Docket No. ER17-1433-000

FERC Order Requiring PJM to Make Certain Modifications to the Application of the FTR Forfeiture Rule to Virtual Transactions

XO Energy's Protest to PJM's Amended Compliance Filing in ER17-1433

On April 18, 2017, PJM filed a compliance filing in response to FERC’s order in Docket No. EL14-37-001 directing PJM to make certain modifications to the FTR forfeiture rule’s application to virtual transactions.  On May 9, 2017, XO Energy filed a motion to intervene and protest of the Compliance Filing as beyond the scope of the Commission’s directives in the January 19 Order and providing PJM unfettered discretion in certain regards.  On June 2, 2017, PJM filed an amended compliance filing to “address[] certain issues raised in response to its Compliance Filing” together with a Motion for Leave to Answer and Answer to certain protests of its Compliance Filing.  XO Energy then protested the Amended Compliance Filing as beyond the scope of the Commission’s directives in the January 19 Order and as unjust, unreasonable, and discriminatory in application.  Furthermore, XO Energy made the following observations with respect to PJM’s Amended Compliance Filing, Amended Proposed Tariff and Answer: (1) PJM’s threshold for forfeiting FTR revenues continues to be unduly broad and vague; (2) contrary to PJM’s contention, the CAISO tariff does not allow discretionary changes to the threshold percentage; (3) PJM’s Amended Proposed Tariff is still contradictory; (4) the $0.01 trigger is too low when compared with the forfeited amount; (5) despite PJM’s arguments to the contrary, the calculation of forfeitures on an FTR portfolio basis is consistent with FERC’s January 19 Order; (6) a $0.01 change in real-time price can cause an all-or-nothing forfeiture; (7) a 0.1 MW difference in virtual flow can cause an all-or-nothing forfeiture; (8) implicit virtual transactions are not considered; (9) the proposed FTR forfeiture rule still allows some forms of manipulation; (10) the implementation of these types of forfeiture rules by the ISOs is the exception and not the rule; (11) the use of firm flow entitlements as line limits highlights the need for greater transparency; and (12) lastly, the proposed FTR forfeiture rule is yet another attempt by PJM and its IMM to limit virtual trading and FTR participation by financial marketers.

XO Energy's Motion to Intervene and Protest in  ER17-1433

In its Motion to Intervene and Protest, XO Energy expressed support for the directives set forth in FERC’s January 19 Order, namely, that (1) “PJM’s current application of the FTR forfeiture rule to virtual transactions is no longer just and reasonable”; (2) “an individual transaction approach does not accurately consider the net impact of a market participant’s overall portfolio of virtual transactions on a constraint related to an FTR position”; and (3) the portfolio approach should evaluate the “net effect of a participant’s entire virtual portfolio – including Incremental Offers (INCs), Decrement Bids (DECs), and UTCs” on a constraint related to an FTR position.  In addition, XO Energy suggested the following: (x) FTRs should also be treated on a portfolio basis and only trigger the forfeiture rule when the FTR portfolio position on a binding constraint exceeds that of the day ahead position; (y) the granularity of the rule should be measured across longer periods of hours (versus singular hours) in order to establish a more consistent convergence metric; and (z) the calculated forfeiture amount should be limited to the triggered binding constraints’ benefit to the FTR portfolio instead of the entire value of the FTR portfolio from all binding constraints.

XO Energy requested that FERC reject and order PJM to resubmit those portions of its compliance filing and proposed tariff that were inconsistent with the January 19 Order.  Furthermore, XO Energy requested that FERC order PJM to include any and all changes to the FTR forfeiture rule in its proposed tariff, which PJM is bound by, instead of a business practice manual.    

Docket No. RM17-2-000

Uplift Cost Allocation and Transparency in Markets Operated by Regional Transmission Organizations and Independent System Operators

XO Energy Comments in RM17-2

XO Energy submitted comments to FERC related to the NOPR regarding uplift cost allocation and transparency in the markets.  XO Energy expressed its strong support for the adoption of the best practices identified in the Uplift NOPR, namely, the principles of cost causation, helping and harming deviations, netting and increased transparency. Furthermore, XO Energy concurred with the comments filed by the FMC in their entirety and specifically reiterated the FMC’s request that the Commission: (1) adopt the MISO uplift cost allocation methodology in its entirety, that is, in addition to distinguishing between helping and harming deviations and incorporating the concept of netting, include the concepts of known versus unknown deviations, a category for local reliability, and the “second pass” mechanism for uplift allocations; and (2) reject any opposition from the ISOs, specifically PJM, regarding the implementation of the MISO uplift cost allocation methodology and improved transparency “on the grounds that such changes are too difficult to implement” as MISO has already “demonstrated that greater granularity and transparency is both possible and manageable across the scope and breadth of a large wholesale market.” To the extent that an ISO does not currently allocate uplift to deviations or, in the case of PJM, determines that the cost causation methodology is too difficult to implement, XO Energy strongly recommended that FERC instruct the ISO to adopt the “beneficiary pays” approach, that is, allocate uplift costs to load, the class of market participants that are the least sensitive to price and for whom an allocation of uplift cost is arguably the least likely to distort behavior.

Docket No. ER16-1649-000

CAISO's Proposed Tariff Amendment to Enhance Gas-Electric Coordination to Address Risks Posed by Limited Operability of Aliso Canyon Natural Gas Storage Facility

XO Motion to Intervene and Comments on ER16-1649

On May 9, 2016, CAISO submitted a tariff amendment to FERC that would grant broad, discretionary authority to CAISO and its system operators to manipulate CAISO’s day-ahead and real-time markets in order to, among other actions, (1) artificially inflate the value of transmission (i.e., congestion) in the day-ahead market for the purpose of increasing the internal transfer capability of the transmission system, (2) arbitrarily adjust the volume of CRRs, thereby eradicating market participants’ ability to hedge forward congestion risks associated with CRRs acquired in previous auctions, and (3) peremptorily suspend or limit convergence bidding, including at specific regions or locations, to ensure that “virtual bidding cannot detrimentally affect the CAISO markets” by “detrimentally affect[ing] system reliability or grid operations” as well as “market efficiency,” all under the guise of maintaining gas and electricity reliability in light of the risks posed by Aliso Canyon’s limited operability.  In its Motion to Intervene and Comments, XO Energy expressed concern that CAISO’s proposed discretionary actions were particularly alarming in the face of the Commission’s price formation initiatives, as they appeared to foster market inefficiencies, a lack of transparency, and a variety of unintended consequences.

Docket No. ER15-24-000

Settlement Intervals and Shortage Pricing in Markets Operated by Regional Transmission Organizations and Independent System Operators

XO Energy Comments in RM15-24

In response to a September 17, 2015 NOPR in this docket, XO Energy submitted comments to the issues raised by FERC, namely, that each RTO and ISO be required to align settlement intervals with dispatch intervals.  Furthermore, XO Energy commented that additional steps should be taken to improve overall market efficiency in the RTOs/ISOs, including the (1) implementation of a transmission product in the day-ahead markets, and (2) requirement that load bid in at more granular locations and at time periods that are more closely aligned with dispatch and settlement intervals.

Docket No. EL14-37-000

FTR Forfeiture and Application to UTCs

XO Energy Post Technical Conference Comments on EL14-37

On April 29, 2015, FERC issued a request for comments on the technical conference held on January 7, 2015 in this docket by FERC staff, pursuant to an order initiating an investigation under section 206 of the FPA to evaluate whether: (1) PJM’s FTR forfeiture rules as they apply to virtual transactions, including UTCs, INCs and DECs are just and reasonable; and (2) PJM’s current uplift allocation rules associated with UTCs, INCs and DECs are just and reasonable.  In its comments, XO Energy strongly urged FERC to act expeditiously in this docket to restore the vital role that financial market participants play in bringing increased efficiencies to the wholesale electricity markets.  Furthermore, XO Energy highlighted the following issues:  (x) to date, there has been no evidence or analysis provided to support the allocation of uplift to UTCs; (y) PJM should focus on price formation issues like convex hull pricing or ELMP to more accurately represent both day-ahead and real-time pricing thereby minimizing the amount of uplift; and (z) PJM should expand its available nodes for UTCs to be consistent with the nodes available for INCs and DECs.  XO Energy also recommended that, in the near term, the day-ahead markets in all of the ISOs should be expanded to include day-ahead transmission rights in order to facilitate the proper alignment of the energy and transmission markets.

Docket No. AD14-14-000

Price Formation in Energy and Ancillary Services Markets Operated by the Regional Transmission Organizations and Independent System Operators

XO Energy Comments on AD14-14

On November 20, 2015, FERC directed the RTOs and ISOs to provide responses to certain questions related to price formation.  The underlying reports were filed on February 17, 2016 by PJM and on March 4, 2016 by IS-ONE, CAISO, MISO, SPP, and NYISO.  On April 8, 2016, in addition to providing specific comments on the reports submitted by the ISOs, XO Energy highlighted the importance of the following initiatives:  (1) implementation of a day-ahead financial transmission right across all of the ISOs in order for participants to better hedge their real-time congestion risk and converge day-ahead and real-time congestion; (2) implementation of  one of three uplift constructs (or a combination thereof) as a “best practices” model, namely, “beneficiary pays,” day-ahead load and net short, and/or separate charges by cause model(s); (3) encourage FERC to undertake a comprehensive review of MLSA to ensure that it is consistently applied; (4) adoption of transparency-related initiatives across all of the ISOs that, at a minimum, would require each ISO to provide granular pricing data, granular outage data, granular uplift data, and base modeling data to all market participants; and (5) “granular expansion” of the financial markets to mirror every available substation that is part of the current network model in order to improve market efficiency, transparency and price formation.