On November 22, PJM’s Independent Market Monitor (IMM) filed a complaint regarding a rule change to PJM’s capacity market approved by the PJM Markets and Reliability Committee (MRC). At the November 17 MRC meeting, the MRC approved—over objections from the IMM—changes to PJM’s Manual 18 to delete language that imposed conditions on early replacement transactions. In response, the IMM filed a complaint at FERC arguing that the modified rules are unjust and unreasonable, inconsistent with competitive markets, and allow behavior that defeats a well-functioning market. The IMM argues that the modified rules “provide incentives to offer paper capacity in the PJM capacity market and to suppress market prices for actual physical capacity in the PJM market.” According to the IMM, “The modified rules allow behavior that would otherwise be considered prohibited market manipulation because behavior permitted under the modified rules defeats PJM’s well functioning market for physical capacity.”

The complaint asserts that shortly after the changes were voted by the MRC, certain market participants submitted transactions to PJM which would have violated the language deleted from Manual 18, which transactions were approved by PJM. The IMM argues that these submitted and approved transactions are not consistent with a well-functioning market for physical capacity. The IMM recommends that FERC initiate its own investigation in conjunction with the complaint into manipulation of the market that exploits the “newly flawed” market rules. In addition, the IMM states that it continues to investigate the issues and may submit referrals related to the complaint to FERC.