Shell Seeks FERC Relief From Claim Entering Bilateral FTR Data Into PJM Creates Separate Contract
June 02,2020
In a petition for a declaratory order concerning Financial Transmission Rights in PJM related to the GreenHat Energy default, Shell Energy North America (US), L.P. petitioned FERC to interpret the PJM Interconnection, L.L.C. (“PJM”) Tariff provisions regarding bilateral transfers of Financial Transmission Rights (“FTRs”) and to resolve an ongoing dispute currently pending in Texas state court.
Shell said that, "The court proceeding involves a breach-of-contract claim by GreenHat Energy, LLC ('GreenHat') regarding bilateral contracts to transfer FTRs between GreenHat and Shell Energy. GreenHat does not allege that Shell Energy breached those binding agreements. Instead, it makes the extraordinary claim that entering data into PJM’s platform for reporting FTR transfers created additional separate, binding contracts, which Shell Energy allegedly breached."
"The PJM Tariff governs the rights and obligations of FTR Holders, including certain provisions related to bilateral FTR transfers. The PJM Tariff does not, however, establish specific terms and conditions for agreements between parties to bilateral FTR transactions. Such terms and conditions are established in parties’ bilateral agreements. That was the case for Shell Energy and GreenHat. GreenHat’s assertion that data entered into FTR Center somehow created separate, standalone contracts with Shell Energy and associated payment obligations directly contradicts PJM’s representations to the Commission that FTR Center is merely a 'reporting mechanism' for FTR transfers -- a representation adopted in the delegated letter order accepting PJM’s Tariff
provisions regarding bilateral FTR transfer," Shell said
"GreenHat explained to the court in the Texas proceeding that its claim regarding the effects of entering data into FTR Center is rooted in Shell Energy’s obligation as a market participant to adhere to the requirements of the PJM Tariff. GreenHat’s claim, therefore, depends on an interpretation of PJM’s Tariff provisions for bilateral FTR transfers. Indeed, interpretation of the Tariff to clarify that use of FTR Center does not create a separate contract as claimed by GreenHat is necessary to avoid widespread, adverse consequences to the PJM market. Over a nearly 6-year period of time, approximately 137,000 FTR Center entries were made, associated with 95 unique customer short names.2 Unresolved, GreenHat’s claim would lead to uncertainty, and very likely legal disputes between the PJM members associated with those entries. Like other PJM members, Shell Energy could be subjected to unknown terms of alleged contracts it never agreed to, simply because of data entered into FTR Center. Data entered for a transfer of an FTR should not supersede the clear terms of written bilateral agreements. FERC can avoid these potential disputes by providing the requested Tariff interpretation," Shell said
Accordingly, Shell Energy petitioned the Commission to:
• interpret the PJM Tariff provisions regarding bilateral FTR transfers to confirm that (1) the parties’ bilateral agreements control, as between the parties to the bilateral contracts, the terms and conditions of their transactions; (2) in the context of bilateral FTR transfers, FTR Center is only a reporting mechanism for the transfers; and (3) entering data into FTR Center to report the transfer of FTRs does not create a separate, standalone contract between the parties to the bilateral agreement, or modify the parties’ bilateral agreement
• assert primary jurisdiction over and resolve GreenHat’s claim on the merits, which will allow Shell Energy to file a pleading seeking dismissal of GreenHat’s state court claim against Shell Energy for failure to state a claim as a matter of law.