PJM’s Chief Risk Officer Provides Insights at FERC Technical Conference on Credit and Risk Management

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PJM Chief Risk Officer Nigeria Bloczynski was chosen by the Federal Energy Regulatory Commission (FERC) to participate in two panels at FERC’s Technical Conference Regarding RTO/ISO Credit Principles and Practices, held remotely on February 25–26 before the Commission.

PJM Chief Risk Officer Nigeria Bloczynski

In her filed remarks and panel presentation, Ms. Bloczynski outlined PJM’s recent credit reforms, PJM’s credit risk philosophy and steps PJM has undertaken to strengthen its internal expertise. The Technical Conference explored the fundamental principles underlying credit risk management and how those principles are applied in regional transmission organization (RTO) and independent system operator (ISO) markets. Panelists also discussed strengthening internal processes and staffing.

Conference participants throughout the two days also responded positively to Bloczynski’s recommendation that FERC provide guidance to allow for confidential communication among RTOs/ISOs if and when credit issues arise involving market participants who operate in several RTO/ISO markets.

Improved communication among RTOs/ISOs would help mitigate risk on a broad scale, Bloczynski said in her submitted testimony.
“I am a firm believer that RTOs/ISOs should be able to share information about issues they are confronting, especially with regard to certain market participants,” she stated.

“With the varied groups of participants in our markets, we need to understand how they are engaging, and we need the ability to validate what they are telling us,” she added. “Transparency is key to understanding and eventually mitigating large risk exposures.”

Bloczynski participated Feb. 25, in two of the five conference panels, sharing work that resulted from extensive collaboration between PJM and its stakeholder community.

Recent PJM enhancements include criteria used for evaluation, and requirements for documents, collateral and minimum capitalization requirements, among other measures. These reforms also firmly established PJM’s authority to limit, suspend or terminate participants representing unreasonable risk.

Among more recent reforms at PJM is mark-to-auction valuation. This allows PJM to make a collateral call if a member’s Financial Transmission Rights (FTR) portfolio is declining in value based on the most recent FTR auction prices. And just last month, PJM revised its Tariff and Operating Agreement to increase flexibility in formulating and implementing a plan to address a defaulting member’s FTR positions.

While market design is important, participants said that strong, evolving and collaborative credit policy is fundamental to protection from market and credit risk. Bloczynski also offered critical insights and lessons learned at PJM about the development of internal resources and expertise within RTOs/ISOs.