The PJM Interconnection has proposed to increase the minimum capitalization thresholds required to participate in PJM’s wholesale electricity markets to keep step with inflation, better manage risk and protect all market participants from default.
Minimum capitalization thresholds demonstrate proof of market participants’ financial health and eligibility to participate in PJM markets. Changes outlined in PJM’s May 27 filing with the Federal Energy Regulatory Commission align with similar requirements approved by FERC for other grid operators nationwide.
Proposed revisions to PJM’s credit policy are designed to incentivize market participants to strengthen their balance sheets while preventing unreasonable barriers to entry, it said on June 1.
“These changes strengthen PJM credit policy and ensure the thresholds remain current over time while providing flexibility for market participants,” said Lisa Drauschak, PJM Sr. Vice President, Chief Financial Officer and Treasurer. “They allow reasonable access to PJM markets for both established and developing business entities.”
The changes, the first since 2011, would take effect over time to:
• Increase the tangible net worth required of FTR market participants to $2 million as of the effective date
• Grow the tangible net worth required of all other market participants to $2 million via a phased approach
• Institute a 3% annual increase to these thresholds to account for inflation, beginning five years after implementation
• Result in more uniform requirements for minimum capitalization for all market participants
For new or emerging market participants who may not meet these criteria, the PJM Tariff provides alternative means to gain market access; options range from posting of collateral, letter of credit or surety bond to a corporate guaranty.
To provide time to procure needed capital, strengthen their balance sheet or provide alternate credit support, PJM proposes that the iterative changes begin to take effect on April 30, 2027.
Thereafter, a five-year ramping schedule is designed so that all PJM non-FTR market participants may demonstrate a $2 million tangible net worth by 2032. The proposed changes received near-unanimous support from the January Members Committee.
