By Rich Heidorn, Jr.
PJM Insider
Wilmington – PJM stakeholders Thursday soundly defeated a proposal to relieve holders of Financial Transmission Rights (FTRs) from responsibility for balancing congestion costs.
The proposal by Steven Lieberman of Old Dominion Electric Cooperative concerned market-to-market (M2M) payments under the Midwest ISO-PJM Joint Operating Agreement. It would have eliminated the balancing congestion account as a source of M2M funds and allocated the costs to the Balancing Operating Reserve (BOR) deviations account. The Members and Reliability Committee (MRC) rejected the proposal on a sector-weighted vote of 1.57-3.43.
The proposal was something of a Hail Mary pass, coming after the MRC failed to reach consensus on two other proposed changes to the funding of balancing congestion.
Supporters of the proposal said the change was needed to eliminate disparities in the allocation of M2M payments. When PJM exceeds limits on a binding MISO flowgate, the cost is assigned to BOR if the constraint is relieved by a PJM generating unit. The cost is assigned to holders of Financial Transmission Rights (FTRs) if a MISO generator relieves the constraint. This allocation method, some say, has contributed to increasing underfunding of FTRs.
Harry Singh, vice president at J. Aron & Co., presented an analysis that showed funding available for FTRs in January was only about 50% of target allocations. In some hours, underfunding reached 100%, Singh said. Most of the underfunding was the result of construction-related transmission outages, he said.
“People say FTRs were never intended to be a perfect hedge,” Singh said. “I get it. But if you have 100% underfunding it’s no hedge at all.”
Other stakeholders acknowledged concern over FTR underfunding but said the proposal brought to the committee shifted costs without addressing the causes.
“This proposal is to squish the balloon and have it pop out somewhere else,” said David Pratzon, who represents generators.
Walter Hall, an energy market advisor to the Maryland Public Service Commission, noted that Market Monitor Joseph Bowring has questioned whether FTR underfunding is a real problem or the result of improper measurement. “We are concerned about additional charges on end users,“ Hall said.
In December, two other proposals to reallocate the cost of balancing congestion also failed to win consensus. The first option, which would have allocated costs to real time loads and exports, won majority support from only the Other Supplier segment. The Electric Distribution (ED) segment was unanimous in opposition.
A second option, to allocate costs to all FTR MWh, including counter-flow FTRs, also failed despite support from most ED and End Use Customer members. Most Generators, Other Suppliers and Transmission Operators were opposed.
