On December 28, 2015, FERC issued an order establishing a technical conference on revenue adequacy issues relating to PJM’s allocation of Auction Revenue Rights (“ARR”) and Financial Transmission Rights (“FTR”). On October 19, 2015, PJM submitted proposed changes to Schedule 1 of its Amended and Restated Operating Agreement pursuant to Section 206 of the Federal Power Act (“FPA”). On the same day, PJM also submitted a filing pursuant to Section 205 of the FPA wherein PJM proposed revisions to its Attachment K-Appendix. According to PJM, a cost-shift is occurring where revenues from ARR holders are being redirected to FTR holders, due to a reduction in the quantity of ARRs. PJM argues that the cost shift under the existing ARR and FTR provisions renders them unjust and unreasonable, which necessitated the recent filings.

In its order establishing a technical conference, FERC noted that a more complete record is necessary in order to determine whether PJM’s proposed operating agreement and tariff revisions are just and reasonable. In particular, FERC indicated that the technical conference shall address the following issues: (1) ARR modeling and allocation processes; (2) treatment of portfolio positions in allocating underfunding or surplus among FTR holders and the potential for market manipulation; and (3) balancing congestion in ARR/FTR product design.

A copy of FERC’s order can be found here.