On December 3, 2018, FERC largely rejected a complaint filed by Monterey MA, LLC (“Monterey”) alleging that PJM Interconnection, L.L.C. (“PJM”) improperly adjusted prices after two transmission line outage events for unauthorized reasons, and without proper notice and documentation in violation of PJM’s Tariff. Monterey requested that FERC reinstate original prices and that changes be made to the Tariff relating to price revisions so that re-pricing events are more transparent for market participants. FERC mostly found that Monterey’s allegations were unreasonable and thus largely denied Monterey’s complaint, including Monterrey’s request to reinstate the original market prices.
As a financial market participant that engages in virtual transactions in PJM, Monterey took financial positions in the day-ahead energy market based on its expectation of what real-time prices would be and subsequently lost money after PJM revised the market prices. Monterey alleged that its losses stemmed from PJM’s improper revision of the real-time prices following two separate transmission outages. Regarding the first event, Monterey advanced two arguments: (1) that PJM violated its Tariff by failing to include supporting documentation when it provided notice of the real-time final verified price revisions, and (2) that PJM’s decision to revise the final verified prices was based on incorrect data and that the revised prices should be re-settled using the correct information. FERC agreed with Monterey that PJM failed to provide the required documentation because PJM did not provide sufficient data or documentation to evidence its reason for the price correction so as to fully inform market participants. FERC declined, however, to grant Monterey’s requested relief to reinstate the original final verified prices because FERC found that the evidence in the record supported the conclusion that the price correction was warranted and, thus, ordering the reinstatement of an incorrect price would cause an “absurd” result and hinder confidence in the PJM energy market.
Regarding the second outage, Monterey argued that PJM acted without authority when it adjusted initially posted real-time prices. FERC found that PJM acted within its Tariff to adjust the initially posted prices. Specifically, FERC found that PJM’s Tariff describes in detail the process for calculating prices and that it would be unreasonable to conclude that PJM does not have the authority to ensure that such prices are correct and free of known errors prior to official posting on its website. FERC further pointed out that Monterey itself acknowledged elsewhere in its complaint that the initially posted prices on PJM’s website are subject to change. Thus, FERC denied Monterey’s complaint on this ground. FERC also denied Monterey’s request to require that PJM’s Tariff and Manuals’ processes for price revisions be revised, as well as to find that PJM’s denial of Monterey’s request for arbitration regarding the two pricing events be found to have violated PJM’s Tariff.
A copy of FERC’s order can be found here.