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Auction Revenue Rights FAQs


  1. What is an Auction Revenue Right (ARR)?
  2. When and how do I acquire ARRs?
  3. What is the benefit of participating in the Annual ARR Allocation?
  4. What is the difference between Stage 1 and Stage 2 of the Annual ARR Allocation?
  5. Describe the ARR Allocation Process in Stage 1?
  6. What are valid Sources in Stage 1 of the ARR Allocation?
  7. What is an Historic Load Aggregation Zone?
  8. What is a Load Aggregate and how is one created?
  9. What if I am awarded ARRs in Stage 1 that I do not want?
  10. Describe the ARR Allocation Process in Stage 2?
  11. What are valid Sources in Stage 2?
  12. Is there a limit to the amount of ARRs an LSE can be allocated in the Annual ARR Allocation?
  13. How does an LSE receive ARRs for Firm Pt-to-PT service?
  14. What happens if the net economic value of ARRs is negative?
  15. When submitting a request for Firm Point-to-Point ARRs, what do I need to submit in OASIS?
  16. Where do the LMPs used in the ARR Target Allocation come from?
  17. How are external capacity units handled during the Annual ARR Allocation period?
  18. What if my external capacity unit is in a territory that is being incorporated into the PJM Market?
  19. Will participants be able to see all ARRs that are subscribed?
  20. What are the available paths that a participant can submit an ARR request during the Annual ARR Allocation?
  21. Do I need to designate an ICAP resource when I am requesting ARRs during the Annual ARR Allocation?
  22. What happens when 100% of the capability is not allocated?
  23. What is ARR Trading?
  24. How could I lose an ARR which has already been granted?
  25. For ARRs, what happens if you do not have load at the beginning of the planning period, but know you will pick it up later in the year?
  26. How does PJM determine if there is a load shift for the ARR reassignment?
  27. What is the MW granularity of the reallocation process?
  28. How will an LSE know what ARRs are reassigned?
  29. How will an LSE know what ARRs are available?
  30. Are ARRs tied to specific retail customers?
  31. How can an LSE who does not acquire ARRs during the Annual ARR Allocation receive ARRs during the year if that LSE acquires new load in the zone?
  32. If an LSE’s received ARRs during the Annual ARR Allocation, and then self schedules those ARRs in the Annual FTR Auction to convert them into FTRs, what happens if the LSE loses load throughout the year?
  33. Will there be a separate FTR auction for the New Jersey Basic Generation Supplier (BGS) Auction?
  34. How are the ARR credits paid out to the participants? Monthly, Annually?


Q1: What is an Auction Revenue Right (ARR)?
A1: Auction Revenue Rights are entitlements allocated annually to Firm and Network Transmission Service Customers that entitle the holder to receive an allocation of the revenues from the Annual FTR Auction.
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Q2: When and how do I acquire ARRs?
A2: ARRs can be acquired in the following mechanisms:

Annual ARR Allocation – Auction Revenue Rights (ARRs) requested by Firm and Network Transmission Customers are allocated on an annual basis.

Daily ARR Reassignment – ARRs allocated for the planning period will be reassigned on a proportional basis within a zone as load switches between LSEs within the planning period.
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Q3: What is the benefit of participating in the Annual ARR Allocation?
A3: The Annual ARR Allocation is the mechanism by which property rights are allocated to Firm and Network Transmission Customers.
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Q4: What is the difference between Stage 1 and Stage 2 of the Annual ARR Allocation?
A4: The ARR allocation process is a two-stage allocation process. In Stage 1, each LSE would be allowed to designate ARRs for Network Service and Firm Pt-to-Pt service to a percentage of the historical generation resources for the zone. In Stage 2, each LSE would be allowed to designate ARRs for Network and Firm Pt-to-Pt service from any source (the "free-for-all").
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Q5: Describe the ARR Allocation Process in Stage 1?
A5: Stage 1 of the Annual ARR Allocation is a two round allocation process. First PJM will assign each LSE a pro-rate amount of the MW capability from each historical generation resource. Then, each LSE chooses the set of ARRs that it wants to request based on the resources assigned and submits ARR requests to PJM. An LSE’s request is limited to an amount not greater than the designated MW amount of the generation resource. In round 1 of Stage 1, LSE’s may request a total up to their base load in each zone. In round 2 of Stage 1, LSE’s may request a total up to their peak load in each zone minus already awarded round 1 ARRs.

Once all requests are received, PJM will test all requests for feasibility and approve all requests that are feasible.
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Q6: What are valid Sources in Stage 1 of the ARR Allocation?
A6: PJM publishes a list of Historical Generation Resources prior to the Annual ARR Allocation for each transmission zone or each historic load aggregation zone within a transmission year. The list is based on the historical reference year that corresponds to the LMP-based market implementation for that transmission zone. The list consists of actual generators that exist in the zone and serve load at the time of market integration.
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Q7: What is an Historic Load Aggregation Zone?
A7: An Historic Load Aggregation Zone is a sub-region within a transmission zone that has been served separately under a supply contract and/or generation resources. An example of a load aggregation zone is a municipal or cooperative utility. This sub-region has been served separately from the other non-municipal/cooperative load in the transmission zone.
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Q8: What is a Load Aggregate and how is one created?
A8: A LSE may aggregate load within a zone based on distribution factors that are agreed upon between the LSE and the EDC. Distribution factors may be modified periodically. An LSE must submit the request to create a Load Aggregate to PJM Market Settlements. Included in the request are the proposed name of the Aggregate, the Station (B1), Voltage (B2), Equipment (B3), and the distribution factors. The distribution factors may be defined to any level of granularity but must add up to the value of 1 (100%).
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Q9: What if I am awarded ARRs in Stage 1 that I do not want?
A9: An LSE may surrender any portion of the awarded ARRs prior to Stage 2 of the Annual ARR Allocation.
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Q10: Describe the ARR Allocation Process in Stage 2?
A10: Stage 2 is an iterative allocation process that consists of three sequential rounds. In each round, 1/3 of the remaining system capability that was not allocated in Stage 1 is awarded.

In each round, an LSE chooses a set of ARRs it wants to request from any generator bus, hub or external interface or load zone. In Stage 2, the ARR request is limited to 1/3 of the Network Customer’s Peak Load remaining unallocated after Stage 1.

Once all requests are received in each round, PJM will test all requests for feasibility. If all requests are not simultaneously feasible, then PJM will pro-rate the ARRs. PJM will approve all requests that are feasible.
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Q11: What are valid Sources in Stage 2?
A11: In Stage 2, an ARR request may be designated from any generation bus, hub, zone or interface.
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Q12: Is there a limit to the amount of ARRs an LSE can be allocated in the Annual ARR Allocation?
A12: In both Stages of the Annual ARR Allocation an LSE may only request ARRs up to the value of their Network Service Peak Load value in that zone or load aggregation zone. In Stage 1 round 1, an LSE may request ARRs up to the full the value of their Zonal Base load. In Stage 1 round 2, an LSE may request ARRs up to the value of their Network Service Peak Load in that zone or load aggregation zone minus awarded ARRs from round 1. In Stage 2, however, an LSE can only request and be allocated the amount that remains unallocated from Stage 1.
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Q13: How does an LSE receive ARRs for Firm Pt-to-PT service?
A13: ARR requests for Firm Pt-to-Pt service can be made in the Annual ARR Allocation. During the Annual ARR Allocation, requests for ARRs must be associated with firm pt-to-pt service that spans the entire planning period and are confirmed by the opening of the Annual ARR Allocation. ARR requests associated with shorter term point-to-point service may be made within the planning period via OASIS.
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Q14: What happens if the net economic value of ARRs is negative?
A14: The ARR is considered a liability, defined by the clearing prices that are determined for the source and sink of the ARR.
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Q15: When submitting a request for Firm Point-to-Point ARRs, what do I need to submit in OASIS?
A15: To qualify for an annual allocation of ARRs, Firm Point-to-Point ARR requests are associated with firm point-to-point service that spans the entire next planning period, and is confirmed by the opening of the Annual ARR Allocation window. The Firm Transmission Service Customer submits Transmission Service Requests (TSRs) via OASIS, including the optional request for the associated ARR. This is also required if a Firm Point to Point ARR is requested outside the Annual ARR Allocation window. During transitional periods when PJM expands, and FTRs are allocated for the transition period, Firm Point to Point FTR requests have the same requirements.
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Q16: Where do the LMPs used in the ARR Target Allocation come from?
A16: The ARR Target Allocation is calculated to determine the revenues that will be distributed to ARR holders in proportion to (but not to exceed) the economic value of the ARRs. The economic value of each ARR is based on the LMPs that result from the Annual FTR Auction and each ARR is defined by a valid source and sink.
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Q17: How are external capacity units handled during the Annual ARR Allocation period?
A17: Participant must have a Transmission Service Request (TSR) submitted in OASIS and confirmed prior to the Annual ARR Allocation period. ARR requests associated with External Capacity Units are submitted with a source designated at the specific unit bus that is tied to the respective interface point.
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Q18: What if my external capacity unit is in a territory that is being incorporated into the PJM Market?
A18: If the external capacity is in an expansion territory, the above rule will apply until the territory is incorporated. Once the territory is incorporated into PJM, then the firm point-to-point transmission service will convert to Network Integration Service, as long as both parties have mutually agreed to the conversion.
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Q19: Will participants be able to see all ARRs that are subscribed?
A19: A participant will be able to view the ARRs they are allocated.
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Q20: What are the available paths that a participant can submit an ARR request during the Annual ARR Allocation?
A20: Stage 1 requests must use the Historical Generation Resource list as the source point; sink points are Zones and Aggregates. For Stage 2, ARR requests will be designated from eligible ARR source points to aggregate loads. Eligible ARR source points include Generator Busses, Interfaces, Zones and Hubs. Eligible ARR sink points include Zones and Aggregates.
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Q21: Do I need to designate an ICAP resource when I am requesting ARRs during the Annual ARR Allocation?
A21: No. ARR requests do not have to be designated from a unit specific capacity resource. ARR requests will be designated from eligible ARR source points to aggregate loads. Eligible ARR source points include Generator Busses, Interfaces, Zones and Hubs. Eligible ARR sink points include Zones and Aggregates.
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Q22: What happens when 100% of the capability is not allocated?
A22: Excess Revenue Auctions will result in the Annual FTR Auction. Those Excess Revenues are used to fund any deficiencies in the FTR Target Allocation payments.
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Q23: What is ARR Trading?
A23: In the PJM FTR Markets, ARRs can only be traded between affiliates and must be traded after the Annual ARR Allocation and before the Annual FTR Auction. ARRs can be traded among affiliates for accounting purposes, and will be reflected in PJM Market Settlements. ARR trading is facilitated in eFTR.

ARRs can be traded bilateral outside the PJM Market, but there will be NO impact to Market Settlements, and any settlement that occurs will be done by the individual participants conducting the bilateral trade.
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Q24: How could I lose an ARR which has already been granted?
A24: You would lose an ARR if there is a reduction of you Network Peak Load at any time during the planning period.
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Q25: For ARRs, what happens if you do not have load at the beginning of the planning period, but know you will pick it up later in the year?
A25: ARRS will be reassigned automatically on a daily basis as load shifts from one supplier to another at any time during the planning period.
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Q26: How does PJM determine if there is a load shift for the ARR reassignment?
A26: On a daily basis, PJM will compare each LSE’s daily deviation of Network Peak Load in the zone.
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Q27: What is the MW granularity of the reallocation process?
A27: All ARRs are specified to the nearest 0.1 MW.
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Q28: How will an LSE know what ARRs are reassigned?
A28: PJM will inform each LSE of their ARR reassignment.
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Q29: How will an LSE know what ARRs are available?
A29: PJM will post the aggregate value ($$) of ARRs for each zone.
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Q30: Are ARRs tied to specific retail customers?
A30: No. ARRs are tied to aggregate load amounts.
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Q31: How can an LSE who does not acquire ARRs during the Annual ARR Allocation receive ARRs during the year if that LSE acquires new load in the zone?
A31: When an LSE acquires another LSE’s load any time during the planning period, the LSE will be assigned ARRs. The new LSE is assigned the ARRs that are forfeited from the previous LSE that lost the load in the zone. This Reassignment of ARRs is an automatic process that happens daily.
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Q32: If an LSE’s received ARRs during the Annual ARR Allocation, and then self schedules those ARRs in the Annual FTR Auction to convert them into FTRs, what happens if the LSE loses load throughout the year?
A32: LSE will lose ARRs, and the ARRs lost are reassigned to the new LSE serving that load. The LSE will retain their FTRs that are converted in the Annual FTR Auction until they are sold.
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Q33: Will there be a separate FTR auction for the New Jersey Basic Generation Supplier (BGS) Auction?
A33: No. ARRS will be reassigned automatically on a daily basis as load shifts from one supplier to another at any time during the planning period.
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Q34: How are the ARR credits paid out to the participants? Monthly, Annually?
A34: The Annual FTR Auction and corresponding ARRs will be settled on a monthly basis over the course of the planning period for which the FTRs awarded in the Annual FTR Auction are in effect.
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