RTO Attempts to Lobby Commissioners
By Rich Heidorn Jr.
VALLEY FORGE, Pa. — PJM won’t act on FERC’s order to rerun its July 2018 financial transmission rights auction unless the commission denies the RTO’s planned motion for a stay, officials told members Wednesday.
FERC’s Jan. 30 order rejected PJM’s request to waive rules requiring it to quickly liquidate GreenHat Energy’s FTR positions following the company’s default. The RTO liquidated only GreenHat’s FTRs settling in August, saying that selling all the positions immediately would increase members’ losses (ER18-2068).
CFO Suzanne Daugherty told the Market Implementation Committee on Wednesday that unwinding settlements of the company’s FTR portfolio could add $250 million to $300 million to the $186 million the RTO had earlier projected the default would cost members. Daugherty stressed that the calculations are preliminary and might vary significantly after PJM is able to rerun the results of the July auction. (See PJM: FERC Order Could Boost GreenHat Default by $300M.)
Deputy General Counsel Chris O’Hara said PJM will ask FERC to stay its order until it rules on the RTO’s request for rehearing or clarification, which will be filed before March 1.
“There’s a couple things we unquestionably need clarification from FERC on, assuming the order stands,” O’Hara said, noting members’ approval in January of a new mark-to-auction component for FTR collateral requirements. “Is FERC saying we should go back to the credit rules that existed in July?”
Ex Parte Communications
RTO officials are so alarmed by the impact of the ruling that Craig Glazer, PJM’s D.C.-based vice president of federal government policy, may have violated FERC’s ex parte rules. Commissioners Cheryl LaFleur and Richard Glick and their aides, along with Rachel Marsh, legal adviser to Chairman Neil Chatterjee, said Glazer attempted to speak to them about the issue in separate phone calls on Jan. 30, according to filings the three offices put in the docket.
Marsh and LaFleur aide Jessica Cockrell said Glazer called them for what he initially said was a “procedural update” on the case. “Mr. Glazer explained that PJM intends to file an emergency motion for stay, and also that the order may have significant financial implications for PJM members and require inclusion of relevant amounts on members earnings reports,” Cockrell said.
Glick said Glazer “indicated that PJM was going to issue a press release pointing out that the commission’s order was going to cost its members hundreds of millions of dollars. I told Craig that I was aware of the proceeding and that it remains an outstanding issue and that we should not discuss it. He followed up by noting that PJM was going to file an emergency order with the commission seeking a stay of the Jan. 30 order. I reiterated that we should not discuss this matter until the proceeding is concluded and he agreed. We then ended the conversation.”
PJM spokeswoman Susan Buehler denied that Glazer was attempting to lobby the commissioners.
“As the filed record indicates, Craig contacted commissioners to give them a procedural update on the order which could have a significant impact on PJM members. He wanted to make sure they knew PJM intended to make several filings,” Buehler said in an email. “Regarding the ex parte filing, PJM understands the need for sensitivity when addressing procedural matters with the commission.”
‘Disappointed’ in Delay
O’Hara said the RTO was disappointed that it took FERC six months to rule on the waiver request. “They could have ruled within 30 days. Waiting six months obviously makes [unwinding FTR settlements] more complicated,” he said.
Direct Energy’s Marji Philips asked O’Hara why the RTO did not ask the commission for expedited treatment for the waiver request. “Fair question,” O’Hara responded. “I’ll have to look into that.”
FERC ordered PJM to rerun the auction conducted in July under Tariff rules requiring it to offer all of GreenHat’s FTR positions at a price designed “to maximize the likelihood of liquidation.” That means including liquidation offers for all GreenHat’s FTR positions for August 2018 through May 2019, instead of just the prompt month.
The order also requires PJM to recalculate the default allocation assessments made based on GreenHat FTRs that went to settlement between September and January 2019 if those FTRs get liquidated as a result of the rerun of the July auction.
PJM’s Tim Horger said the RTO, which has never rerun a cleared FTR auction, is still evaluating potential implications of the ruling. “You’re going to have … auctions [after July] where members sold positions they never owned,” he said.
Because the FTR portfolios of participants who traded in the July auction will be revised, the reshuffling is expected to trigger credit collateral calls.
The revised results also will cause FTR auctions from August 2018 through January 2019 “to become infeasible solutions,” violating the simultaneous feasibility test, PJM said.
The RTO will have to make billing adjustments reflecting revised default allocation assessment charges since Aug. 1 — revisions that may cause additional members to default.
There could be additional briefings in the docket regarding how PJM can remedy the violations, O’Hara said. “We’re not entirely sure what to do.”
Daugherty said the RTO believes the order only requires it to rerun the July 2018 auction for August because the auctions from September forward were under revised rules approved by the commission.
In October, the commission approved PJM’s requests to change its rules so it wouldn’t have to immediately offer any GreenHat positions for liquidation after Aug. 24. (See FERC OKs Key PJM Changes to Address GreenHat Default.)
FERC last week approved PJM’s request to withdraw an earlier petition to allow bilateral counterparties the option to assume indemnified positions (ER19-24). The RTO made the request after FERC issued a deficiency notice seeking more information on its indemnification procedures.
In asking to withdraw its filing, the RTO said “the proposal does not provide sufficient benefits to the PJM membership to justify PJM continuing to seek approval.” The commission acted over the opposition of Shell Energy, which said the withdrawal would prevent the commission from ruling on its dispute with the RTO over existing indemnification rules. (See Shell Energy Seeks to Avoid Liability in GreenHat Trades.)
The commission also rejected Shell’s request to institute a Section 206 proceeding but said “Shell remains free to file a complaint.”