On September 6, 2018, FERC denied the PJM Interconnection, L.L.C.’s (“PJM”) rehearing request of FERC’s prior order rejecting proposed revisions to PJM’s Amended and Restated Operating Agreement (“Operating Agreement”) and Open Access Transmission Tariff (“OATT”) that would allocate uplift charges to Up-to-Congest transactions (“UTCs”) similarly to other virtual transactions. However, FERC granted rehearing in part to accept PJM’s proposal to exclude internal bilateral transactions from the calculation of supply and demand deviations for the purpose of uplift allocation.

In October 2017, PJM proposed to allocate uplift charges to UTCs (i.e., a type of virtual transaction) in the same way that uplift is allocated to other virtual transactions — namely, incremental offers of supply (“INCs”) and decrement demand bids (“DECs”). In an order dated January 12, 2018 (“January 12 Order”), FERC rejected PJM’s proposal, without prejudice, on the grounds that PJM had failed to demonstrate that UTCs were sufficiently similar to INCs and DECs to justify allocating uplift to UTCs in the same manner that it allocates uplift to INCs and DECs (see January 24, 2018 edition of the WER). On February 9, 2018, PJM filed a request for rehearing alleging that the Commission erred by: (1) rejecting PJM’s proposal instead of setting it for hearing; and (2) rejecting the filing as a whole, without explaining why the proposed revisions concerning internal bilateral transactions and uplift payment calculations were not just and reasonable. PJM argued that treating a UTC as a “paired” INC and a DEC for the purpose of uplift allocation is just and reasonable because UTCs, like INCs and DECs, can impact the commitment and dispatch of resources in the day-ahead market, transmission flows, and prices, and can therefore influence the amount of uplift incurred.

FERC granted in part and denied in part PJM’s rehearing request. First, FERC affirmed its prior rejection of PJM’s proposal to allocate uplift to UTC transactions on the same basis it uses to allocate uplift to INCs and DECs. FERC concluded that INCs and DECs are unique transactions because they clear individually such that it is possible that only one side of the bids may clear. FERC explained that a UTC is in a fundamentally different type of financial position than an INC or DEC, because the energy injection and withdrawal cancel out. FERC denied in part PJM’s rehearing request upon finding that PJM did not demonstrate that its proposed allocation method was just and reasonable. Second, FERC granted rehearing in part to accept PJM’s proposal to exclude internal bilateral transactions from the calculation of supply and demand deviations for the purpose of uplift allocation. However, FERC rejected, without prejudice, PJM’s proposed modification to the methodology used to calculate balancing Operating Reserve credit because excluding from the calculation day-ahead energy revenues received in hours outside of the real-time operating period but continuing to include real-time charges in such hours may allow instances in which a resource is overpaid. Finally, contrary to PJM’s assertions, FERC concluded that it was not required to set PJM’s proposal for hearing.

A copy of FERC’s order is available here.