XO Energy, LLC has written a letter to the PJM Board to, "express concern regarding the significant discrepancies that have occurred during the stakeholder process of the Energy Market Uplift Senior Task Force ('EMUSTF')," and the allegedly, "unacceptable practices that have occurred."

In short, XO Energy expressed concern with stakeholder alignments seeking to allocate greater uplift costs to virtual transactions, and what XO Energy perceived as attempts to decrease virtual transactions and financial marketer participation in the market.

XO Energy cited in particular "Proposal Q" which was before the EMUSTF, which XO alleged amounted to charging triple capacity deviations to the UTC products

XO said that this proposal would shift 76% of Real-Time Uplift charges and 25% of Day-Ahead Uplift charges, to the UTC product.

"It should be noted that four sectors (Electric Distributors, End Use Customers, Transmission Owners, and Generation Owners) control 80% of the MRC vote, with only 66% required to pass a proposal. The MRC Phase 2 voting results indicated that 95% of these four sectors supported PJM's Proposal Q, while only 15% of the fifth sector (Other Supplier) voted in favor of this package. Given the composition of the MRC, the results of the vote are not surprising -- the approval of Proposal Q successfully shifted 76% of uplift charges to the Other Supplier sector, a sector with an inconsequential presence)," XO said

XO called this proposal inconsistent with FERC's recent NOPR on uplift, which requires uplift to be assigned to cost causers (namely, deviations), but XO said PJM has not moved to harmonize its proposals with FERC's NOPR.

Prior to the MRC action, XO further alleged that, "There have been several instances of voting irregularities during Phase 2 of the EMUSTF ... PJM staff undertook the revote process on their own initiative, without prompting from stakeholders, following the initial Phase 2 vote in December. Following the task force level vote, PJM staff proposed a revote at the December MRC in an effort to modify the voting parameters, in the hopes that reducing the number of packages would produce a simple majority to be voted on at the MRC."

"XO is understandably concerned about PJM's decision to recount the votes not once but twice in an effort to upset the results following valid voting procedures at the task force level. PJM's revote efforts resulted in its own package being elevated to the MRC level for a vote," XO said

"The stakeholder process is driven by each stakeholder's fiduciary obligation to its constituent company, in other words, what is in the shareholders' financial interests. PJM, as a neutral administrator, has an obligation to administer its wholesale power market in an open, fair and competitive manner. PJM is required to act as a neutral body without giving priority to one sector over others. XO is concerned that the packages promulgated by PJM and its IMM, including Phase 2 Package Q, benefits load while producing great harm to the Other Supplier Sector, including the financial community. XO is concerned that inequitable, stakeholder-centric initiatives, which do not comport with fundamental market design principles, such as best practices and cost causation, are taking precedence," XO said

"Although the proposals to charge triple capacity deviations to the UTC product and decrease the number of biddable nodes for virtual transactions may be a welcome change to load serving customers, they are not consistent with the tenets of a competitive wholesale market," XO said

"In the past year or more, XO has witnessed an unwarranted negativity from PJM and its staff towards both financial products and the financial trading community," XO alleged. "Overall, it appears that the intended goal of the EMUSTF stakeholder process, particularly the proposals put forth by PJM and its IMM, is to eradicate the UTC product and to reduce the volume of virtual trading in PJM. The recent rush to advance proposals without sufficient stakeholder support, combined with the lack of process for participants to discuss proposals, are severely undermining market participants' confidence in PJM. In addition, financial market participants feel bulldozed by PJM's perceived priority in advancing its own proposals through the voting process and its favoritism of other sectors. These actions are strongly affecting market participants' confidence in PJM's 'neutral' administration of its duties and its operation of a fair and efficient market," XO said

See XO's full letter here