The Market Implementation Committee approved a request by Market Monitor Joseph Bowring to investigate whether traders could be manipulating PJM’s interface pricing points by breaking schedules into multiple “back-to-back” transactions.

In the 2012 State of the Market report, the monitor described the practice as “sham scheduling,” in which he said traders were hiding the actual source of generation.

PJM prices transactions with external balancing authorities based on the source and sink identified on the NERC eTag. Breaking the transaction into portions with separate eTags can lead to loop flows and incorrect pricing.

A trade from NYISO into PJM, for example, should be priced at the PJM/NYIS Interface. But if a trader breaks the transaction into one trade from NYIS to Ontario and a second on the ONT-MISO-PJM market path, PJM would price the transaction at the ONT Interface price, which is often higher. The monitor recommended that PJM work with NYISO, MISO and Ontario to prevent the practice.

“It’s not a huge problem but we’re worried about the potential of the problem,” Bowring told the committee.

One member representing a Midwestern utility affiliate, was skeptical. “I don’t see how logically you could break up transactions to game the system,” he said. (NOTE: PJM Insider is withholding the speaker’s name and company affiliation in accordance with the PJM Code of Conduct. The rules require the media to obtain a speaker’s permission before quoting him by name at all meetings except those of the Members and Markets and Reliability committees.)

In response to questions from PJM vice president of market operations Stu Bresler, Bowring said that he had contacted traders making back-to-back trades but that it had not changed their behavior.

“Did they say it’s not parking and hubbing?” Bresler asked.

Bowring said he could not discuss specifics of his conversations but added, “We have not been satisfied there was a satisfactory explanation.”