PJM Thursday postponed a vote on changes needed to comply with the Commodity Futures Trading Commission order exempting most PJM market participants from CFTC jurisdiction.
PJM Chief Financial Officer Suzanne Daugherty said the delay was needed to address questions from members about the proposed tariff and Operating Agreement changes, which expand financial marketers’ officer certification requirements.
The CFTC agreed March 28 to largely exempt from its regulations Financial Transmission Rights, day ahead and real time energy transactions, forward capacity transactions and reserve regulation transactions, sales that are already regulated by the Federal Energy Regulatory Commission. However, the CFTC said the exemption did not apply to financial market participants that cannot qualify as “appropriate persons” under the Commodity Exchange Act (CEA).
PJM responded April 7 by announcing it may deny trading privileges to as many as 55 small market participants if they are unable to qualify for the exemption. PJM said the change was necessary for the RTO to avoid being deemed a swap dealer and becoming subject to CFTC reporting requirements.
Captive Customers
J.P. Morgan vice president Robert O’Connell said PJM’s officer certification requirements are unnecessarily complex compared with those of the New York ISO. He suggested that PJM has been less responsive to member complaints about paperwork requirements because it has “captive customers.”
If PJM members had alternatives for trading in PJM “there would be more thought given to person on the other side of the table,” O’Connell said.
Daugherty said PJM staff would attempt to simplify the requirements but was unable to accept companies’ Securities and Exchange Commission certifications, as O’Connell requested.
In preparing the changes needed to comply with the CFTC order, PJM officials discovered Operating Agreement language that raises questions about PJM Settlement Inc.’s independent authority to seek asset recovery following a trading participant’s default. Officials said they will propose deletion of the language, which appears to require a member vote before beginning collection efforts.
“Telling you about [PJM’s case] can be very detrimental to the legal position we’re in” by publicly exposing weaknesses in the RTO’s case, said PJM General Counsel Vince Duane. Instead, he said PJM would continue its current practice of “private bilateral conversations with those who are closest to the situation or most impacted by it.”
