PJM, MISO File JOA Settlement With Mutual Release Provision
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January
5, 2011
PJM and the Midwest ISO have filed a proposed settlement at FERC to resolve all claims
relating to several cross-complaints (Dockets EL10-45 et. al.) lodged by each RTO
concerning the Joint Operating Agreement (JOA).
The RTOs have alleged each other's actions with respect to market-to-market coordination
were inconsistent with the JOA (see 4/13).
The settlement provides for the release and discharge forever of each and every participant
(including all intervenors, members of Midwest ISO, members of PJM, Midwest ISO,
and PJM) from, "any and all claims, demands, damages, amounts owed, actions, causes
of actions, or suits of any kind or nature whatsoever, known or unknown, foreseen
or unforeseen, that arose or could have arisen under the JOA for events that occurred
prior to the date of the filing of the settlement." The stipulation would provide
that no rebillings or resettlements of any kind regarding activities conducted under
the JOA for any time prior to the filing of the settlement shall occur.
Additionally, going forward, a one-year limitation on claims arising under the JOA
shall be established. Specifically, the JOA would be revised to provide that no
claim seeking an adjustment in the billing for any service, transaction, or charge
under the JOA may be asserted with respect to a particular month, if more than one
year has elapsed since the first date upon which the invoice was rendered for the
billing for that month.
The stipulation provides for a "baseline review," to be conducted by an independent
third party, of the market-to-market provisions of the JOA. Additionally, the RTOs
shall institute a "Change Management Process" governing the steps either RTO shall
take when it desires to modify a provision affecting the market-to-market process,
including the determination of market-to-market settlements under the JOA. The settlement
specifies that the RTO proposing the change shall not implement the proposed change
until it receives notification from the other RTO that it concurs with the change
or until the completion of any dispute resolution process.
More specifically, PJM and MISO have agreed to several principles regarding the JOA.
For example, the RTOs have agreed that the purpose of market-to-market coordination
under the JOA is to address regional, not local, congestion issues, and the RTOs
agree to implement such coordination, including market-to-market settlements, when
both Midwest ISO and PJM operations have significant impacts on a constrained M2M
Flowgate.
The RTOs have further agreed that, as a general matter, they should minimize financial
harm to one RTO that results from market-to-market coordination initiated by the
other RTO that produces less than optimal dispatch, which can lead to revenue inadequacy
for Financial Transmission Rights and impose the burden of such revenue inadequacy
on one or both of the RTOs.
Another guiding principle clarifies that market-to-market coordination under the
JOA will be initiated by the monitoring RTO whenever a M2M Flowgate is constrained
and therefore binding in its dispatch.
To the extent practicable, market-to-market coordination will take place on the most
limiting M2M Flowgate using that M2M Flowgate's actual (thermal, reactive, or stability)
limit. To ensure that this guideline is followed, market-to-market coordination
that involves use of a limit that is below 95% of the M2M Flowgate's actual limit
will be subject to an "after-the-fact review" to determine if market-to-market settlements
are appropriate, unless the lower limit was agreed to by Midwest ISO and PJM prior
to the market-to-market binding event.
A flowgate that is expected to be constrained but that is not a M2M Flowgate (e.g.
a "substitute M2M Flowgate") may be defined and activated in the market-to-market
coordination process, pending the outcome of the M2M Flowgate tests to determine
if the flowgate qualifies as an M2M Flowgate. A substitute M2M Flowgate may be used
until the actual constraint is entered in both RTOs' systems.
However, the RTO requesting the use of a substitute M2M Flowgate does so at its own
risk. In other words, in the event that the substitute M2M Flowgate does not pass
the M2M Flowgate tests, then for the period that the substitute M2M Flowgate was
used, the requesting RTO will not receive any market-to-market payment with respect
to market flows that exceed Firm Flow Entitlement on that Flowgate.
Currently, in determining market-to-market settlements, PJM uses a generation percent
table to reflect unit specific exports in its Market Flow Calculator. However, the
RTOs have agreed to amend the JOA to eliminate the use of specific generator contribution
percentages to reflect unit specific exports in the Market Flow Calculator, and instead
they will use a "slice of system" methodology, where all generation is scaled down
proportionately to reflect the total amount of exports. This will conform PJM's
practice to Midwest ISO's practice. It also will eliminate an aspect of PJM's practice
that led to certain errors in the market-to-market settlements in the past
The RTOs also have agreed to amend the JOA to revise the methodology for determining
Firm Flow Entitlements in the market-to-market settlement calculation to provide
for the use of point-to-point transmission service schedules instead of reservations
to calculate the firm market flow limits. "The use of schedules rather than reservations
more accurately reflects the real-time usage of M2M Flowgates because market participants
do not always schedule energy to the full extent of their reservations. Using reservations
in the market-to-market settlement calculation therefore overstates usage of M2M
Flowgates," the RTOs said.
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