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PJM, Numerous Parties File Settlement Concerning GreenHat Default, FTR Auction

$12.5 Million To Be Paid To Certain Participants; Funded Via Default Allocation Assessments On PJM Members

October 10, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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PJM and numerous parties have filed a settlement to resolve all issues concerning liquidation of the GreenHat Energy, LLC's Financial Transmission Rights (FTRs) as a result of GreenHat's default, and the July 2018 FTR auction (July Auction)

The settlement provides that an aggregate of $12.5 million would be paid to two participants, and would create a fund to pay any other potential claims

The settlement would resolve the GreenHat proceedings without any requirement for PJM to re-run or resettle the July Auction or any subsequent FTR Auction for the 2018/2019 Planning Period, or to change the clearing results of any auction in such Planning Period. PJM will prepare a simulated clearing of the July Auction under certain agreed assumptions, but that simulated clearing will be only for the purpose of determining potential payments to be made by entities claiming economic harm other than those two entities specifically identified in the settlement

The settlement would provide credits to the two participants in the July Auction that have presented claims of economic harm from the manner in which PJM conducted that auction -- Apogee Energy Trading LLC and Boston Energy Trading and Marketing LLC

The settlement would provide for a credit of five million dollars ($5,000,000) to Apogee and seven million five hundred thousand dollars ($7,500,000) to BETM

In consideration of those credits, Apogee and BETM each release and relinquish any claims they may have in connection with economic harm they claim to have suffered due to the manner in which PJM addressed the GreenHat FTRs in the July Auction. Nothing in the settlement relieves either Apogee or BETM of any liability for Default Allocation Assessments they may be assessed under settlement. As PJM Members, both Apogee and BETM are subject to Default Allocation Assessments in accordance with the allocation rules in Operating Agreement, section 15.2.2.

The settlement provides that PJM will fund through Default Allocation Assessments the credits made to Apogee, BETM, and any new Claimants found to have suffered Economic Harm (discussed below). This reflects that the payments are a proxy for re-running or resettling the July Auction to liquidate additional GreenHat FTRs, which would have increased the costs of the GreenHat default and thus increased the Default Allocation Assessments charged to the PJM Members subject to such assessments.

Additionally, the settlement provides for potential payments to other July Auction Participants that assert a claim of Economic Harm from the manner in which PJM addressed liquidation of the GreenHat FTRs in the July Auction. "[O]ther than Apogee and BETM, no other participant in the July Auction protested the Waiver Request or presented, on the record or during settlement discussions, estimated claims of economic harm from PJM’s conduct of the July Auction. That no other claimants have yet come forward does not necessarily imply there are no other claimants; however, the Settling Parties assess that it is unlikely that there are large claims outstanding from parties that have not yet claimed Economic Harm and that will now choose to do so," settling parties said

To fund any additional payments, the settlement would establish a Payee Fund, funded through Default Allocation Assessments, in the amount of the aggregate Economic Harm of any additional claimants, but not to exceed five million dollars ($5,000,000)

Settling parties noted that many of the Settling Parties, as well as supporting and non-opposing participants, are either PJM Members that, under the Operating Agreement, are obligated to bear the costs (through a Default Allocation Assessment) that result when a PJM Member defaults on its financial obligations in the PJM market, or represent the interests of the ultimate consumers which will bear such costs.

In support of the settlement, settling parties said, "In simplest terms, the 'payor' parties that participated in the settlement discussions judged that their interests and those of other similarly situated PJM Market Participants were better served by agreeing to the specified settlement credits to Apogee and BETM (and, pursuant to Article VI of the Settlement, any other July Auction Participant that advances a similar claim of economic harm) in order to avoid exposure to the potentially greater Default Allocation Assessments that would result if PJM were ordered to liquidate additional GreenHat FTRs in a re-running of the July Auction."

Settling parties include PJM Interconnection, L.L.C.; American Electric Power Service Corporation; American Municipal Power, Inc.; Apogee Energy Trading LLC; Boston Energy Trading and Marketing LLC; Buckeye Power, Inc.; DC Energy, LLC; Direct Energy Business, LLC; Direct Energy Business Marketing, LLC; Dominion Energy Services, Inc.; Duke Energy Kentucky, Inc.; Duke Energy Ohio, Inc.; East Kentucky Power Cooperative, Inc.; EDF Trading North America, LLC; EDF Energy Services, LLC; EDP Renewables North America LLC; Elliott Bay Energy Trading, LLC; Exelon Corporation; FirstEnergy Service Company; LS Power Associates, L.P.; Mercuria Energy America, Inc.; Mercuria SJAK Trading, LLC; NextEra Energy Marketing, LLC; NRG Power Marketing LLC; the PJM Industrial Customer Coalition; the PSEG Companies; and Southern Maryland Electric Cooperative, Inc.

The Settling Parties were also authorized to state that the Delaware Division of the Public Advocate and the Office of People’s Counsel for the District of Columbia do not oppose the Settlement. "Settling Parties further note that no participant involved in the settlement process has advised the Settling Parties that it will oppose the Settlement," the settling parties said

It should be noted that Shell Energy North America (US), L.P. was denied a late-filed intervention in the proceeding. Generally, Shell opposed re-running the July Auction, which as noted, will not occur under the settlement

Shell had said in a FERC filing that, "If PJM Interconnection, L.L.C. ('PJM') liquidates GreenHat Energy, LLC’s (“GreenHat”) Financial Transmission Rights ('FTR') portfolio by rerunning the auction for the August 2018 Planning Period Balance that occurred in July 2018 ('August Auction'), PJM Members like Shell Energy North America (US), L.P. ('Shell Energy') and, in turn, ratepayers will be forced unnecessarily to pay an estimated cost of hundreds of millions of dollars to clean up the mess of one market participant -- GreenHat."

Docket ER18-2068

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