FirstEnergy Solutions Files Complaint at FERC Over Allocation of FTRs for Facilities Returning to Service

FirstEnergy Solutions Corp. has filed a complaint at FERC concerning rules governing the PJM Auction Revenue Right (ARR) allocation process for transmission facilities that have been modeled as out-of-service for the entire year but which return to service for one or more months.

If a transmission facility is scheduled to be out of service for multiple months of the year, PJM has the discretion to model that facility as out-of-service for the entire year. These scheduled outages restrict the capability of the transmission system, which can result in LSEs' ARR requests being prorated, FirstEnergy Solutions said.

In situations where transmission facilities that have been modeled as out-of-service for the entire year in the ARR allocation process return to service for one or more months, PJM creates monthly financial transmission rights (FTRs) for this available capability.

"Instead of allocating these FTRs to the same LSEs that had their annual ARR requests pro-rated, PJM sells them in the monthly FTR auction, broadly distributing the value of such FTRs to all ARR/FTR holders," FirstEnergy Solutions said.

"The result is a reduced ability of LSEs who have received pro-rated ARRs in the annual auction to hedge congestion costs, contrary to the original intent of PJM’s FTR/ARR paradigm. Moreover, broadly distributing the value of FTRs that result from the additional transmission capability represents a transfer of wealth with no economic or policy justification. It is unjust and unreasonable for LSEs who have had their ARR requests pro-rated in the annual allocation to be denied the newly-available FTRs (or the corresponding ARRs) simply because the transmission capability was not reflected in the annual model," FirstEnergy Solutions said.

FirstEnergy Solutions noted that the PJM Tariff provides a mechanism for the distribution of ARRs on a monthly basis where transmission capability not modeled for the annual allocation becomes available during the planning year because of newly constructed or upgraded transmission capability.

"There is no policy or economic basis for treating newly-constructed transmission capability that was not modeled for the annual ARR allocation differently than existing transmission capability that was not modeled for the annual ARR allocation. The just and reasonable solution is to amend the PJM Tariff to provide for a mechanism to allow for the monthly allocation of ARRs to LSEs whose annual ARR allocations were pro-rated as a result of an outage of a transmission facility, up to the original amount of ARRs requested, when such facilities are in-service and available during certain months of the year," FirstEnergy Solutions said.