By Rich Heidorn Jr.
PJM’s Independent Market Monitor told the Federal Energy Regulatory Commission last week that proposals by the RTO and a marketer to change the financial transmission rights (FTR) forfeiture rule would weaken protections against market manipulation.
The Monitor leveled the criticism in comments filed last week in the Section 206 case FERC ordered last year regarding the RTO’s treatment of virtual transactions (EL14-37).
The Monitor said PJM’s proposal to use a load- or generation-weighted reference bus rather than the largest impact bus would “functionally eliminate” the forfeiture rule under the current, non-portfolio approach to evaluating impacts of transactions on congestion.
In September, FERC ordered the Section 206 proceeding to determine whether PJM is improperly treating up-to-congestion transactions differently than incremental offers (INCs) and decrement bids (DECs). While INCs and DECs are charged uplift and subject to the FTR forfeiture rule, UTCs are exempt from both.
Ruling by October?
The Monitor’s criticism was in response to some of the almost two dozen comments filed in late May following a Jan. 7 technical conference on the issue.
In opening the Section 206 docket last year, the commission said it would rule within five months after it receives comments following the technical conference. That would put FERC on schedule for a ruling by the end of October. (See FERC Issues Request for Comments in UTC Uplift Docket; Ruling by October?)
The Monitor’s reply, filed June 23, was also critical of a proposal by EDF Trading to replace the forfeiture rule with individual enforcement actions.
“An enforcement action approach, relative to a rule-based approach, is inefficient, non-transparent and of limited value as a deterrent to market manipulation,” the Monitor said. “Such a rule is unclear and effectively unenforceable, which may be the point.”
The Monitor added that PJM’s current rule not subjecting UTCs to forfeitures “ignores [the] laws of physics.”
“As the power flows from the UTC source to the UTC sink, it flows across constraints. As a result, the net flow from a UTC should be treated the same as an INC when the UTC net flow is an injection and the same as a DEC when the UTC net flow is a withdrawal, under the FTR forfeiture rule.”
Uplift Task Force to Resume
FERC’s ruling in the 206 case may result in the application of uplift charges to UTCs, an issue that has split PJM stakeholders. UTC trading volumes collapsed after Sept. 8, the refund-effective date set by FERC for any uplift assessments.
PJM told the Markets and Reliability Committee on Thursday that the Energy Market Uplift Senior Task Force (EMUSTF) will resume regular meetings in August or September.
Stakeholders had asked to suspend the task force’s efforts on uplift cost allocation pending FERC action on PJM’s Capacity Performance proposal. FERC largely approved the proposal June 9.
Until last week — when it met to discuss the results of the backcast analysis on several cost allocation proposals — the task force had not held a meeting since April.
Also last week, PJM filed a proposed revision on how it pays generators for lost opportunity costs in the day-ahead and real-time markets (ER15-1966). The MRC approved the proposal, which came out of the task force meetings, in April. (See PJM Members Tighten Lost Opportunity Cost Rules; Tech-Specific Eligibility Retained.)
