Common use of Patterns of Ownership Clause in Contracts

Patterns of Ownership. 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, trading firms 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 13-12 presents the 2017/2020 long term FTR auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 77.5 percent of prevailing flow buy bid FTRs and 84.9 percent of counter flow buy bid FTRs with the result that financial entities purchased 80.8 percent of all long term FTR auction cleared buy bids for the 2017/2020 Long Term FTR Auction. Physical entities purchased only 19.2 percent of all available long term FTRs in the 2017/2020 Long Term FTR Auction. Buy Bids Physical 22.5 15.1 19.2 Financial 77.5 84.9 80.8 Total 100.0 100.0 100.0 Sell Offers Physical 36.9 26.6 33.3 Financial 63.1 73.4 66.7 Total 100.0 100.0 100.0 Table 13-13 presents the annual FTR auction cleared FTRs for the 2017/2018 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2017/2018 planning period, financial entities purchased 77.5 percent of prevailing flow FTRs, up 20.6 percentage points, and 79.7 percent of counter flow FTRs, down 5.2 percentage points, with the results that financial entities purchased 66.6 percent, up one percentage point, of all annual FTR auction cleared buy bids for the 2017/2018 planning period. Trade Type Organization Type Self-Scheduled FTRs FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical Yes 7.2 1.0 4.8 No 32.7 22.3 28.6 Total 39.9 23.3 33.4 Financial No 60.1 76.7 66.6 Total 100.0 100.0 100.0 Sell Offers Physical 21.3 17.6 20.0 Financial 78.7 82.4 80.0 Total 100.0 100.0 100.0 Table 13-14 presents the monthly balance of planning period FTR auction cleared FTRs for 2017 by trade type, organization type and FTR direction. Financial entities purchased 74.3 percent of prevailing flow FTRs, up 1.7 percent, and 82.7 percent of counter flow FTRs, up 0.6 percent, for the year, with the result that financial entities purchased 78.3 percent, up 1.3 percent, of all prevailing and counter flow FTR buy bids in the monthly balance of planning period FTR auction cleared FTRs for 2017. Table 13-14 Monthly Balance of Planning Period FTR Auction patterns of ownership by FTR direction: 2017 Trade Type Organization Type FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical 25.7 17.3 21.7 Financial 74.3 82.7 78.3 Total 100.0 100.0 100.0 Sell Offers Physical 16.7 17.0 16.8 Financial 83.3 83.0 83.2 Total 100.0 100.0 100.0 Table 13-15 presents the average daily net position ownership for all FTRs for 2017, by FTR direction. Physical 49.6 28.1 40.4 Financial 50.4 71.9 59.6 Total 100.0 100.0 100.0 In an effort to manage FTR revenues, PJM may use normal transmission limits (rather than the inflated limits used in Stage 1A) in the FTR auction model. These capability limits may be reduced if ARR funding is not affected, all requested self scheduled FTRs clear and net FTR auction revenue is positive. If the normal capability limit cannot be reached due to infeasibilities then FTR Auction capability reductions are undertaken pro rata based on the MW of Stage 1A infeasibility and the availability of auction bids for counter flow FTRs.29 In another effort to manage FTR revenues, PJM implemented a rule stating that PJM may model normal capability limits (rather than the inflated limits used in Stage 1A) on facilities which are infeasible due to modeled transmission outages in Monthly Balance of Planning Period FTR Auctions. The capability of these facilities may be reduced if ARR target allocations are fully funded and net auction revenues are greater than zero. This reduction may only take place when there are counter flow auction bids available to reduce the infeasibilities.30 In the 2017/2020 Long Term FTR Auction, 133,153 MW (26.8 percent of demand; 44.8 percent of total FTR volume) of counter flow FTR buy bids cleared, an increase from 120,650 MW and 43.5 percent of total FTR volume. In the same auction, prevailing flow FTR buy bids cleared 163,931 MW (9.8 percent of demand;

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, trading firms 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 13-12 4 presents the 2017/2020 long term 2015 to 2018 Long Term FTR auction Auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 77.5 73.9 percent of prevailing flow buy bid FTRs and 84.9 78.3 percent of counter flow buy bid FTRs with the result that financial entities purchased 80.8 75.6 percent of all long term Long Term FTR auction Auction cleared buy bids for the 2017/2020 2015 to 2018 Long Term FTR Auction. Physical entities purchased only 19.2 percent of all available long term FTRs in the 2017/2020 Long Term FTR Auction7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 15 (October 10, 2013), p. 39. Buy Bids Physical 22.5 15.1 19.2 26.1 21.7 24.4 Financial 77.5 84.9 80.8 73.9 78.3 75.6 Total 100.0 100.0 100.0 Sell Offers Physical 36.9 26.6 33.3 31.0 32.0 31.3 Financial 63.1 73.4 66.7 69.0 68.0 68.7 Total 100.0 100.0 100.0 Table 13-13 5 presents the annual Annual FTR auction Auction cleared FTRs for the 2017/2018 2014 to 2015 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2017/2018 2014 to 2015 planning period, financial entities purchased 77.5 57.5 percent of prevailing flow FTRs, up 20.6 percentage points, FTRs and 79.7 80.0 percent of counter flow FTRs, down 5.2 percentage points, with the results that financial entities purchased 66.6 percent, up one percentage point, 64.4 percent of all annual Annual FTR auction Auction cleared buy bids for the 2017/2018 2014 to 2015 planning period. Trade Type Organization Type Self-Scheduled FTRs FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical Yes 7.2 1.0 4.8 10.4 0.6 7.4 No 32.7 22.3 28.6 32.1 19.5 28.2 Total 39.9 23.3 33.4 42.5 20.0 35.6 Financial No 60.1 76.7 66.6 57.5 80.0 64.4 Total 100.0 100.0 100.0 Sell Offers Physical 21.3 17.6 20.0 28.2 25.4 27.4 Financial 78.7 82.4 80.0 71.8 74.6 72.6 Total 100.0 100.0 100.0 Table 13-14 6 presents the monthly balance Monthly Balance of planning period Planning Period FTR auction Auction cleared FTRs for 2017 2014 by trade type, organization type and FTR direction. Financial entities purchased 74.3 80.1 percent of prevailing flow FTRs, up 1.7 percent, and 82.7 percent of counter flow FTRs, up 0.6 percent, for the year, with the result that financial entities purchased 78.3 percent, up 1.3 percent, of all prevailing and counter flow FTR buy bids in the monthly balance of planning period FTR auction cleared FTRs for 2017. Table 13-14 Monthly Balance of Planning Period FTR Auction patterns of ownership by FTR direction: 2017 Trade Type Organization Type FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical 25.7 17.3 21.7 Financial 74.3 82.7 78.3 Total 100.0 100.0 100.0 Sell Offers Physical 16.7 17.0 16.8 Financial 83.3 83.0 83.2 Total 100.0 100.0 100.0 Table 13-15 presents the average daily net position ownership for all FTRs for 2017, by FTR direction. Physical 49.6 28.1 40.4 Financial 50.4 71.9 59.6 Total 100.0 100.0 100.0 In an effort to manage FTR revenues, PJM may use normal transmission limits (rather than the inflated limits used in Stage 1A) in the FTR auction model. These capability limits may be reduced if ARR funding is not affected, all requested self scheduled FTRs clear and net FTR auction revenue is positive. If the normal capability limit cannot be reached due to infeasibilities then FTR Auction capability reductions are undertaken pro rata based on the MW of Stage 1A infeasibility and the availability of auction bids for counter flow FTRs.29 In another effort to manage FTR revenues, PJM implemented a rule stating that PJM may model normal capability limits (rather than the inflated limits used in Stage 1A) on facilities which are infeasible due to modeled transmission outages in Monthly Balance of Planning Period FTR Auctions. The capability of these facilities may be reduced if ARR target allocations are fully funded and net auction revenues are greater than zero. This reduction may only take place when there are counter flow auction bids available to reduce the infeasibilities.30 In the 2017/2020 Long Term FTR Auction, 133,153 MW (26.8 percent of demand; 44.8 percent of total FTR volume) of counter flow FTR buy bids cleared, an increase from 120,650 MW and 43.5 percent of total FTR volume. In the same auction, prevailing flow FTR buy bids cleared 163,931 MW (9.8 percent of demand;and

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, trading firms 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 13-12 3 presents the 2017/2020 long term Monthly Balance of Planning Period FTR auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 77.5 percent of prevailing flow buy bid FTRs and 84.9 percent of counter flow buy bid FTRs with the result that financial entities purchased 80.8 percent of all long term FTR auction cleared buy bids for the 2017/2020 Long Term FTR Auction. Physical entities purchased only 19.2 percent of all available long term FTRs in the 2017/2020 Long Term FTR Auction. Buy Bids Physical 22.5 15.1 19.2 Financial 77.5 84.9 80.8 Total 100.0 100.0 100.0 Sell Offers Physical 36.9 26.6 33.3 Financial 63.1 73.4 66.7 Total 100.0 100.0 100.0 Table 13-13 presents the annual FTR auction Auction cleared FTRs for the 2017/2018 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2017/2018 planning period, financial entities purchased 77.5 percent of prevailing flow FTRs, up 20.6 percentage points, and 79.7 percent of counter flow FTRs, down 5.2 percentage points, with the results that financial entities purchased 66.6 percent, up one percentage point, of all annual FTR auction cleared buy bids for the 2017/2018 planning period. Trade Type Organization Type Self-Scheduled FTRs FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical Yes 7.2 1.0 4.8 No 32.7 22.3 28.6 Total 39.9 23.3 33.4 Financial No 60.1 76.7 66.6 Total 100.0 100.0 100.0 Sell Offers Physical 21.3 17.6 20.0 Financial 78.7 82.4 80.0 Total 100.0 100.0 100.0 Table 13-14 presents the monthly balance of planning period FTR auction cleared FTRs for 2017 2015 by trade type, organization type and FTR direction. Financial entities purchased 74.3 75.5 percent of prevailing flow FTRsflow, up 1.7 down 0.9 percent, and 82.7 percent 79.7 percent, down 6.0 percent, of counter flow FTRs, up 0.6 percent, FTRs for the year, with the result that financial entities purchased 78.3 77.3 percent, up 1.3 down 2.8 percent, of all prevailing and counter flow FTR buy bids in the monthly balance of planning period FTR auction cleared FTRs for 2017. Table 13-14 Monthly Balance of Planning Period FTR Auction patterns of ownership by FTR direction: 2017 Trade Type Organization Type FTPrevailing Flow R Direction Counter Flow All cleared FTRs for 2015. Buy Bids Physical 25.7 17.3 21.7 24.5 20.3 22.7 Financial 74.3 82.7 78.3 75.5 79.7 77.3 Total 100.0 100.0 100.0 Sell Offers Physical 16.7 17.0 16.8 34.1 34.0 34.1 Financial 83.3 83.0 83.2 65.9 66.0 65.9 Total 100.0 100.0 100.0 Table 13-15 4 presents the average daily net position ownership for all FTRs for 20172015, by FTR direction. Physical 49.6 28.1 40.4 39.2 19.1 31.5 Financial 50.4 71.9 59.6 60.8 80.9 68.5 Total 100.0 100.0 100.0 In an effort to manage FTR revenues, PJM may use normal transmission limits (rather than the inflated limits used in Stage 1A) in the FTR auction model. These capability limits may be reduced if ARR funding is not affected, all requested self scheduled FTRs clear and net FTR auction revenue is positive. If the normal capability limit cannot be reached due to infeasibilities then FTR Auction capability reductions are undertaken pro rata based on the MW of Stage 1A infeasibility and the availability of auction bids for counter flow FTRs.29 In another effort to manage FTR revenues, PJM implemented a rule stating that PJM may model normal capability limits (rather than the inflated limits used in Stage 1A) on facilities which are infeasible due to modeled transmission outages in Monthly Balance of Planning Period FTR Auctions. The capability of these facilities may be reduced if ARR target allocations are fully funded and net auction revenues are greater than zero. This reduction may only take place when there are counter flow auction bids available to reduce the infeasibilities.30 In the 2017/2020 Long Term FTR Auction, 133,153 MW (26.8 percent of demand; 44.8 percent of total FTR volume) of counter flow FTR buy bids cleared, an increase from 120,650 MW and 43.5 percent of total FTR volume. In the same auction, prevailing flow FTR buy bids cleared 163,931 MW (9.8 percent of demand;100.0

Patterns of Ownership. 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, trading firms 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 13-12 presents the 2017/2020 long term FTR auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 77.5 percent of prevailing flow buy bid FTRs and 84.9 percent of counter flow buy bid FTRs with the result that financial entities purchased 80.8 percent of all long term FTR auction cleared buy bids for the 2017/2020 Long Term FTR Auction. Physical entities purchased only 19.2 percent of all available long term FTRs in the 2017/2020 Long Term FTR Auction. Buy Bids Physical 22.5 15.1 19.2 Financial 77.5 84.9 80.8 Total 100.0 100.0 100.0 Sell Offers Physical 36.9 26.6 33.3 Financial 63.1 73.4 66.7 Total 100.0 100.0 100.0 Table 13-13 presents the annual FTR auction cleared FTRs for the 2017/2018 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2017/2018 planning period, financial entities purchased 77.5 percent of prevailing flow FTRs, up 20.6 percentage points, and 79.7 percent of counter flow FTRs, down 5.2 percentage points, with the results that financial entities purchased 66.6 percent, up one percentage point, of all annual FTR auction cleared buy bids for the 2017/2018 planning period. Trade Type Organization Type Self-Scheduled FTRs FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical Yes 7.2 1.0 4.8 No 32.7 22.3 28.6 Total 39.9 23.3 33.4 Financial No 60.1 76.7 66.6 Total 100.0 100.0 100.0 Sell Offers Physical 21.3 17.6 20.0 Financial 78.7 82.4 80.0 Total 100.0 100.0 100.0 Table 13-14 5 presents the monthly balance of planning period FTR auction cleared FTRs for 2017 2018 by trade type, organization type and FTR direction. Financial entities purchased 74.3 76.2 percent of prevailing flow FTRs, up 1.7 percent3.6 percentage points, and 82.7 82.9 percent of counter flow FTRs, up 0.6 percent1.0 percentage points, for the year, with the result that financial entities purchased 78.3 79.0 percent, up 1.3 percent2.0 percentage points, of all prevailing and counter flow FTR buy bids in the monthly balance of planning period FTR auction cleared FTRs for 20172018. Buy Bids Physical 23.8 17.1 21.0 Financial 76.2 82.9 79.0 Total 100.0 100.0 100.0 Sell Offers Physical 18.0 19.5 18.5 Financial 82.0 80.5 81.5 Total 100.0 100.0 100.0 Table 13-6 shows the HHI values for cleared MW for the 2018/2019 planning period monthly auctions by period. Table 13-14 6 Monthly Balance of Planning Period FTR Auction patterns of ownership HHIs by FTR direction: 2017 Trade period Auction Hedge Type Organization Type FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical 25.7 17.3 21.7 Financial 74.3 82.7 78.3 Total 100.0 100.0 100.0 Sell Offers Physical 16.7 17.0 16.8 Financial 83.3 83.0 83.2 Total 100.0 100.0 100.0 Prompt Month Prompt Month+1 Prompt Month+2 Q2 Q3 Q4 Jun-18 Obligation 353 432 487 587 659 773 Option 3796 5981 7006 4854 4761 6586 Jul-18 Obligation 329 434 1283 827 559 681 Option 0000 0000 0000 3666 3918 6260 Aug-18 Obligation 254 534 528 509 430 522 Option 2437 3135 4673 5486 4729 5578 Sep-18 Obligation 330 481 534 610 772 Option 0000 0000 0000 1622 4876 Table 13-15 7 presents the average daily net position ownership for all FTRs for 20172018, by FTR direction. Physical 49.6 28.1 40.4 36.8 18.9 29.7 Financial 50.4 71.9 59.6 63.2 81.1 70.3 Total 100.0 100.0 100.0 In an effort to manage FTR revenues, PJM may use adjust normal transmission limits (rather than the inflated limits used in Stage 1A) in the FTR auction model. These capability limits may be reduced if ARR funding is not affected, all requested self scheduled FTRs clear and net FTR auction revenue is positive. If the normal capability limit canis not be reached due to infeasibilities consistent with full funding goals and simultaneous feasibility, then FTR Auction capability reductions are undertaken pro rata based on the MW of Stage 1A infeasibility and the availability of auction bids for counter flow FTRs.29 In another effort to manage FTR revenues, PJM implemented a rule stating that FTRs.36 PJM may model normal capability limits (rather than the inflated limits used in Stage 1A) on facilities which are infeasible due to modeled also remove or reduce infeasibilities caused by transmission outages in Monthly Balance by clearing counter flow bids without being required to clear the corresponding prevailing flow bids.37 The use of Planning Period FTR Auctions. The capability both of these facilities may be reduced if ARR target allocations procedures are fully funded contingent on PJM actions not affecting the full funding of allocated ARRs, all requested self scheduled FTRs clear and net FTR auction revenues are greater than zero. This reduction may only take place when there are counter flow auction bids available to reduce the infeasibilities.30 In the 2017/2020 Long Term FTR Auction, 133,153 MW (26.8 percent of demand; 44.8 percent of total FTR volume) of counter flow FTR buy bids cleared, an increase from 120,650 MW and 43.5 percent of total FTR volume. In the same auction, prevailing flow FTR buy bids cleared 163,931 MW (9.8 percent of demand;revenue is positive.

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. 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 the 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, trading firms 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 1312-12 3 presents the 2017/2020 long term Annual FTR auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 77.5 percent of prevailing flow buy bid FTRs and 84.9 percent of counter flow buy bid FTRs with the result that financial entities purchased 80.8 percent of all long term FTR auction cleared buy bids for the 2017/2020 Long Term FTR Auction. Physical entities purchased only 19.2 percent of all available long term FTRs in the 2017/2020 Long Term FTR Auction. Buy Bids Physical 22.5 15.1 19.2 Financial 77.5 84.9 80.8 Total 100.0 100.0 100.0 Sell Offers Physical 36.9 26.6 33.3 Financial 63.1 73.4 66.7 Total 100.0 100.0 100.0 Table 13-13 presents the annual FTR auction Auction cleared FTRs for the 2017/2018 2013 to 2014 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2017/2018 2013 to 2014 planning period, financial entities purchased 77.5 54.7 percent of prevailing flow FTRs, up 20.6 percentage points, FTRs and 79.7 82.2 percent of counter flow FTRs, down 5.2 percentage points, with the results result that financial entities purchased 66.6 percent, up one percentage point, 61.5 percent of all annual Annual FTR auction Auction cleared buy bids for the 2017/2018 2013 to 2014 planning period. Trade Type Organization Type Self-Scheduled FTRs FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical Yes 7.2 1.0 4.8 9.2 0.2 7.0 No 32.7 22.3 28.6 36.1 17.5 31.5 Total 39.9 23.3 33.4 45.3 17.8 38.5 Financial No 60.1 76.7 66.6 54.7 82.2 61.5 Total 100.0 100.0 100.0 Sell Offers Physical 21.3 17.6 20.0 20.7 19.0 20.2 Financial 78.7 82.4 80.0 79.3 81.0 79.8 Total 100.0 100.0 100.0 Table 1312-14 4 presents the monthly balance Monthly Balance of planning period Planning Period FTR auction Auction cleared FTRs for 2017 January through June 2013 by trade type, organization type and FTR direction. Financial entities purchased 74.3 73.4 percent of prevailing flow FTRs, up 1.7 percent, and 82.7 83.1 percent of counter flow FTRs, up 0.6 percent, FTRs for the first six months of the year, with the result that financial entities purchased 78.3 percent, up 1.3 percent, 77.1 percent of all prevailing and counter flow FTR buy bids in the monthly balance of planning period FTR auction cleared FTRs for 2017. Table 13-14 Monthly Balance of Planning Period FTR Auction patterns cleared FTRs for January through June 2013. Figure 12-2 shows the FTR forfeitures values for both counter flow and prevailing flow FTRs for each month of ownership June 2010 through June 2013 by FTR direction: 2017 Trade Type Organization Type FTPrevailing Flow R Direction Counter Flow All company type. Total forfeitures for the 2012 to 2013 planning period were Buy Bids Physical 25.7 17.3 21.7 26.6 16.9 22.9 Financial 74.3 82.7 78.3 73.4 83.1 77.1 Total 100.0 100.0 100.0 Sell Offers Physical 16.7 17.0 16.8 32.7 32.9 32.7 Financial 83.3 83.0 83.2 67.3 67.1 67.3 Total 100.0 100.0 100.0 $519,317 (0.06 percent of total FTR target allocations). Physical Counter Financial Counter $300,000.00 Table 1312-15 5 presents the average daily net position ownership for all FTRs for 2017January through June 2013, by FTR direction. Physical 49.6 28.1 40.4 49.4 24.7 41.0 Financial 50.4 71.9 59.6 50.6 75.3 59.0 Total 100.0 100.0 100.0 In an effort to manage FTR revenues, PJM may use normal transmission limits (rather than the inflated limits used in Stage 1A) in the FTR auction model. These capability limits may be reduced if ARR funding is not affected, all requested self scheduled FTRs clear and net FTR auction revenue is positive. If the normal capability limit cannot be reached due to infeasibilities then FTR Auction capability reductions are undertaken pro rata based on the MW of Stage 1A infeasibility and the availability of auction bids for counter flow FTRs.29 In another effort to manage FTR revenues, PJM implemented a rule stating that PJM may model normal capability limits (rather than the inflated limits used in Stage 1A) on facilities which are infeasible due to modeled transmission outages in Monthly Balance of Planning Period FTR Auctions. The capability of these facilities may be reduced if ARR target allocations are fully funded and net auction revenues are greater than zero. This reduction may only take place when there are counter flow auction bids available to reduce the infeasibilities.30 In the 2017/2020 Long Term FTR Auction, 133,153 MW (26.8 percent of demand; 44.8 percent of total FTR volume) of counter flow FTR buy bids cleared, an increase from 120,650 MW and 43.5 percent of total FTR volume. In the same auction, prevailing flow FTR buy bids cleared 163,931 MW (9.8 percent of demand;100.0

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 generally considered to be financial entities even if they are utilities in their own countries. Table 13-13 presents the 2016 to 2019 Long Term FTR Auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 70.1 percent of prevailing flow buy bid FTRs and 78.5 percent of counter flow buy bid FTRs with the result that financial entities purchased 73.8 percent of all Long Term FTR Auction cleared buy bids for the 2016 to 2019 Long Term FTR Auction. Buy Bids Physical 29.9 21.5 26.2 Financial 70.1 78.5 73.8 Total 100.0 100.0 100.0 Sell Offers Physical 29.2 24.3 27.5 Financial 70.8 75.7 72.5 Total 100.0 100.0 100.0 Table 13-14 presents the Annual FTR Auction cleared FTRs for the 2015 to 2016 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2015 to 2016 planning period, financial entities purchased 56.3 percent of prevailing flow FTRs, down 1.2 percent, and 75.0 percent of counter flow FTRs, down 5.0 percent, with the results that financial entities purchased 62.3 percent, down 2.1 percent, of all Annual FTR Auction cleared buy bids for the 2015 to 2016 planning period. Buy Bids Physical Yes 8.8 0.9 6.3 No 34.9 24.1 31.4 Total 43.7 25.0 37.7 Financial No 56.3 75.0 62.3 Total 100.0 100.0 100.0 Sell Offers Physical 22.9 23.5 23.2 Financial 77.1 76.5 76.8 Total 100.0 100.0 100.0 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, trading firms 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 countries22 See PJM. “Manual 6: Financial Transmission Rights,” Revision 16 (June 1, 2014), p. 39. Table 13-12 15 presents the 2017/2020 long term Monthly Balance of Planning Period FTR auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 77.5 percent of prevailing flow buy bid FTRs and 84.9 percent of counter flow buy bid FTRs with the result that financial entities purchased 80.8 percent of all long term FTR auction cleared buy bids for the 2017/2020 Long Term FTR Auction. Physical entities purchased only 19.2 percent of all available long term FTRs in the 2017/2020 Long Term FTR Auction. Buy Bids Physical 22.5 15.1 19.2 Financial 77.5 84.9 80.8 Total 100.0 100.0 100.0 Sell Offers Physical 36.9 26.6 33.3 Financial 63.1 73.4 66.7 Total 100.0 100.0 100.0 Table 13-13 presents the annual FTR auction Auction cleared FTRs for the 2017/2018 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2017/2018 planning period, financial entities purchased 77.5 percent of prevailing flow FTRs, up 20.6 percentage points, and 79.7 percent of counter flow FTRs, down 5.2 percentage points, with the results that financial entities purchased 66.6 percent, up one percentage point, of all annual FTR auction cleared buy bids for the 2017/2018 planning period. Trade Type Organization Type Self-Scheduled FTRs FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical Yes 7.2 1.0 4.8 No 32.7 22.3 28.6 Total 39.9 23.3 33.4 Financial No 60.1 76.7 66.6 Total 100.0 100.0 100.0 Sell Offers Physical 21.3 17.6 20.0 Financial 78.7 82.4 80.0 Total 100.0 100.0 100.0 Table 13-14 presents the monthly balance of planning period FTR auction cleared FTRs for 2017 2015 by trade type, organization type and FTR direction. Financial entities purchased 74.3 74.9 percent of prevailing flow FTRs, up 1.7 down 5.2 percent, and 82.7 76.8 percent of counter flow FTRs, up 0.6 down 11.0 percent, for the year, with the result that financial entities purchased 78.3 75.7 percent, up 1.3 down 7.3 percent, of all prevailing and counter flow FTR buy bids in the monthly balance of planning period FTR auction cleared FTRs for 2017. Table 13-14 Monthly Balance of Planning Period FTR Auction patterns of ownership by FTR direction: 2017 Trade Type Organization Type FTPrevailing Flow R Direction Counter Flow All cleared FTRs for 2015. Buy Bids Physical 25.7 17.3 21.7 25.1 23.2 24.3 Financial 74.3 82.7 78.3 74.9 76.8 75.7 Total 100.0 100.0 100.0 Sell Offers Physical 16.7 17.0 16.8 33.8 34.7 34.1 Financial 83.3 83.0 83.2 66.2 65.3 65.9 Total 100.0 100.0 100.0 Table 13-15 16 presents the average daily net position ownership for all FTRs for 20172015, by FTR direction. Physical 49.6 28.1 40.4 39.4 20.4 32.1 Financial 50.4 71.9 59.6 60.6 79.6 67.9 Total 100.0 100.0 100.0 In an effort to manage address reduced FTR revenuespayout ratios, PJM may use normal transmission limits (rather than the inflated limits used in Stage 1A) in the FTR auction model. These capability limits may be reduced if ARR funding is not affectedimpacted, all requested self self-scheduled FTRs clear and net FTR auction Auction revenue is positive. If the normal capability limit cannot be reached due to infeasibilities then FTR Auction capability reductions are undertaken pro rata based on the MW of Stage 1A infeasibility and the availability of appropriate auction bids for counter flow FTRs.29 FTRs.23 In another effort to manage reduce FTR revenuesfunding issues, PJM implemented a new rule stating that PJM may model normal capability limits (rather than the inflated limits used in Stage 1A) on facilities which are infeasible due to modeled transmission outages in Monthly Balance of Planning Period FTR Auctions. The capability of these facilities may be reduced if ARR target allocations are fully funded and net auction revenues are greater than zero. This reduction may only take place when there are counter flow auction bids available to reduce the infeasibilities.30 In the 2017/2020 Long Term FTR Auction, 133,153 MW (26.8 percent of demand; 44.8 percent of total FTR volume) of counter flow FTR buy bids cleared, an increase from 120,650 MW and 43.5 percent of total FTR volume. In the same auction, prevailing flow FTR buy bids cleared 163,931 MW (9.8 percent of demand;than

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 7 See PJM. “Manual 6: Financial Transmission Rights,” Revision 13 (June 28, 2012), p. 39. take physical positions in PJM markets. Financial entities include banks, trading firms 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 13-12 2 presents the 2017/2020 long term Monthly Balance of Planning Period FTR auction market cleared FTRs by trade type, organization type and FTR direction. The results show that financial entities purchased 77.5 percent of prevailing flow buy bid FTRs and 84.9 percent of counter flow buy bid FTRs with the result that financial entities purchased 80.8 percent of all long term FTR auction cleared buy bids for the 2017/2020 Long Term FTR Auction. Physical entities purchased only 19.2 percent of all available long term FTRs in the 2017/2020 Long Term FTR Auction. Buy Bids Physical 22.5 15.1 19.2 Financial 77.5 84.9 80.8 Total 100.0 100.0 100.0 Sell Offers Physical 36.9 26.6 33.3 Financial 63.1 73.4 66.7 Total 100.0 100.0 100.0 Table 13-13 presents the annual FTR auction Auction cleared FTRs for the 2017/2018 planning period by trade type, organization type and FTR direction. In the Annual FTR Auction for the 2017/2018 planning period, financial entities purchased 77.5 percent of prevailing flow FTRs, up 20.6 percentage points, and 79.7 percent of counter flow FTRs, down 5.2 percentage points, with the results that financial entities purchased 66.6 percent, up one percentage point, of all annual FTR auction cleared buy bids for the 2017/2018 planning period. Trade Type Organization Type Self-Scheduled FTRs FTPrevailing Flow R Direction Counter Flow All Buy Bids Physical Yes 7.2 1.0 4.8 No 32.7 22.3 28.6 Total 39.9 23.3 33.4 Financial No 60.1 76.7 66.6 Total 100.0 100.0 100.0 Sell Offers Physical 21.3 17.6 20.0 Financial 78.7 82.4 80.0 Total 100.0 100.0 100.0 Table 13-14 presents the monthly balance of planning period FTR auction cleared FTRs for 2017 January through September 2013 by trade type, organization type and FTR direction. Financial entities purchased 74.3 75.6 percent of prevailing flow FTRs, up 1.7 percent, and 82.7 85.7 percent of counter flow FTRs, up 0.6 percent, FTRs for the first nine months of the year, with the result that financial entities purchased 78.3 percent, up 1.3 percent, 79.6 percent of all prevailing and counter flow FTR buy bids in the monthly balance of planning period FTR auction cleared FTRs for 2017. Table 13-14 Monthly Balance of Planning Period FTR Auction patterns of ownership by FTR direction: 2017 Trade Type Organization Type FTPrevailing Flow R Direction Counter Flow All cleared FTRs for January through September 2013. Buy Bids Physical 25.7 17.3 21.7 24.4 14.3 20.4 Financial 74.3 82.7 78.3 75.6 85.7 79.6 Total 100.0 100.0 100.0 Sell Offers Physical 16.7 17.0 16.8 32.5 28.6 31.9 Financial 83.3 83.0 83.2 67.5 71.4 68.1 Total 100.0 100.0 100.0 Table 13-15 3 presents the average daily net position ownership for all FTRs for 2017January through September 2013, by FTR direction. Physical 49.6 28.1 40.4 46.6 20.6 37.8 Financial 50.4 71.9 59.6 53.4 79.4 62.2 Total 100.0 100.0 100.0 In an effort to manage FTR revenues, PJM may use normal transmission limits (rather than the inflated limits used in Stage 1A) in the FTR auction model. These capability limits may be reduced if ARR funding is not affected, all requested self scheduled FTRs clear and net FTR auction revenue is positive. If the normal capability limit cannot be reached due to infeasibilities then FTR Auction capability reductions are undertaken pro rata based on the MW of Stage 1A infeasibility and the availability of auction bids for counter flow FTRs.29 In another effort to manage FTR revenues, PJM implemented a rule stating that PJM may model normal capability limits (rather than the inflated limits used in Stage 1A) on facilities which are infeasible due to modeled transmission outages in Monthly Balance of Planning Period FTR Auctions. The capability of these facilities may be reduced if ARR target allocations are fully funded and net auction revenues are greater than zero. This reduction may only take place when there are counter flow auction bids available to reduce the infeasibilities.30 In the 2017/2020 Long Term FTR Auction, 133,153 MW (26.8 percent of demand; 44.8 percent of total FTR volume) of counter flow FTR buy bids cleared, an increase from 120,650 MW and 43.5 percent of total FTR volume. In the same auction, prevailing flow FTR buy bids cleared 163,931 MW (9.8 percent of demand;100.0