Two Electric Suppliers Default on their PJM Obligations; Unrecovered Costs to be Imposed On Non-Defaulting PJM Members and Customers Have Been Reassigned to Default Service Providers
February 6, 2014
In the face of rapidly upwardly spiraling wholesale electricity prices due to the return of the “polar vortex,” PJM has informed members that two “retail load serving entities” have not been able to fulfill their collateral calls and payment obligations. Those two members are People’s Power & Gas, LLC and CCES LLC, which was operating as “Clean Currents.” Each of these companies has been declared in default, and PJM has indicated that the retail customers of each company have been reallocated by the applicable electric distribution company for the transmission zones where the retail customers are located.
PJM estimated the cost to be charged to PJM’s “non-defaulting members” as $1.7 – $2.4 million (approximately $0.4 – $0.6 million for People’s Power & Gas, LLC and approximately $1.3 – $1.8 million for Clean Currents). This estimate does not include the cost incurred by the electric distribution companies in processing the transfer of the customers back to default service.
Industry observers noted that these defaults may be only the first of several caused by the large spike in the market and the lack of hedged positions by small load serving entities (LSEs). However, these defaults also highlight the fact that the mechanisms built into the wholesale and retail markets to handle such emergencies worked as they should have. No customer went without service and the transition to a back-stop supplier went so smoothly and without dislocation or complaint.
The efficiency of the wholesale markets is a key reason why the identity of the back-stop – electric distribution company, retail or wholesale – won’t affect the continued efficient workings of these important reliability mechanisms.
This Eckert Seamans’ Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have any questions about the content of this post, please contact Dan Clearfield at (717) 237-7173 /dclearfield@eckertseamans.com or Sarah Stoner at 717.237.6026 / sstoner@eckertseamans.com
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Two Electric Suppliers Default on their PJM Obligations; Unrecovered Costs to be Imposed On Non-Defaulting PJM Members and Customers Have Been Reassigned to Default Service Providers
February 6, 2014
In the face of rapidly upwardly spiraling wholesale electricity prices due to the return of the “polar vortex,” PJM has informed members that two “retail load serving entities” have not been able to fulfill their collateral calls and payment obligations. Those two members are People’s Power & Gas, LLC and CCES LLC, which was operating as “Clean Currents.” Each of these companies has been declared in default, and PJM has indicated that the retail customers of each company have been reallocated by the applicable electric distribution company for the transmission zones where the retail customers are located.
PJM estimated the cost to be charged to PJM’s “non-defaulting members” as $1.7 – $2.4 million (approximately $0.4 – $0.6 million for People’s Power & Gas, LLC and approximately $1.3 – $1.8 million for Clean Currents). This estimate does not include the cost incurred by the electric distribution companies in processing the transfer of the customers back to default service.
Industry observers noted that these defaults may be only the first of several caused by the large spike in the market and the lack of hedged positions by small load serving entities (LSEs). However, these defaults also highlight the fact that the mechanisms built into the wholesale and retail markets to handle such emergencies worked as they should have. No customer went without service and the transition to a back-stop supplier went so smoothly and without dislocation or complaint.
The efficiency of the wholesale markets is a key reason why the identity of the back-stop – electric distribution company, retail or wholesale – won’t affect the continued efficient workings of these important reliability mechanisms.
This Eckert Seamans Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have any questions about the content of this post, please contact Dan Clearfield at (717) 237-7173 dclearfield@eckertseamans.com or Sarah Stoner at 717.237.6026 / sstoner@eckertseamans.com