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FERC Denies Waiver Request Related To Liquidation Of GreenHat FTR Portfolio

January 31, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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FERC has denied a request from PJM for certain waivers relating to the liquidation of the GreenHat Energy, LLC Financial Transmission Rights (FTR) portfolio, with FERC denying waivers that would have resulted in the modification of the previously commenced July auction

In seeking the waiver, PJM had indicated that, after providing PJM members with notice of GreenHat’s default and posting the details of GreenHat’s portfolio, PJM began (but did not conclude) the July 2018 monthly FTR auction consistent with then effective liquidation process in section 7.3.9 of Attachment K-Appendix. PJM stated that it closely monitored the auction and observed market illiquidity and large risk premiums in the FTR auction for the positions that might be liquidated. PJM stated that, based on the recent offers and bids for the FTR auction conducted in July, PJM expects that the liquidation of GreenHat’s entire FTR portfolio in the manner required by the Tariff would result in significant losses to PJM members. Noting that it expects to complete and post the results of the July monthly auction, conducted on July 27, 2018, PJM requested an effective date of July 27, 2018 for its waiver request, so that the waiver is effective beginning with the FTR auction conducted in July.

FERC denied this waiver request

"We find that PJM has not shown that the proposed waiver is limited in scope. PJM explains that, after the July FTR auction had begun -- and all bids and offers had been received -- it identified what it thought might be significant illiquidity and risk premiums related to the FTRs in the GreenHat portfolio. In response, PJM paused aspects of the already-commenced auction and proposed to waive four discrete tariff provisions and begin a stakeholder process to investigate the possibility of adopting new procedures for liquidating GreenHat’s FTR portfolio in the already-commenced auction. Changing the rules governing an already-commenced auction is a significant step that affects both the outcome of that particular auction as well as parties’ confidence in the rules governing future proceedings. That is particularly so here, where the record indicates that PJM proposed the waiver in order to avoid the outcome that the already-commenced auction would have produced. In addition, we note that PJM proposes to waive four discrete elements of the Tariff in order to potentially substitute new rules that were not yet formed, much less included in the record, at the time PJM made its waiver request. Such a significant change to multiple parameters of an already-commenced auction is not a remedy that is limited in scope," FERC said

"The record demonstrates that participants submitted bids in the July monthly FTR auction relying on the liquidation process that existed at the time PJM conducted the auction. Disrupting those settled expectations is likely to cause harm to third parties, even if doing so might produce otherwise more efficient outcome, as PJM contends the waiver request would. We recognize that PJM requested this waiver as one of a series of proposals intended to alleviate the impact of GreenHat’s default on other market participants, and the Commission has approved certain of those proposals. Nevertheless, we find that PJM has not demonstrated that its interest in alleviating the impact of GreenHat’s default justifies its request to bypass the rules governing the already-commenced July monthly FTR auction. That is particularly so since all parties—including PJM -- were aware before the auction of the Tariff requirement to liquidate the GreenHat portfolio at 'at an offer price designed to maximize the likelihood of liquidation.' Under those circumstances, granting a waiver to change the rules after the auction commenced would be particularly disruptive to settled expectations," FERC said

FERC direct that, "To the extent PJM anticipated that the Commission would grant the waiver request, for instance, by liquidating only GreenHat’s August positions and settling GreenHat positions for September, October, November, December and January pursuant to the interim Tariff provision accepted in Docket No. ER18-2289-000 and the Tariff provision accepted in Docket No. ER19-19-000, PJM is required to reconcile any such actions by reinstating the original July auction results, or taking steps that are necessary to comply with the effective Tariff language when the July 2018 auction was conducted, and by unwinding settlements made for September, October, November, December and January positions that should have been liquidated."

Docket No. ER18-2068-000

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