By Rory D. Sweeney

GreenHat Default Update

VALLEY FORGE, Pa. — PJM’s Brian Chmielewski told attendees at last week’s Market Implementation Committee meeting that the Board of Managers’ investigation of the GreenHat Energy financial transmission rights default will run through the new year, with a report and recommendations to follow.

There will updates on a roughly weekly basis, CFO Suzanne Daugherty said, suggesting Thursday as the best day for stakeholders to look for them.

The default is expected to become the largest ever in PJM’s FTR market and has spurred RTO policy changes to limit the risks that allowed it to occur. The RTO recently filed a lawsuit in Texas in an attempt to recoup some payments the defaulting company promised but never delivered. (See GreenHat: (Some of) the Rest of the Story.)

Day-ahead Market Timeline Manual Changes

Stakeholders approved by unanimous acclamation changes to the day-ahead deadlines described in Manual 11, made possible by improved computing ability. PJM’s Keyur Patel explained that market participants will have until 11 a.m. to submit day-ahead bids and offers, and the clearing window will be reduced to 2.5 hours. The deadline for posting day-ahead results will remain at 1:30 p.m. or as soon as practicable thereafter.

While the overall proposal has already been approved by PJM’s Markets and Reliability Committee, the manual changes have not yet been addressed. (See “Day-ahead Market Timeline,” PJM MRC/MC Briefs: Oct. 25, 2018.)

PJM’s Tim Horger said implementation will likely occur in mid-December to make sure all market participants are aware of the changes. Staff confirmed that they planned to file the changes at FERC on Nov. 8.

Must-offer Exception Changes

Stakeholders chose PJM’s proposal over a proposal from the Independent Market Monitor for changing the rules describing how capacity resources secure exceptions to their requirement to offer into capacity auctions. (See “Must-offer Exception,” PJM Market Implementation Committee Briefs: Oct. 10, 2018.)

The PJM proposal received 0.79 in favor in a vote that had a 0.5 threshold, while the Monitor’s package received 0.22 in favor. PJM’s proposal was also preferred 0.78 over the status quo.

PJM’s Susan McGill explained the RTO’s rules for how capacity interconnection rights (CIRs) can be transferred and the impact on projects in the interconnection queue. PJM’s Pat Bruno reviewed the RTO’s proposal.

Monitoring Analytics’ Alexandra Salaneck summarized the Monitor’s alternative proposal, which would remove the ability for a unit to request that it retain its capacity resource status as late as 135 days prior to an impending status change to becoming an energy-only resource. The change would have basically allowed resources to get an exception from just one Base Residual Auction, Salaneck explained.

“What we’re trying to prevent is flip-flopping out of and back into [the Reliability Pricing Model],” she said.

Gary Greiner of Public Service Enterprise Group questioned the need for removing that provision.

“I understand the process to be quite rigorous when someone asks for a must-offer exception,” Greiner said. “We’re in a dynamic business environment. There are a lot of reasons” why the provision might be necessary.

The Monitor’s idea struck a chord with Dave Mabry, who represents the PJM Industrial Customer Coalition. He said the “jumping in and out” of BRAs might cause approved transmission projects to become unnecessary.

“I think we’re leaning toward the IMM proposal,” he said.

FTR Forfeiture Proposal Endorsed

Stakeholders endorsed a proposal developed by Exelon, NextEra Energy and VECO Power Trading over an alternative proposed by PJM to revise the RTO’s rule on when FTR profits should be forfeited. (See “FTR Forfeiture,” PJM Market Implementation Committee Briefs: Oct. 10, 2018.)

The joint proposal received 0.85 in favor in a vote that had a 0.5 threshold and 0.74 in favor compared to the status quo. PJM’s proposal originally received 146 votes in favor, or 0.53, and would have exceeded the 0.5 threshold, but staff announced after the vote had been recorded that a participant informed staff in a timely fashion that it had submitted its 14 votes incorrectly. They were changed to oppositional votes, leaving the proposal with 132 votes in favor, or 0.48, and just below the threshold.

Monitoring Analytics’ Seth Hayik presented concerns the Monitor has with changing the rule and reiterated its preference for the existing penny test, which focuses on the actual impact of virtual trades on FTR profits rather than the traders’ intentions.

“We can’t prove intent; we can’t measure intent,” Hayik said. The existing rule is “meant to deter [manipulative behavior] and to catch it,” he said.

The joint proposal’s impact test would have a threshold of FTR flows greater than or equal to 10% across a constraint.

Gabel Associates’ Mike Borgatti, who represents NextEra, agreed that such behavior needs to be eliminated, but that the current rule is too strict for market participants to risk using virtual trading for fear of triggering forfeitures. He said PJM and the Monitor should be able to monitor and take actions against bad behavior, and that being unable to determine intent is “not a sufficient basis to justify a rule” that impedes use of the products.

Stakeholders and the Monitor also battled over the implications of a graph that showed reduced forfeitures since the rule has been in place.

“The only thing we can conclude is that hopefully the feedback is working,” Hayik said.

“That graph is just showing that we have stopped virtual trading,” Exelon’s Sharon Midgley said.

Greiner concurred that PSEG’s use of virtual products has also “dropped precipitously.”

“We have virtually stopped using this as a hedging tool that we used pretty consistently prior to recent changes,” he said.

PJM’s Chmielewski said it’s unclear yet whether the RTO will pursue rebilling if the proposed changes are implemented.

Gas Pipeline Contingencies

Stakeholders endorsed a Calpine proposal over several alternatives on compensating generators who are switched from their preferred gas pipeline because of pipeline contingencies identified by PJM.

Calpine’s proposal received 0.75 in favor on a vote with a 0.5 threshold and 0.99 in favor over the status quo. PJM’s alternative received 0.42. Direct Energy’s proposal received 0.42, and a proposal developed at the meeting to merge elements of the Calpine and Direct Energy proposals received 0.4 in favor.

The Calpine proposal would provide a broader scope of factors and time for which a unit can recover costs during and after a PJM fuel-switch directive. Direct Energy’s proposal would have allowed generators to receive “a just and reasonable rate” that would be treated as balancing operating reserves.

Direct Energy’s Marji Philips said she was frustrated that PJM had decided to direct generators on what fuel sources they must use, but because the policy exists, there “should be some compensation.”

“I don’t believe PJM should be directing an entity to switch fuels,” Philips said.

She argued that the new policy would create more payments for issues that are supposed to be paid for by PJM’s Capacity Performance rules.