The Members Committee on Thursday voted to let the financial transmission rights positions of a defaulting member go to settlement instead of pursuing liquidation of those defaulted FTR positions.
The proposal, which received 4.01 out of a possible 5.00 support in a sector-weighted vote, was one of six alternatives considered earlier in the day by the Markets and Reliability Committee.
The plan was the only one to receive a supermajority of support at the MRC, making it the only one to advance out of that committee.
PJM declared June 21 that GreenHat was in default for not paying its $1.7 million weekly PJM invoice issued on June 5. PJM’s then-applicable Tariff provisions required offering for liquidation the defaulted FTR positions in the next available auction.
Initially, after seeing the bidding on the positions offered for liquidation in the FTR auction conducted in July 2018, PJM filed a request with FERC to be permitted to offer for liquidation only the FTR positions in the defaulted portfolio for one month forward in each of the FTR auctions to be conducted from July through October 2018. But the August 2018 FTR auction resulted in liquidation prices that were four times the actual defaulted portfolio losses August.
Subsequently, at stakeholder request, PJM asked FERC to suspend liquidation of the defaulted positions through Nov. 30 while the members decided on a permanent course of action. (See PJM files with FERC to suspend FTR liquidation of GreenHat portfolio.)
The currently quantifiable portion of the default allocation assessment – representing actual net losses on the FTR portfolio for the months of June 2018 and July 2018 plus the costs to liquidate August 2018 positions – totals approximately $42 million.
The stakeholders’ vote will translate to at least three separate filings reflecting individual components of the proposal endorsed by the Members Committee, said Suzanne Daugherty, senior vice president, CFO and treasurer, as a fail-safe in case FERC objects to any one aspect. PJM planned to make the filings on Oct. 1.
The filings will address the desire to let the positions go to settlement instead of offering for liquidation; clarify members’ capped $10,000 obligation for one component of the allocation of the cost of defaults that impact more than one year; and establish that bilateral FTRs that are valued at less than the purchase price may be assumed by the indemnifying counterparty.
Barring FERC approval, PJM will ask that the commission allow the liquidation suspension to continue to the end of February 2019.
In a nonbinding poll of the MRC following the votes on the six proposals, only 0.50 out of 5.00 expressed a preference for the status quo over the endorsed proposal.
Meanwhile, the Credit Subcommittee is considering new mark-to-auction FTR credit requirements. The group discussed proposals at its Friday meeting that will be presented to the Market Implementation Committee at a future meeting.
Also at Thursday’s Members Committee meeting, stakeholders voted down PJM’s Variable Operations and Maintenance Costs Proposal after several members representing consumers unsuccessfully tried to get the vote postponed.
After all VOM proposal packages failed to receive endorsement at the July MRC, PJM updated its plan, removing the inclusion of fixed costs for energy resources and units that did not clear the capacity auction.
On Thursday, the proposal narrowly passed the MRC with the super-majority support it needed (3.40 out of 5.00 endorsement), but didn’t pass the Members Committee. There, the proposal failed in a sector-weighted vote with 2.92 out of 5.00 support.
The VOM proposal is key to the Tariff-required Quadrennial Review of Variable Resource Requirement Curve Parameters, which PJM must file by Oct. 12. The review ensures that PJM maintains adequate resources to meet reliability requirements at a reasonable cost. (See Cost calculator, Quadrennial Review discussion at MIC.)
At the MRC, none of the four Quadrennial Review packages – proposed by PJM, the independent market monitor, Calpine and the Office of People’s Counsel for Washington, D.C. – reached the 3.335 threshold for sector-weighted voting for recommendation to the Board of Managers.
The Members Committee voted to send the results of the MRC vote on to the Board, instead of re-voting the four packages the MRC voted on earlier in the day.
In other business at the Members Committee:
- The group heard a first read of a problem statement and issue charge for the Stakeholder Process Super Forum. (See Members tackle stakeholder process at Super Forum.)
- Recognizing an agreement reached by PJM and Monitoring Analytics on opportunity cost calculators, members deferred voting on related proposed Operating Agreement revisions to its next meeting. (See PJM, IMM market sellers re-examine Opportunity Cost Calculator.)
- Members approved a proposal from the Market Efficiency Process Enhancement Task Force with a sector-weighted vote of 4.41 out of a possible 5.00.
- The committee voted against expanding attendance at the Liaison Committee meetings beyond the current terms of the Liaison Committee charter, meaning that attendance will be limited to the PJM Board and PJM members. Since that provision has not been strictly enforced, members will be receiving an informational letter outlining the change.
In other business at the MRC:
- Members endorsed the market seller offer cap balancing ratio proposal approved by the Market Implementation Committee. The proposal, which passed a sector-weighted vote with 3.51 out of 5.00 support, heads to the Members Committee for endorsement on Oct. 25.
- Members endorsed a proposal and manual revisions developed by the Distributed Energy Resources Subcommittee to give PJM and transmission owners better observability of behind-the-meter generation resources. There were two abstentions.