2019 in Review: Members Work to Boost Transparency, Reform FTR Market

Stakeholders studied a host of issues, including fuel security, DER and carbon-pricing market design


PJM members tackled a number of diverse topics in 2019 – including the stakeholder process itself, endorsing new rules to ensure that the growing membership is positioned to resolve increasingly complex and potentially contentious issues.

Among the initiatives, stakeholders:

Popular Topic: Transmission Planning

How transmission projects are planned, who gets to build them and how their costs get allocated were common subjects of robust discussion across member meetings in 2019. Informed by FERC guidance, stakeholders initiated efforts to improve transparency and collaboration in the planning process.

PJM’s new transmission project tracker provides easy access to project status and cost allocation information for baseline, network and supplemental projects.

Enhancements to the FTR Market

PJM and stakeholders created the Financial Risk Mitigation Senior Task Force (FRMSTF) to address recommendations in an independent report commissioned by the Board of Managers following the 2018 default of a Financial Transmission Rights Market trader. Starting in May, it has met 14 times and produced its first proposal in time to be endorsed by the Markets & Reliability Committee by year-end.

The proposal makes changes to the Financial Transmission Rights (FTR) auction process designed to mitigate risk of participant default. It increases the frequency of long-term FTR auctions to five times per year from three, with the rationale that more frequent auctions will provide more protection from a potential default by not allowing positions to grow or deteriorate over time without posting additional collateral.

The plan also reduces the residual capability available in each round to 20 percent from 33.33 percent.

In addition, the recommendation addresses the structure of the balance of planning period FTR auctions, changing the available periods from the subsequent three individual future months – or a remaining full quarter – to any individual month remaining in the planning period.

The package will be among the first items to be considered by the Members Committee in 2020.

FRMSTF’s work will be supplemented by a new task force created to undertake a comprehensive review of FTR market design. That group, reporting to the Market Implementation Committee, is expected to begin its work in early 2020 and take about a year to complete its study.

Fuel Security Plan Adopted

In 2019, the Fuel Security Senior Task Force picked up where the Fuel Security Study of 2018 left off, exploring whether market, operational or planning changes are needed to ensure the future availability of fuel and sets of resources on the grid.

The 2018 study stress-tested the system using more than 300 scenarios. The findings showed that the grid can withstand an extended period of stress while remaining reliable and fuel secure. However, there were combinations of extreme conditions under which the system could be subject to disruptions.

The task force took the study’s analysis further, adding 56 sensitivities and, in the end, calculating risk for 4,720,380 scenarios.

On Dec. 19, the Markets & Reliability Committee approved a recommendation from the task force for PJM to continue monitoring the system under parameters considered in the Fuel Security Study and report to a stakeholder group no less frequently than every 18 months.

PJM also is in the midst of Phase 3 of examining fuel security issues – the first being the study, the second the work of the task force – which involves working with federal and state agencies alongside other industry sectors to address any specific concerns, such as physical and cybersecurity risks.