Then there were two.
PJM announced tonight that it will ask members to pay more than $2 million in defaults by two retail marketers unable to cover high power costs during January’s arctic cold.
Suzanne Daugherty, PJM chief financial officer, told the Credit Subcommittee this afternoon that two – then unnamed ̶ retailers had defaulted on collateral calls Friday and had until 5 p.m. Tuesday to “cure” the defaults.
One was CCES LLC, operating as Clean Currents, which announced its collapse Friday (see High Prices Claim Green Retailer). The company, which reportedly had 6,000 residential and 2,000 commercial customers in Maryland, Pennsylvania and the District of Columbia, owes $1.6 to $1.8 million.
The other – which Daugherty said had hoped to come up with the collateral by the deadline – was revealed tonight as People’s Power & Gas LLC, which was suspended by ISO New England in late December, returning thousands of customers to Public Service of New Hampshire. It owes PJM $400,000 to $600,000.
“For both of these retail companies, in a single day they jumped from below their working credit to above their working credit.” The crunches resulted, she said, from “a combination of prices and volume.”
Daughterty said that PJM had issued calls for more than $2 billion in collateral in January, at least four times the total for all of 2013.
In an interview after the meeting, Daugherty noted that eight of the top ten winter demand peaks in PJM’s history occurred last month. PJM, which billed $33 billion in all of 2013, billed “a lot more than 1/12th of that” in January, she said.
Mike Bryson, executive director of system operations, told the Operating Committee earlier today that PJM may now have one or two additional winter-peaking zones in addition to East Kentucky Power Cooperative, the only one prior to January. He did not name the zones and said the numbers were tentative.
PJM will ask the Board of Managers at its Feb. 12 meeting to approve an assessment on members to collect the defaults. The allocations will show up in March bills.
Exempt are associate members, municipal members that have received waivers, Emergency and Economy Load Response and ex-officio members, such as state consumer advocates.
The assessment formula, detailed in section 15.2.2 of the Operating Agreement, prorates 10% of the default over all non-exempt members — about $250 to $350 per member. The remainder will be assessed based on total gross activity for the month of the default and the two previous months.
One company, later identified as Peoples, told PJM that an employee had incorrectly entered a day-ahead transaction. It unsuccessfully attempted to raise the collateral within PJM’s grace period, two business days.
The other, Clean Currents, told PJM that it was hopelessly “cash-illiquid.”
“I haven’t seen anything remotely like this, not even in the summer,” Clean Currents Chief Executive Gary Skulnik told The Philadelphia Inquirer. “We were not sufficiently hedged. When the wholesale market started going through the roof, we weren’t able to cover it.”
“There were more members who went into collateral payment default in January but they cured them” Daugherty said. “On any given day there are outstanding collateral calls.”
While PJM isn’t aware of any of other companies in financial distress, Daugherty said that she couldn’t promise “there’s no one else.”
