PJM files with FERC to suspend FTR liquidation of GreenHat portfolio

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At the request of members, PJM on Aug. 23 asked the Federal Energy Regulatory Commission for approval to suspend the liquidation of financial transmission rights until Nov. 30 while it decides how to approach the FTR liquidation from the default of trader GreenHat Energy LLC.

The filing followed a sector-weighted Members Committee vote (with 4.43 in favor out of a possible 5.0) adopting a motion by Exelon and Old Dominion Electric Cooperative (ODEC) to allow the defaulted positions to go to settlement from Aug. 24 through Nov. 30, 2018, in order to eliminate “risk associated with selling a large volume FTR portfolio into a potentially illiquid market.”

PJM declared June 21 that GreenHat was in default for not paying its $1.7 million weekly PJM invoice issued on June 5. Currently, PJM’s Tariff requires the liquidation of the defaulted portfolio at the next available auction, although PJM had previously filed for a waiver of this obligation.

Specifically, on July 26, PJM filed a request with FERC asking that the temporal obligation be waived such that PJM would only attempt to liquidate the FTR positions in the defaulted portfolio for one month forward in each of the FTR auctions to be conducted from July through October of 2018.

Suzanne Daugherty, senior vice president, CFO and treasurer, noted at the Markets & Reliability Committee meeting, which preceded the Members Committee meeting Thursday, that the August 2018 FTR auction resulted in liquidation prices that were more than six times higher than the actual portfolio losses for the first half of August.

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.

Bilge Derin gives first read of Manual 01 revisions  

The time window for the requested liquidation suspension aligns with work outlined in a problem statement and issue charge approved by the MRC to continue stakeholder discussion of alternatives to PJM’s current liquidation process for FTR positions in the portfolio of a defaulting member. The problem statement was approved by an acclamation vote with five objections and one abstention.

More than a dozen liquidation approaches have been identified and will be discussed at special sessions of the MRC meetings scheduled for Sept. 7 and Sept. 18, with the goal of presenting a proposal for a Sept. 27 vote by the MRC and Members Committee (MC). (See PJM, stakeholders discuss FTR liquidation options.)

If members choose to make revisions to the current process, PJM would expect to make a FERC filing by the end of September, providing for 60 days of consideration by the commission before the liquidation suspension would expire on November 30.

Planned Credit Subcommittee meetings are the starting point for engaging members in a larger discussion of the FTR market and credit requirements, Daugherty said.

The Credit Subcommittee will receive a report at its September meeting based upon a workshop conducted by PJM with external experts. The subcommittee already has begun consideration of new mark-to-auction FTR credit requirements.

In response to another member’s question, Daugherty said PJM is targeting the end of September to share a “lessons learned” review. She also noted that only 10 members have not paid their share of the default obligation, totaling less than $20,000. The rights of those members have been revoked.

An alternative motion offered by DTE Energy that would have allowed half of the GreenHat positions to be liquidated through Nov. 30, with the other half going to settlement, was not voted on after the Exelon/ODEC motion passed.

Updates can be found on the FTR page of PJM.com under “FTR Portfolio Liquidation.”

Art Wolfe on Manual 14C changes

In other business, the MRC endorsed a proposal developed by the Market Efficiency Process Enhancement Task Force and associated Manual 14B: PJM Region Transmission Planning Process and operating agreement changes with a sector-weighted vote of 3.87 out of a possible 5.0. By a vote of acclamation, with one abstention, the committee also endorsed changes related  to Manual 14F: Competitive Planning Process.

The MRC approved a motion by LS Power and the PJM Industrial Customer Coalition to delay by one year to Jan. 1, 2020, the deadline for developing comparative frameworks to accompany PJM’s new transmission project cost containment provisions.

The motion sponsors said they were being responsive to PJM’s request for more time to implement the new provisions, and that doing so would improve the final product.

Steve Herling, vice president of planning, concurred.

“Cost containment and transparency – we’re fully committed to both of them, but we have to ensure the integrity of the [Regional Transmission Expansion Planning] process while we’re accomplishing those goals, and this motion is the appropriate way to do that,” he said.

Ed Tatum of American Municipal Power also presented a proposal for addressing “end of life” facilities in the PJM planning process, including revisions to Manual 14B: PJM Region Transmission Planning Process. The issue will be the subject of a special MRC meeting scheduled for Sept. 13 and included as a voting item on the Sept. 27 MC agenda.

The topic also will be addressed in a one-hour WebEx sponsored by PJM transmission owners on Aug. 28.

Due to time constraints, the special MRC on fuel security set for Aug. 23 was rescheduled to 1–2 p.m. on Aug. 29. The meeting will provide an update only; no scenarios will be presented.

Gabrielle Genuario presents Biennial Review changes to Manual 15

First readings

  • Behind-the-meter generation proposal
  • Market seller offer cap balancing and ratio proposal
  • Quadrennial review
  • Opportunity cost calculator (this item was endorsed by the MRC and will be on the Sept. 27 Members Committee agenda for a vote)
  • Governing Documents Enhancements & Clarification Subcommittee proposal
  • Changes to PJM Manual 01: Control Center and Data Exchange Requirements; Manual 15: Cost Development Guidelines; and Manual 21: Rules and Procedures for Determination of Generating Capability.

Informational updates