FERC Approves PJM Tariff Changes To Reduce Bidding Points For Virtual Transactions

FERC has accepted tariff changes filed by PJM to reduce the number of bidding points at which virtual transactions may be submitted by market participants

PJM had proposed to align the eligible trading points for Increment Offers (INCs) and Decrement Bids (DECs) with locations where either generation, load, or interchange transactions are settled, or at trading hubs where forward positions can be taken. Under the proposal, all the current residual metered, hub, and interface nodes would remain eligible trading points for INCs and DECs, while certain aggregate and generator nodes would be eliminated. The zone, Extra High Voltage (EHV), and individual load nodes would no longer be eligible trading points for INCs and DECs.

PJM also proposed to allow Up-to-Congestion (UTC) trading only at hubs, residual metered load, and interfaces but not at individual nodes. Furthermore, zone, aggregate, and EHV nodes would no longer be eligible trading points for UTCs. In addition, PJM proposed to eliminate certain interface nodes that are eligible trading points for UTCs and increase the number of eligible residual metered and hub nodes.

FERC adopted the changes as filed.

"We accept PJM’s proposal to align the eligible trading points for INCs and DECs with nodes where either generation, load, or interchange transactions are settled, or at trading hubs where forward positions can be taken. We find that the proposed alignment would result in resource commitment in the day-ahead market that more closely mimics the set of resources required to physically operate the system in real-time. Thus, as described more specifically below, we find the proposal to be just, reasonable, and not unduly discriminatory or preferential," FERC said

"[W]e find that PJM has adequately supported its proposal to no longer include biddable points at zone nodes, certain generator nodes, certain aggregate nodes, and individual load nodes as eligible bidding points for INCs and DECs," FERC said

"Given that market participants may bid at residual metered nodes and aggregate nodes where load is settled, they maintain a reasonable ability to manage their risk, including the risk of their day-ahead positions. We note that market participants will continue to be able to hedge exposure at the zones on ICE and Nodal Exchange and that PJM will continue to post LMPs at the locations where these futures contracts will settle. We further note that the remaining nodes available to market participants in markets operated by PJM are sufficiently representative to provide market participants the ability to manage their exposure on ICE and the Nodal Exchange. Therefore, we find that PJM’s instant proposal will not significantly hinder a market participant’s ability to manage exposure at the zones," FERC said

"We accept PJM’s proposal to limit eligible bidding points for UTCs to hubs, residual metered load, and interfaces. First, we agree with the IMM’s statement that PJM’s proposal to limit the UTC bid locations to interfaces, zones, and hubs will minimize false arbitrage opportunities for UTCs currently being pursued through penny bids, as the effect of modeling differences between the day-ahead and real-time markets are minimized at these aggregates," FERC said

"We find that PJM’s proposal does not unduly discriminate against UTCs. We find that UTCs and INCs/DECs are different financial products and note several differences between these products that warrant different treatment with respect to the number of available bidding locations," FERC said

PJM’s proposed tariff and operating agreement revisions were accepted to become effective on January 16, 2018.

Docket ER18-88