PJM has revised its proposed review of its auction revenue rights (ARRs) and financial transmission rights markets as stakeholders decide whether to put their work on the issue on hiatus until a report is completed.

At Friday’s ARR/FTR Market Task Force meeting, PJM’s Dave Anders presented the revised draft scope of work to be done by an external consultant in its review of the ARR-FTR construct, a project recommended in last year’s independent consultant report on the GreenHat Energy default.

Anders said PJM received “significant feedback” after last month’s task force meeting and decided to take a “higher-level view” to ask broader structural questions than the RTO had originally proposed.

While the overarching question of whether load is receiving optimal value from the ARR/FTR markets remains the same, Anders said, the revised questions seek to avoid conflicts between load-serving entities and financial traders over what is to be examined. (See PJM ARR/FTR Review Could Pit LSEs vs. Financial Traders.)

“This thinks about the big-picture questions first and then gets down to the more granular considerations,” Anders said.

The new work scope requests that the consultant examine ARRs and FTRs both separately and as a system working together and make recommendations for potential improvements. The questions include a look at the reason the markets were created; whether they are producing the desired outcome; and whether there are alternatives to achieving the desired results.

Anders said the request for hiring the consultant should be posted by the end of this week. He said the RTO hopes to have the consultant start work by the end of July and to have a report done by October.

Sharon Midgley, Exelon’s director of wholesale market development, said PJM’s work scope changes were “excellent” and “raised the level of conversation” instead of assuming any outcomes. She asked if PJM will have the consultant look at the technical platforms running the ARR-FTR markets to ensure the technology is up to date and able to be expanded or changed if needed. “I would hate for us to go through the process and not be able to implement certain things because we don’t have the systems to support it,” she said.

Anders said the consultant may not be able to scrutinize the IT platforms because PJM is searching for someone who understands “the economics” of the market and not necessarily the technology running the programs.

Jim Davis of Dominion Energy said the consultant questions represent what his company had in mind when discussions about the markets were being proposed. Davis said the consultant should spend “sufficient time” considering market design changes to optimize the value or lower the risk to load.

“The scope of work is well defined yet flexible as well,” Davis said.

PJM vs. IMM

After Anders presented the updated scope of work, he discussed potential pathways forward for the task force while the consultant completes its review. Anders said stakeholders have expressed varying opinions, ranging from putting the group into hiatus to looking at some limited-scope items over the next few months.

PJM’s recommendation is to put the task force on hiatus until the consultant completes its work, Anders said, because the broad range of work to be completed may result in changes to aspects of the market construct. He said continuing work on anything that could contradict the consultant’s report would not be a good use of stakeholder time.

“PJM and stakeholders don’t want to give the impression that they’re driving towards some solution at the same time the consultant is doing a broad review,” Anders said.

Howard Haas, chief economist for Monitoring Analytics, PJM’s Independent Market Monitor, said he appreciated the work that went into formulating the work scope but disagreed with the hiatus recommendation. He said conducting a third-party review of the markets was only one aspect of the recommendation that came from the GreenHat report and that it asked PJM, the Monitor and stakeholders to do a “holistic review” of the entire ARR-FTR process.

Slowing down the pace of the task force’s work makes sense during the consultant’s review, Haas said, but the amount of information stakeholders need to cover requires continuous effort. Haas suggested continuing discussions and a presentation of methodologies, analysis and data needed to facilitate a discussion of any needed changes to the current ARR/FTR market.

“There’s a lot of work that has to be done with or without the consultant’s report,” Haas said.

Anders said the Market Implementation Committee will vote July 8 on whether to put the task force on hiatus or continue work. The MIC will vote after receiving the results of a nonbinding poll of task force members on the same question.

Stakeholder Opinions

Davis said he agreed with Haas’ recommendation to continue the task force work at a slower pace. He also suggested that the consultant provide interim updates to the group as it conducts its review to have a better understanding of the issues being examined.

Susan Bruce of the PJM Industrial Customer Coalition said she was “of two minds” when thinking about how the task force should proceed. She said that although she understands PJM’s interest in allowing the consultant to do its work without outside influence, she is open to continuing conversations on market dynamics to avoid losing the sense of momentum that has built during task force discussions since January.

“This is a complicated nut, and I think there are a lot of issues here to discuss,” Bruce said.

Several stakeholders expressed support for a hiatus. Jim Benchek of FirstEnergy said he is concerned that the continuing mixture of data production and presentations by PJM and the Monitor at task force meetings could influence the content of the independent report.

Gary Greiner, director of market policy for Public Service Enterprise Group, said stakeholders need to recognize that the GreenHat report indicated PJM’s markets are not fundamentally broken and did not constitute a “house on fire” situation that needed immediate attention. He said taking more time and being thoughtful in deliberations would be beneficial for stakeholders and at the same time allow the consultant to do its work unimpeded.

“If the consultant comes back and we dismiss everything they’ve done out of hand, then we’ve done a pretty poor job on our part,” Greiner said.