PJM Interconnection’s market monitoring unit (MMU) is taking a closer look at a series of events that took place earlier this month involving a power trading practice that churned loop flows higher by more than 3,000 MW and increased prices after a gulf emerged between contract and actual power flows at the grid operator’s interfaces with American Electric Power (AEP) and Dominion Virginia Power.

“Our MMU is conducting an analysis of the activities so they can get a comprehensive overview of what occurred,” PJM spokesperson Beth Foley told NGI. She noted that the grid operator’s MMU, headed by Joe Bowring, reports to FERC on the unit’s activities. “So he is communicating with them.” She said that PJM’s MMU is “working closely” with FERC on this matter.

When asked whether PJM is investigating whether there was any untoward behavior by market participants, Foley responded, “Right, they are investigating what occurred. They’ll do a detailed analysis…it’s [a] very complicated type of analysis — it’s day-by-day, hour-by-hour — and they’ll determine what the situation was.”

PJM recently issued a policy that all power sale transactions to or from two North American Electric Reliability Council regions west of PJM would be assigned the price at the PJM-AEP interface, regardless of the contract path. The two regions are the East Central Area Reliability Coordination Agreement (ECAR) and the Mid-America Interconnected Network Inc. (MAIN). The policy was authorized by the PJM operating agreement, which states that pricing for sales into PJM should be based on “appropriate flow analysis.”

Contracts scheduled through ties between PJM and FirstEnergy are not affected. They will continue to receive the PJM-FirstEnergy interface price.

PJM said that it acted because of the “large and growing discrepancy” between contract and actual power flows at its interfaces with AEP and Dominion Virginia Power. PJM was subjected to loop flows in excess of 3,000 MW, which distorted congestion prices and could have required transmission loading relief (TLR) steps. TLRs curtail transactions that cause loop flows that could overload the transmission system.

“The significant economic distortions needed to be addressed immediately,” said Bowring. “The result of PJM’s action is to align actual power flows more closely with prices, which allows market forces to correct the problem. Our market, using locational marginal pricing, will self-correct for conditions like this when AEP and Dominion become part of PJM.”

PJM’s press release announcing the corrective steps apparently led to confusion in the energy markets as to whether AEP and Dominion were being looked at by the MMU. The grid operator took decisive action Tuesday to make it clear that neither company is under the microscope by PJM.

The grid operator said that AEP and Dominion were named in the release “solely as a reference to the interface” and that by identifying the two companies in the news release, PJM “did not intend to imply that either company was under investigation” by PJM’s MMU. PJM noted that Dominion and AEP are currently integrating into PJM, and said that their participation will enhance market liquidity, transparency and competitiveness.

PJM’s move to clarify matters came as a welcome relief to Dominion, which attributed a recent decline in the company’s stock price at least in part to confusion over PJM’s announcement.

“We’ve built a company with strong fundamentals that is doing well in uncertain economic times,” said Thomas Capps, CEO at Dominion. “But, like all public companies in today’s volatile market environment, we are aware that share value is often influenced by news coverage and news releases.”

Capps said that Dominion is “disappointed that yesterday’s statement by PJM has contributed to a short-term decline in Dominion’s share valuation.” Shares of Dominion were off by around $4.00 last Tuesday, trading in the $51.00 area, but had recovered much of that lost ground by the end of the week.

“We commend PJM for stepping up to the plate and ensuring that its communications to the markets are clear, candid and credible,” said Capps. “This sets a standard for responsible public communication.”

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