Common use of Monthly Balance of Planning Period FTR Auctions Clause in Contracts

Monthly Balance of Planning Period FTR Auctions. 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. 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 or off peak products.7 Secondary Bilateral Market 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded 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 or and off peak products.7 products.18 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time. Buy Bids The total FTR buy bids in the Monthly Balance of Planning Period FTR Auctions for the entire 2014 to 2015 planning period and the first ten months of the 2015 to 2016 planning period were 25,346,227 MW and 23,243,499 MW.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded 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 4 See PJM. “Manual 6: Financial Transmission Rights,” Revision 15 (October 10, 2013), p. 38. 5 See PJM. “Manual 6: Financial Transmission Rights,” Revision 15 (October 10, 2013), p. 55. 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 or and off peak products.7 products.6 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded 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 or and off peak products.7 products.22 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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 22 See “PJM Manual 6: Financial Transmission Rights,” Rev. 17 (June 1, 2016) at 39. knowledge of bilateral transactions that are done outside of PJM’s bilateral market system. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.. Buy Bids The total FTR buy bids in the Monthly Balance of Planning Period FTR Auctions for the entire 15/16 planning period and the first 10 months of the 16/17 planning period were 25,686,865 MW and 18,651,410 MW. Patterns of Ownership The overall ownership structure of FTRs and the ownership of prevailing flow and counter flow FTRs is descriptive and is not necessarily a measure of actual or potential FTR market structure issues, as the ownership positions result from competitive auctions. In order to evaluate the ownership of prevailing flow and counter flow FTRs, the MMU categorized all participants owning FTRs in PJM as either physical or financial. Physical entities include utilities and customers which primarily take physical positions in PJM markets. Financial entities include banks and hedge funds which primarily take financial positions in PJM markets. International market participants that primarily take financial positions in PJM markets are generally considered to be financial entities even if they are utilities in their own countries. Table 13-8 presents the Monthly Balance of Planning Period FTR Auction cleared FTRs for 2017 by trade type, organization type and FTR direction. Financial entities purchased 74.0 percent of prevailing flow FTRs, up 0.7 percent, and 79.2 percent of counter flow FTRs, up 4.7 percent, for the year, with the result that financial entities purchased 76.4 percent, up

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded 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 or and off peak products.7 products.17 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- PJM administered, bilateral market, or market participants can trade FTRs among 17 See PJM. “Manual 6: Financial Transmission Rights,” Revision 17 (June 1, 2016), p. 39. 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time. Buy Bids The total FTR buy bids in the Monthly Balance of Planning Period FTR Auctions for the entire 2015 to 2016 planning period and the first four months of the 2016 to 2017 planning period were 9,386,860 MW and 10,167,078 MW.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded 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 or and off peak products.7 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.

Monthly Balance of Planning Period FTR Auctions. 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. These are single-round monthly auctions that allow any transmission service customer customers or PJM member members 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 or off peak products.7 Secondary Bilateral Market 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. Credit Issues Default There were three participants that defaulted during 2012 and 4 default events. The average default for 2012 was $47,188 with a maximum default of $111,600. Of all the defaults two were based on collateral and two were based on payments. All of the defaulting participants were financial companies. Two of the defaults were promptly cured and two are outstanding as of the last report.8 These defaults were not related to FTR positions. Patterns of Ownership The ownership concentration of cleared FTR buy bids resulting from the 2011 to 2012 Annual FTR Auction was low for peak, off peak FTR obligations and moderately concentrated for 24-hour FTR obligations. The ownership concentration was highly concentrated for peak, off peak and 24-hour FTR buy bid options for the same time period. The overall ownership structure of FTRs and the ownership of prevailing flow and counter flow FTRs is descriptive and is not necessarily a measure of actual or potential FTR market structure issues, as the ownership positions result from competitive auctions. The percentage of FTR ownership shares may change when FTR owners buy or sell FTRs in the Monthly Balance of Planning Period FTR Auctions or secondary bilateral market. In order to evaluate the ownership of prevailing flow and counter flow FTRs, the MMU categorized all participants owning FTRs in PJM as either physical or financial. Physical entities include utilities and customers which primarily take physical positions in PJM markets. Financial entities include banks and hedge funds which primarily take financial positions in PJM markets. International market participants that primarily take financial positions in PJM markets are generally considered to be financial entities even if they are utilities in their own countries. For the Monthly Balance of Planning Period Auctions of January through March 2012, financial entities purchased 85.0 percent of prevailing flow and 8 Email to Members Committee, “PJM Settlement Member Credit Exposure and Default Disclosure Report – March 2012,” April 10, 2012.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded concluded, is offered in the Monthly Balance of Planning Period FTR Auctions. Existing FTRs are modeled as fixed injections and withdraws. 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 customers or PJM member members 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 or off peak products.7 products.13 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded concluded, is offered in the Monthly Balance of Planning Period FTR Auctions. 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 24-24 hour, on peak or and off peak products.7 products.28 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded 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 6 See PJM. “Manual 6: Financial Transmission Rights,” Revision 13 (June 28, 2012), p. 54. 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 or and off peak products.7 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.

Monthly Balance of Planning Period FTR Auctions. The residual capability of the PJM transmission system system, after the Long Term and Annual FTR Auctions are concluded 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 or and off peak products.7 products.8 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, or may be emergency outages. In addition, it is difficult to model in an annual 8 See PJM. “Manual 6: Financial Transmission Rights,” Revision 15 (October 10, 2013), p. 39. 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 15 (October 10, 2013), p. 55. smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time. Buy Bids The total FTR buy bids in the Monthly Balance of Planning Period FTR Auctions for the 2014 to 2015 planning period and the first four months of the 2015 to 2016 planning period were 25,346,227 MW and 7,840,917 MW.

Monthly Balance of Planning Period FTR Auctions. 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. These are single-round monthly auctions that allow any transmission service customer customers or PJM member members 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 or off peak products.7 products.19 Secondary Bilateral Market Market participants can buy and sell existing FTRs through the PJM- 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. 7 19 See PJM. “Manual 6: Financial Transmission Rights,” Revision 12 (July 1, 2009), p. 39. not PJM members. PJM has no knowledge of bilateral transactions that are done outside of PJM’s bilateral market system. For bilateral trades done through PJM, the FTR transmission path must remain the same, FTR obligations must remain obligations, and FTR options must remain options. However, an individual FTR may be split up into multiple, smaller FTRs, down to increments of 0.1 MW. FTRs can also be given different start and end times, but the start time cannot be earlier than the original FTR start time and the end time cannot be later than the original FTR end time.