PJM gathering stakeholder feedback on handling an FTR market default
PJM Interconnection and its members Feb. 18 narrowed down options for dealing with a financial transmission rights market default, with PJM recommending the defaulting member’s market positions be sold in upcoming FTR auctions.
Hill Energy Resource & Services did not meet a Jan. 11 collateral call and was declared in default, according to PJM. PJM withheld payment to Hill of outstanding December 2021 and January 2022 settlement amounts of $735,000 to partially satisfy the collateral call. The grid operator currently holds $6.1 million in cash from Hill, according to a PJM presentation given during a remotely held Special Members Committee meeting.
FTRs are hedging tools used to mitigate the power price risk associated with transmission line congestion.
PJM has been gathering stakeholder feedback with many of the recommendations being consistent and some being similar, Tim Horger, the grid operator’s director of forward market operations and performance compliance, said during the meeting.
The two approaches members have mainly supported are cancelling Hill’s FTR market positions or selling the open positions in the next long-term auction, according to PJM.
The FTR market default drew PJM’s attention to significant and unusual transmission congestion patterns resulting from a long-term construction outage in the Dominion Virginia Power transmission zone that is creating extreme power price volatility and associated FTR market impacts.
Specifically, the Lanexa-Dunnsville 230-kV transmission line that connects to Virginia’s Northern Neck peninsula is being rebuilt, resulting in an outage expected to last until December 2023. The construction outage sets up a contingency where at times of the day the entire load of the peninsula is being served by a 115 kV line, according to PJM.
A temporary solution has been proposed in which transmission upgrades could be made in the region that would reduce congestion on the 230-kV line, which would in turn impact the defaulted FTR portfolio value.
The upgrades should help reduce congestion and make the Hill portfolio less of a risk, Horger said. Hill’s 2022-2023 FTR positions are currently projected to have a value of negative $5,989,615, according to a PJM presentation.
It is possible that because of the transmission upgrades, the Hill portfolio could be “less negative or even positive” but there is no guarantee of that, Horger said.
FTR portfolio options
One option would be to allow the Hill FTR positions to settle against day-ahead power prices for certain periods or throughout the life of the portfolio which extends through May 2025, PJM said.