Members Move Vote on Changes to FTR Auctions

Transmission planning issues also topic of discussion at Dec. 5 MRC, MC meetings


The Markets & Reliability Committee voted Thursday to postpone voting on a proposal to increase the frequency of long-term Financial Transmission Rights (FTR) auctions.

In a sector-weighted vote of 3.82 out of 5, members endorsed moving a vote on the item to the committee’s Dec. 19 meeting.

Several members representing commercial and industrial end-use customers and consumer advocates voiced concern that the proposed change crossed over into the subject of FTR market design. The Market Implementation Committee in October overwhelmingly endorsed an issue charge designating that topic to a new task force for a separate review beginning in January.

Proposal Mitigates Risk

The frequency of long-term FTR auctions would increase to five times per year (from three) under the proposal, initially presented to the Markets & Reliability Committee Oct. 31. More frequent auctions would reduce the risk of portfolios losing significant value between auctions as a protection from substantial defaults.

Member Elections

Members unanimously voted to fill several committee positions.

New members of the Finance Committee are: Chris Norton of American Municipal Power (electric distributor sector) and David Scarpignato of Calpine (generation owner). The Finance Committee consists of two members from each of the five sectors who serve staggered, three-year terms.

Four of the sector whips remain the same. They are joined by Brian Kauffman of Enel North America, representing the other supplier sector.

Katie Guerry, also of Enel North America and also representing the other supplier sector, will be the new vice chair of the Members Committee. She takes the place of Steve Lieberman of Old Dominion Electric Cooperative, who moves up to become committee chair.

The plan also would reduce the residual capability available each round to 20 percent from 33.33 percent. In addition, the proposal addresses the structure of the balance of Planning Period FTR auctions, changing the available periods from any three individual future months – or a remaining full quarter – to any individual month remaining in the Planning Period.

The recommendation is the first to come out of the Financial Risk Mitigation Senior Task Force, charged with identifying credit policy and market rule reforms and devising a plan for their implementation to be submitted to the PJM Board of Managers.

‘Mark-to-Market Change’

The PJM-stakeholder collaboration grew out of an independent report commissioned by the Board to investigate the default last year of trader GreenHat Energy, LLC.

The report noted that the infrequency of auctions delayed assessments of the forward value of the FTR market. More frequently held auctions would update portfolio valuation more often, providing better indicative pricing.

Interim President and CEO Sue Riley assured stakeholders that regardless of whether they endorsed the proposal, the frequency of auctions still would be reviewed by the new task force, whose scope is “all-inclusive.”

“We thought long and hard about design changes versus credit policy changes, but we concluded it was appropriate to vote on it as a credit change, because it allows us to make a mark-to-market change,” Riley said.

 “If we could get to ‘yes’ on this, it would be a really big win,” she said.

Transmission Planning a Hot Topic

Otherwise, much of the conversation at Thursday’s Markets & Reliability and Members committee meetings involved various aspects of transmission planning.

In a sector-weighted vote of 3.83 out of 5, the MRC endorsed an issue charge to examine establishing a standard process by which transmission assets are determined to be at the end of their useful life, and next steps for their replacement.

Advanced by American Municipal Power and Old Dominion Electric Cooperative, the work “is intended to develop specific governing document language to establish criteria that will apply to all transmission projects that address end-of-life drivers on PJM Tariff transmission assets, address planning-horizon requirements and improve overall transparency, consistency and clarity in the RTEP planning process,” according to the issue charge.

A representative of the Public Power Coalition, which supported the measure, noted that currently, transmission owners may plan for replacement facilities under different regulatory categories that determine how the cost is allocated. It would be helpful, he said, to gain clarity on that point, among others.

Any recommended governing document changes would be expected to be presented to the MRC in March.

Comparative Cost Framework on Track

On a separate transmission planning topic, Mark Sims, Manager of Infrastructure Coordination, updated the committee on the status of a new comparative cost framework to help PJM planners review proposals.

Following a lengthy discussion at the November Planning Committee meeting over the role of the Independent Market Monitor in the competitive transmission planning evaluation process, PJM decided to wait to request endorsement of related changes to Manual 14F: Competitive Planning Process, until the MRC’s Dec. 19 meeting, Sims said.

Resolution Opposes Tariff Attachment M-4 Filing

The Members Committee meeting, which followed the MRC, was marked by a lively discussion on a resolution presented on first read by LS Power concerning how PJM’s planning process should incorporate the removal of highly critical substations.

In particular, the resolution states its opposition to PJM Transmission Owners’ plan to file a new Attachment M-4 to the PJM Tariff for the planning of certain mitigation projects.

The issue involves no more than 20 facilities that have been identified as highly critical under the North American Electric Reliability Corporation’s (NERC) Critical Infrastructure Protection guidance. These facilities, “if rendered inoperable or damaged as a result of a physical attack could result in instability, uncontrolled separation or cascading within an interconnection.”

Mitigating the critical nature of these facilities is the responsibility of the transmission owners. However, stakeholders representing other sectors argue that PJM should provide oversight and develop the most effective and efficient solution in an open and collaborative regional transmission planning process, and are asking for additional transparency.

“As a matter of policy, PJM, not the PJM Transmission Owners, should be the predominant planner of such critical facilities related to our nation’s security,” the resolution says, in part. In a separate but related item, the Office of the People’s Counsel for the District of Columbia still intends to ask the Planning Committee at its Dec. 12 meeting to vote on an issue charge to examine how such projects should be planned.