PJM rules are making it difficult for banks to purchase capacity providers’ revenue streams, Citigroup Energy told the Markets and Reliability Committee last week.

Citigroup Energy’s Barry Trayers presented a first read of a proposed problem statement to consider changing the rules, which require PJM to wait until after the third incremental auction (IA) before reassigning revenue streams from one PJM member to another.

Trayers said Citigroup purchases revenue streams at a discount from capacity providers who prefer to receive their proceeds in a lump sum. “I have customers out there who want to do it. It’s just very difficult to do it,” under current rules, he said. “I’m only [seeking to change] when PJM approves the transaction.”

Trayers said the rule will need to be changed because a proposed Tariff change now pending before the Federal Energy Regulatory Commission would eliminate the third IA, potentially putting such deals in limbo. (See Second Time Not the Charm.)

Harry Singh, of Goldman Sachs, also supported consideration of the rule change but asked for further clarity on whether PJM considers these “auction specific capacity” transactions to be “physical transactions” or simply a reassignment of receivables.

Stu Bresler, vice president of market operations, said the RTO supports “opening discussion” on the issue. PJM Chief Financial Officer Suzanne Daugherty said the change proposed by Citigroup should not increase risks to PJM members because the capacity provider will remain liable for capacity deficiency charges. PJM will retain the capacity provider’s posted collateral and could tap into the reassigned cash flow if needed to cover any shortfalls, she said.

Trayers’ request to waive first read and have an immediate vote on the problem statement was rejected by MRC chair Mike Kormos when several members objected. The issue will be brought to a vote at the MRC’s next meeting.