Internal Bilateral Transactions (IBTs) are bilateral transactions occurring between market participants within a Regional Transmission Organization (RTO) market. While these transactions have differing names in various RTOs (IBTs in PJM, ISO-NE, and NYISO; Financial Schedules in MISO; Inter-SC Trades in CAISO; and Capacity/Energy Trades between QSEs in ERCOT), they all have similar characteristics. That is, they are bilateral power transactions transacted entirely within a nodal market. Given the characteristics of nodal market design, these transactions are the only way that market participants can undertake a forward bilateral forward purchase and sale of power within such a market. While these transactions have been commonplace for years, recent developments are raising questions about their validity and jurisdictional grounding.
The DC Energy Complaint Against PJM
In deciding a complaint filed by DC Energy against PJM for finding IBTs DC Energy had entered into with its affiliate were not compliant with the PJM Tariff, FERC issued an order that appears to significantly limit the scope of permissible IBTs.1 FERC's order implies that, for IBTs to be compliant, the power sold must be a part of the physical dispatch of the system.2 This "physicality" requirement is inconsistent with the manner in which IBTs actually function in the PJM eSchedule system; does not recognize that IBTs are not and cannot be a part of the dispatch process, but can be eScheduled as many as three days after flow date; and would invalidate the vast majority of IBTs, which are eScheduled at a trading hub with the hub acting as both the source and sink.
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