In comments to FERC, Direct Energy Business, LLC and Direct Energy Business Marketing, LLC warned that one of the proposals offered by PJM and certain other stakeholders to address underfunding of Financial Transmission Rights would create a new source of unhedgeable uplift

Direct Energy noted that PJM and others suggest in their comments that removing balancing congestion from the FTR funding pool and allocating balancing congestion costs or credits across a wider cross section of PJM market participants would provide a means to improve FTR funding and ARR feasibility.

"To the extent balancing energy market excess congestion rents or rent shortfalls are removed from the FTR funding pool, as PJM has suggested, a new unhedgeable congestion cost is created, and the ability to fully hedge energy deliveries is eliminated," Direct Energy said.

"Further, if such a charge is allocated as advocated by PJM, either to real-time load or to transmission customers, such a charge would become unavoidable, in addition to being unhedgeable – creating a new uplift charge," Direct Energy said

"Creating an unhedgeable congestion (uplift) cost reduces the value of the FTR product as a hedging tool for transmission customers and load – the very entities for whom the FTR was designed to provide incremental value, rather than simply providing them with a refund of congestion overpayments. Certainly the FTR construct has evolved since its initial inception, including the addition of the ARR product and the participation of entities that trade FTRs for financial gain and not to hedge underlying physical deliveries; but this does not change the origins of the product and the parties for whose benefit the product was developed. Harming transmission customers and/or load by creating an additional unavoidable, unhedgeable congestion (uplift) charge in an effort to provide more revenue certainty for entities voluntarily trading FTRs for profit runs counter to the principles on which the FTR product was based," Direct Energy said

"If the Commission and PJM wish to address negative balancing congestion, the Commission should order PJM to further investigate the causes of that negative balancing congestion and develop modeling or process revisions to address those causes, rather than accepting negative balancing congestion as an inevitable outcome of the status quo of system modeling and market operations," Direct Energy said

See Direct's comments in Docket EL16-6-001 for more details

Tags:
FERC   Wholesale   Transmission   FTRs   Uplift  

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