Monday, March 18, 2019

UPDATED: PJM CFO Retiring in Wake of GreenHat Default

(Updated to add PJM’s motion for stay, filed Feb. 21.)

By Christen Smith and Rich Heidorn Jr.

PJM Chief Financial Officer Suzanne Daugherty will retire April 1 after months of recriminations by stakeholders over credit policies that allowed a small trading shop to default on more than $100 million in financial transmission rights losses.

CFO Suzanne Daugherty will retire from PJM effective April 1. | © RTO Insider

RTO officials declined to say whether Daugherty’s departure was related to the default of GreenHat Energy, saying only that it was her decision to leave. CEO Andy Ott announced Daugherty’s departure in an email Wednesday.

In a brief interview, Daugherty also declined to say whether her departure was related to the GreenHat controversy. “This is the timing for when I decided to move into retirement with my husband” who retired a year ago, she said.

Daugherty said her April 1 departure will allow her to complete PJM’s year-end financial reporting in March. She said she plans to do more traveling with her husband and resume volunteer work in children’s health and education and has no plans to seek a new job. “This is a true retirement,” she said.

GreenHat

Daugherty found herself the target of PJM members’ ire over the RTO’s handling of GreenHat, a small company that was able to procure 890 million MWh of FTRs — the largest FTR portfolio in PJM — while putting up only $600,000 in collateral.

The company, which listed its address as a UPS store in Coronado, Calif., was owned by two traders who previously gained notoriety as participants in J.P. Morgan Ventures Energy Corp.’s scheme to manipulate the CAISO and MISO markets between 2010 and 2012. PJM’s failure to respond promptly to warnings from other FTR traders allowed GreenHat’s $10 million loss in 2017 to balloon to more than $100 million by the time the company defaulted in June 2018. (See Doubling Down – with Other People’s Money.)

At the Market Implementation Committee meeting on Feb. 6, Daugherty told members that a FERC order to rerun the July 2018 FTR auction to liquidate GreenHat’s positions could add $250 million to $300 million to the $186 million the RTO had earlier projected the default would cost members. (See PJM Won’t Act on FTR Order Before Stay Ruling.)

The Board of Managers is expected to issue a report on its investigation of the GreenHat debacle in about a month.

Stay Request Filed

On Feb. 21, PJM filed a motion for a stay on the commission’s order until the commission acts on the RTO’s planned request for rehearing and clarification (ER18-2068).

PJM said the commission ordered rerunning of the August planning period balance FTR auction “without recognition that the results of every auction conducted subsequently likely would be inconsistent — as to FTR paths, megawatt quantities, and ownership — with the revised August auction results.”

The RTO said the order runs “headlong against the commission’s policy against rerunning markets, and its emphasis on avoiding upsetting market participant reliance on settled markets.”

It said rerunning the auction would likely require multiple market participants to post 10 or 20 times as much collateral, pushing some of them in default. It also could give some FTR holders “a free option to retroactively extinguish unprofitable FTRs,” harming others.

20-year Career

Daugherty, who also holds the titles of treasurer and senior vice president, joined PJM in 1998 and became an integral part of the organization, ultimately managing the Business Planning & Analysis Department and serving as controller, liaison to the president and, most recently, as chair of the Markets and Reliability Committee.

In an email announcing Daugherty’s departure, Ott praised her for establishing the stated rate plan, leading the Advanced Control Center project and the Women’s Employee Resource Group.

“We are grateful for Suzanne’s countless contributions to PJM,” he said in the email to stakeholders. “Her relentless focus on driving excellence has helped solidify our reputation as a leading provider of reliable grid operations.”

In 2018, the Philadelphia Media Network — publisher of The Philadelphia Inquirer, Philadelphia Daily News and Philly.com — honored Daugherty with its inaugural Influence of Finance Award for her contributions to PJM as both its longest serving and first female CFO in the organization’s 90-year history.

“It has been my honor and privilege to serve PJM’s employees and members for more than two decades,” Daugherty said in a press release Wednesday. “I am proud to have been part of such an outstanding team doing extremely important work, and I know PJM will continue to forge ahead with innovation, integrity and outstanding service to its members.”

Daugherty told employees about her decision to leave PJM on Tuesday.

Ott assured stakeholders Daugherty’s retirement will not impact day-to-day operations or execution of PJM’s long-term strategy. The RTO said it “has already begun to review its succession plans and will transition Daugherty’s responsibilities in the coming weeks.”

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