Pennsylvania Virtual Transaction Tax
XO Energy’s Letter to Messrs. Schneider and Ott Expressing Concern regarding the Independence and Neutrality of PJM Interconnection, LLC
June 26, 2017
In this letter, XO Energy, LLC expressed concern about the state of competition in the markets administered by PJM Interconnection, LLC (“PJM”) as well as the “independence” and “neutrality” of the ISO. XO Energy had previously expressed its viewpoint that virtual transactions have been under attack - throughout the PJM stakeholder process as well as by physical asset owners, load-serving entities, the Independent Market Monitor and now PJM. Recently, PJM sponsored two proposals that will severely limit competition in the markets. The first proposal will result in a triple energy deviation charge to the up-to congestion (“UTC”) product, a transmission product without an energy component, which will render the product useless. Subsequently, PJM sponsored a second proposal that will dramatically reduce the number of biddable points available to market participants to support energy and transmission hedging in the Day-Ahead Market. The latest attempt to restrict competition in the PJM markets appears to be a coordinated effort between PJM senior staff and members of the Pennsylvania state legislature that would result in a gross tax on virtual transactions in PJM. How can the actions of PJM be viewed as anything other than biased, discriminatory, abusive, and in clear violation of PJM’s obligation to administer its wholesale power market in an open, fair and competitive manner?
XO Energy’s Email to Suzanne Daugherty regarding PJM’s Complete Lack of Transparency with respect to the Proposed Pennsylvania Virtual Transactions Tax
June 28, 2017
In response to phone calls from Suzanne Daugherty, XO Energy notified Ms. Daugherty of its recent meetings with Pennsylvania state legislators during which staff members stated that they had received "support" on the proposed virtual transaction tax from PJM and that XO Energy should be mindful that "PJM speaks out of both sides of its mouth." These statements were contrary to those made by Ms. Daugherty, who indicated during our June 14, 2017 call that PJM was not supportive of the tax. Furthermore, we reminded Ms. Daugherty that XO Energy’s larger concern related to the complete lack of transparency regarding the proposed tax. Admittedly, PJM engaged in discussions with members of the Pennsylvania state legislature for months, however, to our knowledge, failed to notify market participants about the proposed tax or the ISO's role in the process.
Letter from Andrew Ott, President and CEO of PJM Interconnection, LLC, in Response to XO Energy, LLC
June 29, 2017
In response to XO Energy’s Letter, Andrew Ott, President and CEO of PJM Interconnection, LLC, attempted to “address [XO Energy’s] misconception about PJM’s position and role as an independent information source for policy makers.” In the letter, Mr. Ott acknowledged that PJM had been engaging in discussions with Pennsylvania state officials and the Department of Revenue for months. Of note, as of this date, PJM has yet to notify its membership of the proposed virtual transaction tax. Furthermore, news agencies have indicated that the tax could generate between $125 - $300 million per annum, effectively eradicating the energy trading market in one fell swoop (the net profit of virtual transactions was $1.5 million in 2016).
XO Energy Letter to Messrs. Schneider and Ott Expressing Concerns regarding the Significant Discrepancies that have Occurred During the Stakeholder Process of the Energy Market Uplift Senior Task Force
February 24, 2017
In this letter, XO Energy expressed its concerns about the Energy Market Uplift Senior Task Force ("EMUSTF") stakeholder process, namely, that (i) PJM's revoting process represented a voting irregularity that contributes to a decrease in transparency within the stakeholder process, (ii) the lack of due process during the EMUSTF process, (iii) the priority given to stakeholders' fiduciary obligations versus sound market design initiatives, and (iv) the perceived negativity towards virtual products and financial market participants.