into its regulating range, to ensure that it is able to provide the full amount of regulation that the unit has bid in. This will create a LOC component equivalent to the shaded area in red in the figure below. Similarly, if the unit is at its minimum output, it will have to be raised into the regulating range creating an LOC component equivalent to the shaded area in blue as indicated in the figure below. So RegLoc could be the foregone revenue or increase in costs relative to the energy market for providing regulation. Costs may also be incurred in the hours surrounding a regulation assignment. To ensure that the generators are accurately compensated in the hours prior to and following an hour where they regulated, the RegLoc component includes any lost opportunity costs for the period they had to operate uneconomically in a non-regulating hour to comply with a regulation commitment in an adjacent hour. The LOC calculated in these shoulder hours is a component of the total RegLOC calculated for that hour. PJM 2012 www.pjm.com 9 P a g e

Re gloc RLOC SHB RLOC RH RLOC SHA Regulation Lost Opportunity Cost = Regulation LOC in the beginning shoulder hour + Regulation LOC in the regulating hour + Regulation LOC in the ending shoulder hour Approximate formula : RLOC RLOC Where: SHB RH, RLOC LMP SHA RH LMP SH ED GENOFF ED GENOFF TIME RLOCSHB= Regulation LOC in the beginning shoulder hour RLOCSHA= Regulation LOC in the ending shoulder hour LMPSH, LMPRH is the forecasted shoulder hour LMP at resource bus ED is the price from LOC energy schedule associated with the set point the resource must maintain to provide its full amount of regulation GENOFF is the MW deviation between economic dispatch and regulation set point TIME is the percentage of the hour it would take the resource to reduce GENOFFMW using the applicable ramp rate xvii. This formula is showing that there is Regulation LOC in the 2 shoulder periods as well as the regulating hour. Regulation LOC Calculation Example Let us consider the following scenario for a unit providing Regulation. The SPREGO Forecasted LMP is $100. Based on the offer curve, we can calculate that the unit should be dispatched to 400MW if it was not being lowered for Regulation. Here is where the LOC calculations for regulation market differ from other markets. In other markets, the schedule that the unit is committed on for energy is the schedule that is used for LOC calculations. However, in the regulation market that is not the case. The energy schedule that is used for LOC (referred to going forward as LOC energy schedule) is determined using the following rule: Energy Schedule for Regulation LOC = Min [min (available price-based energy schedule), max (available cost-based energy schedules)]. The operating rate is considered as the reference point to decide with schedule is being used. The operating rate is obtained by the following formula: OpRate = (AreaunderCurve + NoLoad)/EcoMax PJM 2012 www.pjm.com 10 P a g e

This process of schedule swapping is inconsistent with the calculation of LOC in other markets. Using this method, a unit may be overcompensated when it is reducing for regulation and may be undercompensated when it is raising for regulation. This particular method needs a review to ensure that it is consistent with other LOC calculations in PJM. For the purpose of this example, let us assume that the cost schedule is the schedule that will be used to calculate the LOC. Example 1: LOC due to unit being lowered for regulation Cost Offer Price Offer Curve curve MW Price MW Price 100 50 100 40 200 60 200 50 300 70 300 60 400 80 400 70 450 80 450 70 Emergency Max [MW] 450 Economic Max [MW] 400 Reg Offer MW 50 RegMax 350 RegMin 200 SPREGO forecasted LMP [$/MWh] 100 Energy Reference MW [MW] 400 REG committed [MW] 50 PJM 2012 www.pjm.com 11 P a g e

The total LOC remains the same as in previous calculation for DASR and SR. The blue shaded area represents the Total LOC in this scenario. To calculate this components, this area is divided into two areas, the rectangular red area and the triangular green area. LOC A LOC B LOC calculation: LOC A (Rectangular red Portion) = [LMP -Marginal cost] * [Energy Reference MW - Final Dispatch] LOC A = [$100 - $70] * [400MW 300MW]=$3000 LOC B (Triangular green Portion) =.5 * [Cost @ Energy Reference MW - Marginal Cost @ Final Dispatch] * Energy Reference MW - Final Dispatch] LOC B =.5 * [$70 - $60] * [400MW 300MW] = =$500 Total LOC = LOC A + LOC B= $3000+$500=$3500 LOC [$/MWh of REG] = Total LOC / REG MW Committed =$3500/50 = $70/MWh REG Rank Price = REG Offer Price + LOC= REG offer price + $70/MWh PJM 2012 www.pjm.com 12 P a g e

Example 2: LOC due to unit being raised for regulation LOC B LOC A PJM 2012 www.pjm.com 13 P a g e

Let us consider the following scenario for a unit providing Regulation. The SPREGO Forecasted LMP is $30. Based on the offer curve, we can calculate that the unit should be dispatched to 150MW if it was not being raised for Regulation. For the purpose of this example, let us assume that the cost schedule is the schedule that will be used to calculate the LOC. Cost Offer Price Offer Curve curve MW Price MW Price 100 50 100 40 200 60 200 50 300 70 300 60 400 80 400 70 450 80 450 70 Emergency Max [MW] 450 Economic Max [MW] 400 Economic Min [MW] 150 RegMax 350 RegMin 200 Reg Offer MW 50 REG Offer Price [$/MWh] $10 SPREGO forecasted LMP [$/MWh] $30 Energy Reference MW [MW] 150 REG committed [MW] 50 The blue shaded area represents the Total LOC in this scenario. To calculate this components, this area is divided into two areas, the rectangular red area and the triangular green area. PJM 2012 www.pjm.com 14 P a g e

LOC calculation: LOC A (Rectangular red portion) = [Marginal cost -LMP] * [ Final Dispatch- Energy Reference MW] LOC A = [$45 -$30] * [250MW- 150MW]= $15*100MW=$1500 LOC B (Triangular green portion) =.5 * [Cost @ Energy Reference MW - Marginal Cost @ Final Dispatch] * Energy Reference MW - Final Dispatch] LOC B = 0.5 * [$55 - $45] * [250MW 150MW]= 0.5*$10*100MW=$500 Total LOC = LOC A + LOC B = $1500+$500=$2000 LOC [$/MWh of REG] = Total LOC / REG MW Committed LOC [$/MWh of REG] =2000/50 =40 REG Rank Price = REG Offer Price + LOC Calculation of Regulation LOC for Hydro units Hydro units that clear for regulation have a different mechanism through which their LOC is calculated. Since hydro units do not have a curve as such, we need another method to calculate LOC for them. The formula is the same as used for other units, except the energy cost value is an average of the LMP at the hydro unit bus for the appropriate on peak or off-peak period, excluding those hours during which all available units at the hydro plant were operating. If this average LMP value is higher than the actual LMP at the generator bus, the opportunity cost is zero. The average LMP calculation is used in these cases to value the water saved by the hydro station for use in other hours to generate. If a hydro unit did not run at full output in a particular hour, the water saved can be used in another hour to generate. Day-ahead LMPs are used for the purpose of estimating opportunity costs for hydro units, and actual LMPs are used in the after-the-fact settlement. xviii xix Summary As we can see from the detailed examples in this paper, the calculation of LOC in the Regulation market differs from that of the DASR and Synchronized Reserve markets. PJM 2012 www.pjm.com 15 P a g e

After the fact Lost Opportunity Cost Settlements The following is a list of scenarios where PJM calculates after the fact lost opportunity costs: 1. Pool or self scheduled units that are directed by PJM to reduce output 2. CT's that are scheduled in the Day-ahead market but are not called on in Real-time 3. Reactive Services 4. Black start 5. Synchronized Reserve after the fact settlement 6. Regulation after the fact settlement The aim of this document is not to repeat the PJM Market Settlements procedure for compensating units for each of these scenarios. This information is well documented in Manual 28 and in the tariff. xx The aim here is to summarize scenarios where the need for after the fact LOC calculation may arise and to highlight any difference that occur in these calculations Pool or self scheduled units that are directed by PJM to reduce output Pool scheduled generators can incur LOC if they are directed by PJM to reduce its output, either due to transmission or reliability issues, and the Real Time LMP is greater than the units offer for the corresponding dispatch point. xxi In this scenario, the units will be compensated hourly based on the following calculation: (LMP Desired MW- Actual MW) * (RT LMP- incremental offer rate at actual MW) Wind generators are treated slightly differently. For these units, the desired MW in the equation above is calculated to be the lesser of the forecasted capability or economic max or LMP desired MW. (Effective 6/1/2012 ) xxii CT's that are scheduled in the Day-ahead market but are not called on in Real-time Combustion Turbines that are scheduled in Day ahead market but not called on in Real Time are compensated based on the following hourly calculation: The higher of (RT LMP- DA LMP)*DA scheduled MW OR (RT LMP-Incremental Offer Rate at DA scheduled MW)* DA scheduled MW PJM 2012 www.pjm.com 16 P a g e

Reactive Services Generators who provide reactive service within the PJM region are compensated under these scenarios xxiii : 1. Generators whose active energy output is reduced to support reactive reliability in PJM are credited hourly for LOC as described for the scenario where a unit is directed by PJM to reduce output. 2. Generator whose active energy output is increased to support reactive reliability in PJM are credited in accordance with BOR credit calculations 3. Generators which are operated as synchronous condensers are credited per the following calculation: Max [(SRMCP * SR MW), unit's total cost to condense] Black Start Services Black start resources can incur LOC when they are undergoing mandatory testing. Compensation for these resources is dependent on whether the energy was delivered to the system or not. If energy was delivered, the formula for the compensation is based on Max( units cost capped offer, RT LMP+start up+no loads costs) up to the units Min Run for the first two attempts If no energy is delivered, the unit is compensated for the unit's start up costs for up to two start attempts. Synchronized Reserve after the fact settlement Resources that cleared for synchronized reserve (tier 2) will be credited the higher of: (SRMCP)*(Assigned Synchronized Capability) (Synchronized offer)*(assigned synchronized capability) + (Opportunity Cost in Real time) + (Energy use incurred in Real time) + Startup costs Note: the LOC calculations are based on RTLMP and not the forecaster SPREGO LMP that was used to determine the SRMCP. Regulation- after the fact settlement PJM first calculates RMCP hourly credit for each resource that provided regulation. RMCP credit = Hourly-integrated Regulation MW * RMCP If the pool scheduled resource's regulation offer price is greater than its RMCP credit for that hour, then the resource receives an additional LOC credit which is calculated by: Lost Opportunity Cost Credit = (Regulation Offer + Lost Opportunity Cost, including Shoulder Hours Lost Opportunity Cost, if applicable) RMCP Credit, only if quantity is positive PJM 2012 www.pjm.com 17 P a g e

CT and hydro generators are not eligible for shoulder hour LOC credits Note: Order 755 requires the elimination of after-the-fact payments in the regulation market since they were found to be discriminatory. This issue is still under discussion in a different stakeholder forum. References: Service Manual 28 Tariff Reactive Services Section 5, Page 27 3.2.3B Reactive Service, Page 1639 Black start Services Section 5, Page 27 Testing section,pages 519,1786 Regulation after the fact settlement Synchronized Reserve after the fact CT's Scheduled in DA not called in RT Pool/self scheduled directed to lower output Section 4, Page 13 Page 1619 Section 6, Page 33 Page 1635 Section 5, Page 26 Page 1640 Section 5, Page 27 Page 1640 Impact of recommended changes on LOC calculations The goal of this section is to review the impacts of using the energy schedule that the unit is committed on to calculate the LOC. Design component : Schedule used to calculate LOC As reviewed earlier in the whitepaper on this topic, the LOC calculated by the clearing engine across the Day Ahead Scheduling Reserve (DASR), Synchronized Reserve and Regulation Markets are largely consistent. The major difference is due to the schedule that is used to calculate the LOC. In the DASR and Synchronized Reserve market, the schedule that the unit is committed on for energy is what is used for this calculation. But when calculating the LOC for regulation market, a schedule swapping occurs based on which is the cheapest available schedule for the unit. The recommendation is to use the same schedule that the unit is committed on to ensure consistency across all the markets. No changes will be made to the DASR and Synchronized Reserve markets for this design component. For example, reviewing the example presented in the whitepaper. PJM 2012 www.pjm.com 18 P a g e

Example 1: LOC due to unit being lowered for regulation Cost Offer Price Offer Curve curve MW Price MW Price 100 50 100 40 200 60 200 50 300 70 300 60 400 80 400 70 450 80 450 70 Emergency Max [MW] 450 Economic Max [MW] 400 Reg Offer MW 50 RegMax 350 RegMin 200 SPREGO forecasted LMP [$/MWh] 100 Energy Reference MW [MW] 400 REG committed [MW] 50 LOC A LOC B Let us consider the following scenario for a unit providing Regulation. The SPREGO Forecasted LMP is $100. Based on the offer curve, we can calculate that the unit should be dispatched to 400MW if it was not being lowered for Regulation. PJM 2012 www.pjm.com 19 P a g e

Current Calculation LOC A (Rectangular red Portion) = [LMP -Marginal cost] * [Energy Reference MW - Final Dispatch] LOC A = [$100 - $70] * [400MW 300MW]=$3000 LOC B (Triangular green Portion) =.5 * [Cost @ Energy Reference MW - Marginal Cost @ Final Dispatch] * Energy Reference MW - Final Dispatch] LOC B =.5 * [$70 - $60] * [400MW 300MW] = =$500 Total LOC = LOC A + LOC B= $3000+$500=$3500 LOC [$/MWh of REG] = Total LOC / REG MW Committed =$3500/50 = $70/MWh REG Rank Price = REG Offer Price + LOC= REG offer price + $70/MWh LOC A LOC B PJM 2012 www.pjm.com 20 P a g e

Recommended Calculation: Assuming that the unit is committed on its price schedule. LOC A (Rectangular red Portion) = [LMP -Marginal cost] * [Energy Reference MW - Final Dispatch] LOC A = [$100 - $80] * [400MW 300MW]=$2000 LOC B (Triangular green Portion) =.5 * [Cost @ Energy Reference MW - Marginal Cost @ Final Dispatch] * Energy Reference MW - Final Dispatch] LOC B =.5 * [$80 - $70] * [400MW 300MW] = =$500 Total LOC = LOC A + LOC B= $2000+$500=$2500 LOC [$/MWh of REG] = Total LOC / REG MW Committed =$2500/50 = $35.71/MWh REG Rank Price = REG Offer Price + LOC= REG offer price + $35.71/MWh Example 2: LOC due to unit being raised for regulation LOC B LOC A Let us consider the following scenario for a unit providing Regulation. The SPREGO Forecasted LMP is $30. PJM 2012 www.pjm.com 21 P a g e

Cost Offer Price Offer Curve curve MW Price MW Price 100 50 100 40 200 60 200 50 300 70 300 60 400 80 400 70 450 80 450 70 Emergency Max [MW] 450 Economic Max [MW] 400 Economic Min [MW] 150 RegMax 350 RegMin 200 Reg Offer MW 50 REG Offer Price [$/MWh] $10 SPREGO forecasted LMP [$/MWh] $30 Energy Reference MW [MW] 150 REG committed [MW] 50 LOC calculation: LOC A (Rectangular red portion) = [Marginal cost -LMP] * [ Final Dispatch- Energy Reference MW] LOC A = [$45 -$30] * [250MW- 150MW]= $15*100MW=$1500 LOC B (Triangular green portion) =.5 * [Cost @ Energy Reference MW - Marginal Cost @ Final Dispatch] * Energy Reference MW - Final Dispatch] LOC B = 0.5 * [$55 - $45] * [250MW 150MW]= 0.5*$10*100MW=$500 Total LOC = LOC A + LOC B = $1500+$500=$2000 LOC [$/MWh of REG] = Total LOC / REG MW Committed LOC [$/MWh of REG] =2000/50 =40 REG Rank Price = REG Offer Price + LOC = REG offer price + $40 $/MWh PJM 2012 www.pjm.com 22 P a g e

LOC B LOC A Recommended calculation: Assuming that the unit is committed on its price schedule. LOC A (Rectangular red portion) = [Marginal cost -LMP] * [ Final Dispatch- Energy Reference MW] LOC A = [$55 -$30] * [250MW- 150MW]= $25*100MW=$2500 LOC B (Triangular green portion) =.5 * [Cost @ Energy Reference MW - Marginal Cost @ Final Dispatch] * Energy Reference MW - Final Dispatch] LOC B = 0.5 * [$65 - $55] * [250MW 150MW]= 0.5*$10*100MW=$500 Total LOC = LOC A + LOC B = $2500+$500=$3000 LOC [$/MWh of REG] = Total LOC / REG MW Committed LOC [$/MWh of REG] =3000/50 =60 REG Rank Price = REG Offer Price + LOC= REG offer price + 60$/MWh PJM 2012 www.pjm.com 23 P a g e

xiii http://pjm.com/~/media/documents/manuals/m35.ashx xiv http://pjm.com/~/media/documents/manuals/m11.ashx xv http://pjm.com/~/media/documents/manuals/m11.ashx xvi http://pjm.com/~/media/documents/manuals/m11.ashx xvii Note that the value of any or all of these components can only be positive or zero. The shoulder hour LOC is calculated only for regulating unit transitioning from on-regulation to off-regulation (or vice versa) in either of the shoulder hours. This is due to the fact that it takes some time for a unit to ramp up/down from its economic dispatch point to/from its regulating range. xviii http://pjm.com/~/media/documents/manuals/m11.ashx xix http://pjm.com/markets-and-operations/ancillary-services/~/media/markets-ops/ancillary/20090915-regulation-hydro-lost-opportunity-cost-calc-examples.ashx xx.http://pjm.com/~/media/documents/manuals/m28.ashx xxi.http://pjm.com/~/media/documents/manuals/m28.ashx, Page 26 xxii http://www.pjm.com/~/media/committees-groups/committees/mc/20111122/20111122-item-05-wind-loc.ashx xxiii http://www.pjm.com/documents/~/media/documents/agreements/tariff.ashx, page 1639 PJM 2012 www.pjm.com 24 P a g e