Common use of Market Structure Clause in Contracts

Market Structure. Any PJM member can participate in the Long Term FTR Auction, the Annual FTR Auction and the Monthly Balance of Planning Period FTR Auctions. PJM oversees the process of selling and buying FTRs through FTR Auctions. Market participants purchase FTRs by participating in Long Term, Annual and Monthly Balance of Planning Period FTR Auctions.5 FTRs can also be traded between market participants through bilateral transactions. ARRs may be self scheduled as FTRs for participation only in the Annual FTR Auction. Total FTR supply is limited by the capability of the transmission system to simultaneously accommodate the set of requested FTRs and the numerous combinations of FTRs that are feasible. For the Annual FTR Auction, known transmission outages that are expected to last for two months or more are included in the model, while known outages of five days or more are included in the model for the Monthly Balance of Planning Period FTR Auctions as well as any outages of a shorter duration that PJM determines would cause FTR revenue inadequacy if not modeled.6 But the auction process does not account for the fact that significant transmission outages, which have not been provided to PJM by transmission owners prior to the auction date, will occur during the periods covered by the auctions. Such transmission outages may or may not be planned in advance or may be emergency outages. In addition, it is difficult to model in an annual auction two outages of similar significance and similar duration in different areas which do not overlap in time. The choice of which to model may have significant distributional consequences. The fact that outages are modeled at significantly lower than historical levels results in selling too many FTRs which creates downward pressure on revenues paid to each FTR.

Market Structure. Any PJM member can participate in the Long Term FTR Auction, the Annual FTR Auction and the Monthly Balance of Planning Period FTR Auctions. PJM oversees the process of selling and buying FTRs through FTR Auctions. Market participants purchase FTRs by participating in Long Term, Annual and Monthly Balance of Planning Period FTR Auctions.5 Auctions.4 FTRs can also be traded between market participants through bilateral transactions. ARRs may be self scheduled as FTRs for participation only in the Annual FTR Auction. Total FTR supply is limited by the capability of the transmission system to simultaneously accommodate the set of requested FTRs and the numerous combinations of FTRs that are feasible. For the Annual FTR Auction, known transmission outages that are expected to last for two months or more are included in the model, while known outages of five days or more are included in the model for the Monthly Balance of Planning Period FTR Auctions as well as any outages of a shorter duration that PJM determines would cause FTR revenue inadequacy if not modeled.6 modeled.5 But the auction process does not account for the fact that significant transmission outages, which have not been provided to PJM by transmission owners prior to the auction date, will occur during the periods covered by the auctions. Such transmission outages may or may not be planned in advance or may be emergency outages. In addition, it is difficult to model in an annual auction two outages of similar significance and similar duration in different areas which do not overlap in time. The choice of which to model may have significant distributional consequences. The fact that outages are modeled at significantly lower than historical levels results in selling too many FTRs which creates downward pressure on revenues paid to each FTR.

Market Structure. Any PJM member can participate in the Long Term FTR Auction, the Annual FTR Auction and the Monthly Balance of Planning Period FTR Auctions. PJM oversees the process of selling and buying FTRs through FTR Auctions. Market participants purchase FTRs by participating in Long Term, Annual and Monthly Balance of Planning Period FTR Auctions.5 Auctions.9 FTRs can also be traded between market participants through bilateral 24 hours a day, seven days a week, while the on peak 9 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 38. transactions. ARRs may be self scheduled as FTRs for participation only in the Annual FTR Auction. Total FTR supply is limited by the capability of the transmission system to simultaneously accommodate the set of requested FTRs and the numerous combinations of FTRs that are feasible. For the Annual FTR Auction, known transmission outages that are expected to last for two months or more are included in the model, while known outages of five days or more are included in the model for the Monthly Balance of Planning Period FTR Auctions as well as any outages of a shorter duration that PJM determines would cause FTR revenue inadequacy if not modeled.6 modeled.10 But the auction process does not account for the fact that significant transmission outages, which have not been provided to PJM by transmission owners prior to the auction date, will occur during the periods covered by the auctions. Such transmission outages may or may not be planned in advance or may be emergency outagesin nature. In addition, it is difficult to model in an annual auction two outages of similar significance and similar duration in different areas which do not overlap in time. The choice of which to model may have significant distributional consequences. The fact that outages are modeled at significantly lower than historical levels results in selling too many FTRs which creates downward pressure on revenues paid to each FTR.

Market Structure. Any PJM member can participate in the Long Term FTR Auction, the Annual FTR Auction and the Monthly Balance of Planning Period FTR Auctions. PJM oversees the process of selling and buying FTRs through FTR Auctions. Market participants purchase FTRs by participating in Long Term, Annual and Monthly Balance of Planning Period FTR Auctions.5 Auctions.13 FTRs can also be traded between market participants through bilateral transactions. ARRs may be self scheduled as FTRs for participation only in the Annual FTR Auction. Total FTR supply is limited by the capability of the transmission system to simultaneously accommodate the set of requested FTRs and the numerous combinations of FTRs that are feasible. For the Annual FTR Auction, known transmission outages that are expected to last for two months or more are included in the model, while known outages of five days or more are included in the model for the Monthly Balance of Planning Period FTR Auctions as well as any outages of a shorter duration that PJM determines would cause FTR revenue inadequacy if not modeled.6 modeled.14 But the auction process does not account for the fact that significant transmission outages, which have not been provided to PJM by transmission owners prior to the auction date, will occur during the periods covered by the auctions. Such transmission outages may or may not be planned in advance or may be emergency outagesin nature. In addition, it is difficult to model in an annual auction two outages of similar significance and similar duration in different areas which do not overlap in time. The choice of which to model may have significant distributional consequences. During the 2011 to 2012 planning period, binding transmission constraints prevented the award of all requested FTRs in the Long Term FTR Auction, the Period FTR Auctions.15 Table 12-2 and Table 12-3 list the top 10 binding constraints along with their corresponding control zones in the Long Term FTR Auction and the Annual FTR Auction. They are listed in order of severity, irrespective of auction round. For each of the top 10 binding constraints, a numerical ranking in order of severity for each auction round is also listed. The fact that outages order of severity is determined by the marginal value of the binding constraint. The marginal value measures the value gained by relieving a constraint by 1 MW. The marginal value is computed and generated in the optimization engine for both on peak and off peak hours.16 Table 12-2 and Table 12-3 demonstrate the marginal value for on peak hours only. The top five binding transmission constraints for the Long Term FTR Auction and the Annual FTR Auction can be seen in Figure 12-1. Annual FTR Auction and Monthly Balance of Planning 15 Binding constraints for Monthly Balance of Planning Period Auctions are modeled posted to the PJM website in monthly files at significantly lower than historical levels results in selling too many FTRs which creates downward pressure on revenues paid to each FTR<xxxx://xxx.xxx.xxx/markets-and-operations/ftr/auction-user-info/ 13 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 38. 14 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 54. historical-ftr-auction.aspx>.

Market Structure. Any PJM member can participate in the Long Term FTR Auction, the Annual FTR Auction and the Monthly Balance of Planning Period FTR Auctions. Table 13-2 shows the date of first availability and final closing date for all annual ARR and FTR products. 2016/2019 Long Term 6/1/2015 12/3/2015 2015/2016 ARR 3/2/2015 3/31/2015 PJM oversees the process of selling and buying FTRs through ARR Allocations and FTR Auctions. Market participants purchase FTRs by participating in Long Term, Annual and Monthly Balance of Planning Period FTR Auctions.5 Auctions.6 FTRs can also be traded between market participants through bilateral transactions. ARRs may be self scheduled as FTRs for participation only in the Annual FTR Auction. Total FTR supply is limited by the capability of the transmission system system, as modeled in the Annual ARR Allocation. Stage 1A ARR requests must be granted, which artificially increases the capacity of the model on those facilities affected by the over allocated Stage 1A ARR requests. The capacity modeled in the Annual ARR Allocation is used as the capacity for the Annual FTR Auction to simultaneously accommodate the set of requested FTRs and the numerous various combinations of requested FTRs. Depending on assumptions used in the auction transmission model, the total FTR supply can be greater than or less than system capability in aggregate and/or on an element by element basis. When FTR supply is greater than system capability, FTR target allocations will be greater than congestion revenues, contributing to FTR revenue inadequacy. Where FTR supply is less than system capability, FTR target allocations will be less than congestion revenues, contributing to FTR revenue surplus. PJM can also make further adjustments to the auction model to address expected revenue inadequacies. PJM can assume higher outage levels and PJM can decide to include additional constraints (closed loop interfaces) both of which reduce system capability in the auction model. These PJM actions reduce the supply of available Stage 1B and Stage 2 ARRs, which in turn reduce the number of FTRs that are feasibleavailable for purchase. PJM made such adjustments in the 2014 to 2015 and 2015 to 2016 planning year auction model. For the Annual FTR Auction, known transmission outages that are expected to last for two months or more are included in the model, while known outages of five days or more are included in the model for the Monthly Balance of Planning Period FTR Auctions as well as any outages of a shorter duration that PJM determines would cause FTR revenue inadequacy if not modeled.6 modeled.7 But the auction process does not account for the fact that significant transmission outages, which have not been provided to PJM by transmission owners prior to the auction date, will occur during the periods covered by the auctions. Such transmission outages may or may not be planned in advance or may be emergency outages. In addition, it is difficult to model in an annual auction two outages of similar significance and similar duration in different areas which do not overlap in time. The choice of which to model may have significant distributional consequences. The fact that outages are modeled at significantly lower than historical levels results in selling too many FTRs which creates downward pressure on revenues paid to each FTR. To address this issue, the MMU has recommended that PJM use probabilistic outage modeling and seasonal ARR/FTR markets to better align the supply of ARRs and FTRs with actual system capabilities. After the Long Term FTR Auction, residual capability on the PJM transmission system is auctioned in the Annual FTR Auction. Annual FTRs are effective beginning June 1 of the planning period through May 31. Outages expected to last two or more months are included in the determination of the simultaneous feasibility for the Annual FTR Auction. ARR holders who wish to self schedule must inform PJM prior to round one of this auction. Any self-scheduled ARR requests clear 25 percent of the requested volume in each round of the Annual FTR Auction as price takers. This auction consists of four rounds that allow any transmission service customers or PJM members to bid for any FTR or to offer for sale any FTR that they currently hold. FTRs in this auction can be obligations or options for peak, off peak or 24-hour periods. FTRs purchased in one round of the Annual FTR Auction can be sold in later rounds or in the Monthly Balance of Planning Period FTR Auctions. Table 13-3 shows the top 10 binding constraints for the 2015 to 2016 Annual FTR Auction based on the marginal value of on peak hours. 6 See PJM. “Manual 6: Financial Transmission Rights,” Revision 15 (October 10, 2013), p. 38. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 15 (October 10, 2013), p. 55. Xxxx - Xxxxxxxxx Flowgate MISO NA NA 1 NA Xxxxxx - Xxxxxxxx Line DPL NA 2 3 1 Xxxxxx - Mount Olive Line DPL 1 NA NA NA South Akron - Xxxxx Park Tap Line ATSI 2 6 75 NA Wempletown Transformer ComEd 3 527 55 4 Xxxx - Xxxxxxxxx Flowgate MISO 24 3 NA XX Xxxxxxxxx - Maryland Line ComEd 4 23 NA 12 Xxxxxx - Xxxxxxx Xx. Line BGE 6 4 4 3 The residual capability of the PJM transmission system, after the Long Term and Annual FTR Auctions are concluded, is offered in the Monthly Balance of Planning Period FTR Auctions. Existing FTRs are modeled as fixed injections and withdrawals. Outages expected to last five or more days are included in the determination of the simultaneous feasibility test for the Monthly Balance of Planning Period FTR Auction. These are single-round monthly auctions that allow any transmission service customer or PJM member to bid for any FTR or to offer for sale any FTR that they currently hold. Market participants can bid for or offer monthly FTRs for any of the next three months remaining in the planning period, or quarterly FTRs for any of the quarters remaining in the planning period. FTRs in the auctions include obligations and options and 24-hour, on peak and off peak products.8 Market participants can buy and sell existing FTRs through the PJM administered, bilateral market, or market participants can trade FTRs among themselves without PJM involvement. Bilateral transactions that are not done through PJM can involve parties that are not PJM members. PJM has no knowledge of bilateral transactions that are done outside of PJM’s bilateral market system.

Market Structure. Any PJM member can participate in the Long Term FTR Auction, the Annual FTR Auction and the Monthly Balance of Planning Period FTR Auctions. PJM oversees the process of selling and buying FTRs through FTR Auctions. Market participants purchase FTRs by participating in Long Term, Annual and Monthly Balance of Planning Period FTR Auctions.5 Auctions.4 FTRs can also be traded between market participants through bilateral transactions. ARRs may be self scheduled as FTRs for participation only in the Annual FTR Auction. Total FTR supply is limited by the capability of the transmission system system, as modeled in the FTR auction, to simultaneously accommodate the set of requested FTRs and the numerous various combinations of requested FTRs. Depending on assumptions used in the FTR auction transmission model, the total FTR supply can be greater than or less than system capability in aggregate and/or on an element by element basis. When FTR supply is greater than system capability, FTR target allocations will be greater than congestion revenues, contributing to FTR revenue inadequacy. Where FTR supply is less than system capability, FTR target allocations will be less than congestion revenues, contributing to FTR revenue surplus. PJM can also make further adjustments to the FTR auction model to account for anticipated revenue inadequacies by including more conservative outage assumptions and additional constraints (closed loop interfaces). These conservative measures reduce the supply of available Stage 1B and Stage 2 ARRs, which in turn reduce the number of FTRs that are feasibleavailable for purchase. PJM made such adjustments in the 2014 to 2015 planning year auction model. For the Annual FTR Auction, known transmission outages that are expected to last for two months or more are included in the model, while known outages of five days or more are included in the model for the Monthly Balance of Planning Period FTR Auctions as well as any outages of a shorter duration that PJM determines would cause FTR revenue inadequacy if not modeled.6 modeled.5 But the auction process does not account for the fact that significant transmission outages, which have not been provided to PJM by transmission owners prior to the auction date, will occur during the periods covered by the auctions. Such transmission outages may or may not be planned in advance or may be emergency outages. In addition, it is difficult to model in an annual auction two outages of similar significance and similar duration in different areas which do not overlap in time. The choice of which to model may have significant distributional consequences. The fact that outages are modeled at significantly lower than historical levels results in selling too many FTRs which creates downward pressure on revenues paid to each FTR.

Market Structure. Any PJM member can participate in the Long Term FTR Auction, the Annual FTR Auction and the Monthly Balance of Planning Period FTR Auctions. PJM oversees the process of selling and buying FTRs through FTR Auctions. Market participants purchase FTRs by participating in Long Term, Annual and Monthly Balance of Planning Period FTR Auctions.5 Auctions.3 FTRs can also be traded between market participants through bilateral transactions. ARRs may be self scheduled as FTRs for participation only in the Annual FTR Auction. Total FTR supply is limited by the capability of the transmission system to simultaneously accommodate the set of requested FTRs and the numerous combinations of FTRs that are feasible. For the Annual FTR Auction, known transmission outages that are expected to last for two months or more are included in the model, while known outages of five days or more are included in the model for the Monthly Balance of Planning Period FTR Auctions as well as any outages of a shorter duration that PJM determines would cause FTR revenue inadequacy if not modeled.6 modeled.4 But the auction process does not account for the fact that significant transmission outages, which have not been provided to PJM by transmission owners prior to the auction date, will occur during the periods covered by the auctions. Such transmission outages may or may not be planned in advance or may be emergency outages. In addition, it is difficult to model in an annual auction two outages of similar significance and similar duration in different areas which do not overlap in time. The choice of which to model may have significant distributional consequences. The fact that outages are modeled at significantly lower than historical levels results in selling too many FTRs which creates downward pressure on revenues paid to each FTR.