FERC Denies PJM Proposal To Allocate Uplift To UTCs

FERC rejected, without prejudice, a filing from PJM to allocate uplift to Up-to-Congestion transactions (UTCs)

PJM had proposed to allocate uplift to Up-to-Congestion transactions (UTC), a type of virtual transaction, in the same manner that uplift is currently allocated to other virtual transactions, namely, incremental offers of supply (INC) and decrement demand bids (DEC). PJM also proposed to discontinue the netting of bilateral transactions for the purpose of uplift allocation, and change the calculation of uplift payments to ensure that resources are no worse off for following PJM’s dispatch instructions.

PJM's proposal had been supported by certain LSEs and retail suppliers

"We find PJM has failed to demonstrate that its proposal is just and reasonable," FERC said

"PJM fails to demonstrate in the instant filing why it would be appropriate to allocate uplift to a UTC, a single transaction, as though it were multiple transactions. We find that PJM has not adequately justified its supposition that UTCs behave in the markets with sufficient similarity to paired INCs and DECs to support allocating uplift to UTCs in the same way it allocates uplift to INCs and DECs, as proposed in the instant filing. While PJM claims that its proposal treats UTCs equivalently to INCs and DECs, we find that the proposal essentially allocates uplift to a UTC twice, because the proposed allocation methodology would allocate uplift to a UTC as if it were instead a separate INC transaction and a separate DEC transaction. Further, we are not persuaded that a UTC is 'identical' to a combined INC at the UTC source and DEC at the UTC sink. For example, INCs and DECs clear separately, allowing for the possibility that one side of a pair may not clear, while a UTC clears the market as a whole," FERC said

"While PJM has stated that UTCs can change which resources are committed in the day-ahead market and therefore can affect uplift, it has not attempted to quantify the approximate magnitude of UTCs’ impact on commitment decisions or uplift costs, nor shown that this amount justifies the proposed allocation of costs to UTCs. As noted above, under PJM’s proposal, a UTC would essentially be allocated uplift twice, compared to an individual INC or DEC, and PJM has not shown that the amount of uplift caused by UTCs justifies this allocation," FERC said

"While we find PJM has not justified the instant proposal, we recognize that it may be appropriate to allocate some uplift costs to UTCs. Therefore, our rejection in this docket is without prejudice to PJM proposing an alternative uplift allocation method for UTCs," FERC said

Docket No. ER18-86