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PJM, IMM Inform Traders That Certain External Interchange Scheduling Practices Will Be Referred to FERC Enforcement
PJM issued a notice to market participants that, "certain external interchange scheduling practices could result in notification of such transactions by PJM, and/or referral by the Independent Market Monitor (IMM), to the FERC Office of Enforcement for investigation."
"The basis for such referral is that PJM and the IMM believe these transactions provide no value by way of enhanced market efficiencies or operational benefit and could constitute manipulative, harmful or inappropriate market behavior," PJM and IMM said in a jointly issued statement
"The behavior in question involves market participants observing interface price differentials for the first portion of an hour and, based on such observations, determining what the hourly integrated price differentials are likely to be, and then scheduling interchange in a profitable direction for only the last portion of that same hour. Therefore, market participants that schedule interchange transactions between PJM and external Balancing Authorities that begin at 45 minutes past the hour and end at the top of the very next hour would be subject to referral," PJM and IMM said.
"Other behaviors that would result in the same or similar settlement could also be subject to referral. For example, modifying the transaction volume of an existing schedule for the last 15 minute interval could also be subject to referral. As another example, scheduling a transaction in one direction (the profitable direction) that begins at 45 minutes past the hour and continues into the next hour, and then scheduling another transaction in the opposite direction that begins at the top of the hour, thereby offsetting the first transaction, could also be subject to referral. Such activity among corporate affiliates could also be subject to referral. Transactions that are scheduled to begin at 45 minutes past the hour and stop at 15 minutes past the top of the next hour could also be subject to referral should PJM and/or the IMM have reason to believe that such transactions were submitted to exploit the hourly integrated nature of PJM settlements," PJM and IMM said.
"PJM and the IMM have observed external interchange schedules that appear to have been deliberately submitted for the purpose of exploiting interface price differentials without resulting in physical energy flow between the associated Balancing Authorities. External energy schedules submitted at any interface points that appear to be intended to inappropriately garner payments based on interface price differentials but do not result in physical energy flow could be subject to referral. For example, multiple interchange schedules, each of which represents a partial schedule that does not reflect the full physical energy path, or schedules that are in the opposite direction of a portion of a larger transaction that involves multiple Balancing Authorities so as to “cancel out” the physical flow that would otherwise be caused by a portion of the larger transaction could also be subject to referral. The key in these cases would be whether PJM and/or the IMM believes that the schedules together represent a method by which to extract revenues based on interface price differentials without inducing physical energy flow between Balancing Authorities," PJM and IMM said.
"Should a market participant seeking to engage in external interchange transactions of the sort described above, nonetheless believe it has a bona fide commercial rationale to support such transaction (exploiting pricing non-convergence arising from different rules and practices across the interface is not a bona fide rationale), such participant is strongly encouraged to discuss the matter in advance with both PJM and the IMM," PJM and IMM said.
ADVERTISEMENT Copyright 2010-
July 30, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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