Stakeholders Endorse Enhanced Credit, Market Rules to Protect Evolving Markets, FTR Auctions

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PJM’s Markets and Reliability Committee (MRC) and Members Committee Thursday (March 26) endorsed a comprehensive package of amendments to the Tariff and Operating Agreement to enhance credit and market rules.

By an overwhelming 90 percent majority at the MRC meeting, and by acclamation at the Members Committee meeting, stakeholders supported the improvements crafted to protect energy market participants, strengthen risk processes, and protect, ultimately, the 65 million customers in PJM’s footprint.

The proposed changes will be filed with the Federal Energy Regulatory Commission (FERC) by March 31. That allows the required 60 days for FERC to rule on the matter in time for new rules to be in effect for the upcoming FTR auctions in June and thereafter.

“PJM has worked very hard with stakeholders to develop mutually agreeable language to adequately address credit risk in the markets,” PJM Chief Risk Officer Nigeria Bloczynski said after the Members Committee vote. “I applaud the investment by stakeholders and members in their actions to protect our energy markets.”

The March 26 vote was the culmination of long-standing, broad and ongoing reform of PJM’s evolving markets and credit rules, and most recently, seven intensive months of collaboration in a stakeholder task force to enhance governing document provisions recommended by an independent consultant following an FTR market participant default in 2018.

The changes were first presented by the Financial Risk Mitigation Senior Task Force to the MRC in December, and were the result of intensive review by members, stakeholders and PJM staff.

The endorsed changes, which now go to FERC, include new and revised credit risk frameworks to enhance market participants’ reporting requirements, evaluate internal and external credit scores, and adjust collateral requirements.

Bloczynski noted that PJM is committed to continued transparent, rigorous stakeholder engagement to further examine policies as they are enacted with the evolving energy markets. PJM is also pressing forward with the reactivation of the Credit Rules Subcommittee and the newly minted ARR/FTR Senior Task Force to examine the merit of market structure reform.

PJM CEO Manu Asthana applauded the successful collaboration between stakeholders, members and PJM staff to navigate the critical milestone and achieve credit risk frameworks required to protect market participants. “This is a great example of collaboration with our members and stakeholders to solve difficult problems. These credit enhancements bring important protections to our members,” Asthana said.