No.  Any bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, must be fully disclosed in the Part 1 Application.  This implies that any such arrangement must be entered into before the Part 1 Applications are received and cannot be entered into later in the Auction Process.  In the Part 2 Application, a Qualified Bidder will be required to certify that, other than agreements disclosed in the Part 1 Application, the Qualified Bidder has not entered and will not enter into any agreement regarding bidding or participation in the auction.

Bidding agreements are disclosed in the Part 1 Application.

If it is possible that the parent and Guarantor of Entity A could cease to exist during the Auction Process, Entity A should apply to the auction under its own financial standing.  There is no mechanism to update financial information or to change the identity of the Guarantor once it is submitted in the Part 1 Application and once a creditworthiness assessment has been made.  If Entity A applies under the financial standing of its parent and Guarantor, the Auction Manager will communicate to Entity A through the notification of qualification that Entity A is required to submit a Pre-Auction Letter of Credit and that Entity A’s named parent and Guarantor is required to submit a letter of intent to provide a guaranty for a specific amount that is determined on the basis of the creditworthiness assessment of the named parent and Guarantor.  Entity A could be in a situation where it cannot fulfill the pre-auction security requirements of the Part 2 Application because its (now defunct) parent and Guarantor cannot provide a letter of intent to provide a guaranty.

Entity A should instead proceed through the Part 1 Application relying on its own financial standing.  Entity A will be required to submit a Pre-Auction Letter of Credit and possibly a letter of reference from a bank (if its unsecured credit line under the terms of the Supplier Master Agreement is not sufficient to support its indicative offer).  Entity A would be able to fulfill the pre-auction security requirements if the merger occurs as anticipated and its parent and Guarantor ceases to exist or becomes another entity.  If Entity A is successful at the auction, Entity A can subsequently request of the EDC a creditworthiness assessment for an entity that would serve as Guarantor and that would fulfill the creditworthiness requirements of the Supplier Master Agreement.

Yes.  When the merger closes, the Entities will become associated.   If the association is created after Entities A and B have submitted their Part 2 Applications but before the Part 2 Application deadline, the Auction Manager would consider any supplemental information submitted by Entities A and B as a consequence of the creation of the association.

We reiterate that it is assumed that neither Entity A nor Entity B would legally or effectively combine with each other or with any subsidiaries of the company with which its parent has merged.

The fact that Entities A and B could enter into an Arrangement in the Part 1 Application may contribute to ease concerns about an association forming between Entities A and B after the Part 2 Applications are submitted because the restrictions placed on the Entities participating in the Arrangement are likely to be sufficient for those that would apply to any two Qualified Bidders that are associated with one another.  However, the participation in an Arrangement does not grant an exception for the Entities to make all other certifications required of the Part 2 Application, including:  (1) certifications that the Qualified Bidder must remain the same Entity until three days after the Board renders a decision on the auction results; and (2) the certification that the Qualified Bidder will not substitute another entity in its place, transfer its rights to another entity, or otherwise assign its status as a bidder to another entity.  These certifications ensure that the Entities that submit to the qualification process, that certify agreement to the Supplier Master Agreement and the Auction Rules, and that certify compliance to the Association and Confidential Information Rules are those Entities that bid and that would sign the Supplier Master Agreement should they be successful at the auction.

On the basis of the Part 1 and Part 2 Applications, the Auction Manager would determine whether Entities A and B comply with the Association and Confidential Information Rules and whether these Entities could be registered in the auction as a “Joint Bidder”.  This determination would rely on the details of the certifications and information disclosures, as well as the specific circumstances; a general determination cannot be made.

We emphasize in the strongest possible terms that this response does NOT purport to state that if the parent of Entity A and the parent of Entity B have plans to merge, it is legal under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) or other controlling antitrust laws for Entity A and Entity B to form a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction (“Arrangement”).  Our response discusses, under the hypothetical that Entity A and Entity B do participate in an Arrangement and have entered into such an Arrangement after seeking all relevant legal advice in their sole discretion, the possibility that these Entities may continue to participate in the auction.  Bidders should consult their own legal counsel to determine whether any such Arrangement in their particular circumstances complies with the HSR Act as well as any other regulation, law, or undertaking of the Entities and of the merging parties.

Although the Association and Confidential Information Rules are designed to accommodate many different circumstances, unfortunately these Rules do not contemplate the arrangement that you describe and the Auction Manager would not accept such an arrangement in the Part 1 Application.  The contingent arrangement that you describe does not seem to be an ‘agreement’.  If, on the one hand, Entity A is acting without the accord and the knowledge of Entity B, then there is no agreement between Entity A and Entity B, contingent or otherwise.  Entity A cannot declare a Bidding Agreement with Entity B when Entity B is not even informed of that fact.  If, on the other hand, Entity A and Entity B are communicating with respect to their participation in the auction, then each of Entity A and Entity B should declare in it Part 1 Application an actual bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, which renders a ‘contingent’ agreement moot.

If Energy Marketer A continues to stand alone and conduct its business independently, and has not legally or effectively combined with any subsidiaries of the company with which its parent has merged, it would not be considered to have substituted, assigned or transferred its rights as a Qualified or Registered Bidder and would be considered the Same Entity.

We are assuming that no other subsidiary of the merging parents is participating in the auctions.  If, on the contrary, Parent A and Parent B do merge between the time of qualifications and three days after the Board renders a decision on the auction results and a subsidiary of Parent B is a Qualified Bidder, then an additional and immediate issue arises with respect to the Association and Confidential Information Rules.  Energy Marketer A will have certified in its Part 2 Application that it is not associated with any other Qualified Bidder.  Energy Marketer A would violate this certification of the Part 2 Application upon the merger of Parent A with Parent B if a subsidiary Parent B was also a Qualified Bidder.  Indeed, in this case, Energy Marketer A and Energy Marketer B, the subsidiary of Parent B and another Qualified Bidder in the auction, would become sister companies and thereby associated with each other.  Bidders that are known to be associated or to have become associated and have not declared an association in the Part 2 Application, and have not declared in the Part 1 Application a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, are subject to sanctions, including forfeiting the right to any further participation in the auctions.

Even if, as it appears from your description of the situation, Energy Marketer A will remain the Same Entity and will not be considered to have substituted, assigned or transferred its rights as a Qualified or Registered Bidder, the Auction Manager may ask Energy Marketer A to certify that procedures are in place to keep its business separate from other affiliates including through corporate personnel who may communicate across affiliates.  Furthermore, the Auction Manager may require additional information or additional undertakings to ensure continued compliance with the Association and Confidential Information Rules, such as ensuring that no confidential information (relative to its bidding strategy or regarding the Auction Process) would be exchanged with its affiliates as a result of the merger of its parent.

The requirement that a Qualified Bidder and a Registered Bidder not substitute, transfer or assign its rights serves an important purpose.  Each bidder is required to maintain its corporate identity so that the effectiveness of the certifications it has made and the certifications other bidders have made, in order to preserve the fairness and the competitiveness of the auction, are maintained.  When a bidder changes its corporate identity, including being acquired and folded into another company, it would in general lose its rights as a bidder and would be disqualified from participation in the auction.  There may be additional issues concerning the certifications of the Part 1 and Part 2 Applications but the inability to uphold the certification that energy marketer A not transfer its right is sufficient to result in energy marketer A’s exclusion from the auction.  It would not be able to assign or transfer its rights to the new corporate entity or substitute that entity in its place.  Please note that these certifications are intended to be in effect from the time at which the certification is made until three days after the Board has rendered a decision on the auction results.  This period of time should be sufficiently short that entities participating in the auction can plan any such activity so that it does not interfere with their participation in the auction.

If energy marketer A is acquired by energy marketer B, as stated above, in general energy marketer A would be precluded from further participation in the auction.  However, it may be possible that the acquisition could be structured or timed in a way that enables energy marketer A to constitute a distinct part of an acquisition that can be postponed until a later time.  If it is the case that energy marketer A continues to stand alone and conduct its business independently throughout the Auction Process, and that energy marketer A has not legally or effectively combined with the acquiring entity or any subsidiaries of the acquiring entity, then energy marketer A will not have assigned, substituted or transferred its rights as a bidder and energy marketer A may continue in the Auction Process.  The Auction Manager may ask for additional information or additional representations to ensure that this is the case, and to ensure that energy marketer A continues to abide by the certifications of the Part 1 and Part 2 Applications even if its situation has changed and even if it will change its corporate structure in the near future.  This could involve asking energy marketer A to represent that it has not exchanged and will not exchange any information concerning its business that could involve the auction to the acquiring entity or its affiliates.  These are high hurdles that would most likely require careful advance planning on the part of energy marketer A.

By energy marketer A acquiring energy marketer B, we assume you mean that the corporate entity that is energy marketer A acquires the corporate entity that is energy marketer B or a corporate entity that owns energy marketer B.

This transaction most likely would not be considered a substitution, transfer or assignment of energy marketer A’s rights as a bidder.  However, this transaction would pose a high risk of energy marketer A not being able to make or uphold certifications made in the Part 2 Application.  This in turn may mean that energy marketer A may not be able to become a Registered Bidder or, if energy marketer A is already a Registered Bidder, that energy marketer A risks sanctions including disqualification (see, for instance, FAQ-26 and FAQ-27).

If energy marketer A acquires energy marketer B or an entity that owns energy marketer B, any information held by energy marketer B would, by definition, be information held by energy marketer A as well.  It would not be possible to keep energy marketer A as a standalone entity, by attempting to separate it from information held by energy marketer B that may cause it to be unable to make or uphold certifications in the Part 2 Application.  Energy marketer A would own energy marketer B and all certifications that it has made would apply to it and to energy marketer B that is now part of energy marketer A.  If energy marketer B had confidential information relative to the bidding strategy of another Qualified Bidder, energy marketer A would be unable to make or uphold its certification that it did not have any knowledge of confidential information relative to the bidding strategy of another Qualified Bidder.  If energy marketer A had made this certification in the Part 2 Application already, energy marketer A would face sanctions, which could include forfeiting the right to any further participation in the auction.  We note that energy marketer A is also at risk of receiving information, during the due diligence process, concerning transactions that energy marketer B had made with respect to the auction, rendering energy marketer A unable to make or uphold the certification that it did not have any knowledge of confidential information relative to the bidding strategy of another Qualified Bidder.

As the time between becoming a Qualified Bidder and the end of the Auction Process is reasonably short, it would be advisable for Qualified Bidders to refrain from any acquisitions that would involve entities active in trading and marketing in PJM during that period, as there is a risk that a Qualified Bidder can then be in a position of not being able to make or uphold the certifications of the Part 2 Application, and of facing possible disqualification.

Furthermore, if energy marketer B had made any transactions with another Qualified Bidder (say, energy marketer C) where energy marketer C relied on the fact that energy marketer B was not a Qualified Bidder, the acquisition by energy marketer A could raise issues with respect to the certifications made by energy marketer C.  All Qualified Bidders are asked to certify that they have not disclosed confidential information relative to their bidding strategy.  However, notwithstanding that certification, “during negotiations prior to the auction for contractual arrangements for power to serve BGS load were it to be a winner at the BGS Auction”, Qualified Bidders are permitted to “discuss with the counterparty to such arrangements the nature of the products to be purchased, the volume, and the price at which you are willing to buy these products.”  See, for instance, FAQ-46, which explains that the counterparty in such negotiations must be an entity that is not a Qualified Bidder.  Energy marketer C may have discussed confidential information with energy marketer B, believing, correctly at the time, that energy marketer B was not a Qualified Bidder.  However, by being acquired by energy marketer A, energy marketer B would be part of a Qualified Bidder.  The certifications of energy marketer C would become inaccurate through the action of energy marketer A.  This type of circumstance may lead the Auction Manager to disqualify energy marketer A, who would be unable to make or uphold the certification that it did not have confidential information relative to the bidding strategy of another Qualified Bidder (i.e., energy marketer C) because of its acquisition of energy marketer B.

If energy marketer A continues to stand alone and conduct its business independently, and has not legally or effectively combined with any subsidiaries of the company with which its parent has merged, it would not be considered to have substituted, assigned or transferred its rights.  The Auction Manager may ask energy marketer A to certify that procedures are in place to keep its business separate from other affiliates including through corporate personnel who may communicate across affiliates.  Furthermore, the Auction Manager may require additional information or additional undertakings to ensure continued compliance with the Association and Confidential Information Rules, such as ensuring that no confidential information (relative to its bidding strategy or regarding the Auction Process) would be exchanged with its soon-to-be affiliates.  Under these conditions, it is expected that energy marketer A would remain eligible to continue participation in the auction.  Please note that these are high hurdles that would most likely require careful advance planning on the part of energy marketer A.  Further, energy marketer A would be required to continue upholding all certifications that it made in the Part 2 Application, including the certification that it will not disclose confidential information relative to its bidding strategy; there is no exception that would permit disclosure to affiliates or parents.

We have assumed in this answer that no other subsidiary of the merging parents is participating in the auction (see, for instance, FAQ-54).  If, on the contrary, a subsidiary of the company with which energy marketer A’s parent has merged is a Qualified Bidder, then an additional and immediate issue arises with respect to the Association and Confidential Information Rules.  Energy marketer A certified in its Part 2 Application that energy marketer A is not associated with any other Qualified Bidder.  Energy marketer A would violate this certification of the Part 2 Application upon the merger of its parent.  Indeed, if a merger of energy marketer A’s parent and another Qualified Bidder’s parent were to occur after the Part 2 Application, but prior to the auction, energy marketer A and the other Qualified Bidder would become sister companies and thereby associated with each other.  Bidders who are known to be associated or to have become associated and have not declared an association in the Part 2 Application, and have not declared in the Part 1 Application a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, are subject to sanctions, including forfeiting the right to any further participation in the auction.

With possible exceptions that will be discussed later in this answer, in general a Qualified Bidder cannot be registered to participate in a BGS Auction unless either it can state affirmatively that it is not associated with any other Qualified Bidder, or it can name the other Qualified Bidder(s) with which it is associated and explain the nature of the association as defined in the Association and Confidential Information Rules.

Although the Association and Confidential Information Rules are designed to accommodate many different circumstances, and although the certifications and disclosures from each Qualified Bidder are examined on a case-by-case basis, the Auction Manager must be able to completely determine whether a Qualified Bidder that has submitted a Part 2 Application is or is not associated with other Qualified Bidders.  The Auction Manager must be able to make this determination because Qualified Bidders that are associated are treated differently under the Association and Confidential Information Rules.  For example, associated Qualified Bidders may be jointly subject to load caps.  Information with respect to associations must be known with certainty at the time of the Part 2 Application, so that the Auction Manager can request additional information, and so that the Auction Manager can impose any required restrictions on those Qualified Bidders that are associated with each other.  The Association and Confidential Information Rules do not provide for this to occur after the Part 2 Application should an association be newly created during the Auction Process.

In general, two Qualified Bidders that may become associated but are unsure whether they will become associated during that period would not both be able to register and bid based on a disclosure that they “could” become associated.  There may be exceptions.  First, if a Qualified Bidder (Party A) submits a Part 2 Application disclosing that it could become associated with another Qualified Bidder (Party B) but Party B has not elected to submit a Part 2 Application, the Auction Manager may ask for additional information.  The Auction Manager could conclude that Party A could register to participate in the auction.  Second, if applicants had, in their Part 1 Application, declared a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, and if they disclose the fact that they may become associated at the Part 2 Application stage, the Auction Manager could conclude that the Qualified Bidders can register to bid in the auction.  In this case, the Auction Manager explicitly considers the fact that the restrictions placed on members of a bidding consortium or members of a bidding arrangement are likely to be sufficient for those that would apply to Qualified Bidders that are associated with one another.

Please note that this answer only examines the possibility that Qualified Bidders may become associated with one another while each Qualified Bidder continues to stand alone and conduct its business independently; for example, the parents of the Qualified Bidders could merge or combine in some manner, so that the Qualified Bidders would become sister companies, but the Qualified Bidders would not themselves combine or merge.  This answer does not directly contemplate cases where, for example, the Qualified Bidders themselves would merge or combine.  If Qualified Bidders themselves combined or merged, one or both of these Qualified Bidders would likely be unable to uphold the certification that the Qualified Bidder would not substitute another entity in its place, transfer its rights to another entity, or otherwise assign its status as a bidder to another entity.  This certification is required in the Part 1 and Part 2 Applications.  These certifications ensure that the entity that submits to the qualification process, that certifies its agreement to the Supplier Master Agreement and the Auction Rules, and that certifies its compliance to the Association and Confidential Information Rules is the same entity that bids and that would sign the Supplier Master Agreement should that entity become a winner in the auction.

Confidentiality agreements are prudent in general given that the Qualified Bidder is providing confidential information to someone from outside its organization.  Furthermore, the Qualified Bidder is responsible for any failure on the part of the Advisor to maintain the confidentiality of the information.  Such failure may result in sanctions, including forfeiture of the Pre-Auction Letter of Credit and disbarment for participation in future BGS Auctions.  Confidentiality agreements, as well as any other protections that the Qualified Bidder wishes to put in place, are required whenever an Advisor may be in a position to serve as a conduit of information between Qualified Bidders.  Such would be the case if the Advisor has contact with more than one Qualified Bidder.

An Advisor is an entity or person(s) that will be advising or assisting a bidder with bidding strategy in the BGS-RSCP Auction, with estimation of the value of a system’s tranches, or with the estimation of the risks associated with serving BGS load.  This advice may be with respect to the round-by-round submission of bids and analysis of the information on the general progress of the auction.  This advice may be in preparation for submitting bids at the auction in terms of analyzing the risks and rewards of supplying tranches for a given EDC.

A bidder may, for example, be obtaining general market information from an entity (i.e., subscribing to a service that educates its readers with respect to the market or provides to its subscribers general trends in market prices).  This entity would not be an Advisor because the information obtained is general in nature and not specific to the auction.  A bidder may, as another example, retain a person to provide updates on the market or educate the bidder as to items such as the responsibilities of being an LSE in PJM.  This person would not be an Advisor because the information obtained is general in nature and not specific to the auction.  A bidder may retain a person that will analyze the migration risk of customers of different BGS-RSCP classes for a given EDC.  This person would be an Advisor as such an analysis would be one element of estimating the value of a system’s tranches. In general, an Advisor provides assistance that is specific to the auction.

In general, legal counsel for the bidder would not be considered an Advisor under this definition unless legal counsel provides both legal advice and advice of the type described above.

Please note that, for a Qualified Bidder to be able to make and uphold its certification that it will not disclose confidential information relative to its bidding strategy or regarding the Auction Process, the bidder, when obtaining general information from a person that is not its Advisor, cannot disclose confidential information, including the fact that it has qualified to participate in one or both of the BGS Auctions.

The arrangements that must be disclosed in the Part 1 Application may be described as follows.  An applicant to one or both of the BGS Auctions must disclose any bidding agreement, bidding arrangement, bidding consortium, or joint venture in the Part 1 Application.  Please consult the definitions of bidding agreement, bidder consortium and joint venture provided in the glossary to the Part 1 Application and the Part 2 Application.  In such arrangements, two or more entities are cooperating to submit bids in the auctions.  All entities participating in such arrangements must be named in the Part 1 Application and are included in the list of Qualified Bidders.  All entities participating in such arrangements are asked to make the certifications under the Association and Confidential Information Rules in the Part 2 Application (even if only one of the entities is expected to sign the BGS Supplier Master Agreement).  The pre-auction letter of credit must be submitted in a way that allows the EDCs to draw upon the pre-auction letter of credit if any of the entities that are parties to such arrangements fail to abide by these certifications or otherwise make a material omission or misrepresentation in the applications.  Please note that all such arrangements must be entered into before the Part 1 Applications are received, must be disclosed in the Part 1 Application, and cannot be entered into later in the Auction Process.

While bidding agreements, bidding arrangements, bidding consortia, and joint ventures must be entered into before the Part 1 Application and disclosed in the Part 1 Application, this does NOT mean that all contractual arrangements entered into before the Part 1 Application by an applicant and that may be related to its participation in the BGS Auctions must necessarily be disclosed in the Part 1 Application.  There are a variety of contractual arrangements in which an applicant to the BGS Auctions can enter that are not bidding agreements, bidding arrangements, bidding consortia, or joint ventures.  There are a variety of contractual arrangements for power to serve BGS load were the applicant to be a winner at the BGS Auction that an applicant may enter into prior to the Auction and that do not require a disclosure in the Part 1 or the Part 2 Application.

While you provide a general description of the type of arrangement in which you have entered, you do not provide sufficient details for a definite response as to whether disclosures are necessary in the Part 1 or the Part 2 Application in your case.  We can state that neither the fact that the arrangement in your case is entered into before the Part 1 Application or the fact that the arrangement is contingent on your winning in the auction imply that a disclosure is necessary.  If the arrangement in question is not for purposes of submitting joint bids in the auction, and if you determine in good faith that the arrangement does not correspond to a bidding agreement, bidder consortium and joint venture as defined in the Part 1 Application, then the arrangement need not be disclosed in the Part 1 Application.

You also do not provide sufficient details regarding your arrangement for the Auction Manager to provide guidance as to whether the arrangement may affect your ability to make the certifications required by the Association and Confidential Information Rules in the Part 1 and Part 2 Applications.  These  certifications include that the Qualified Bidder certify that: it will not disclose at any time information regarding the list of Qualified Bidders (including the fact that it is itself a Qualified Bidder); it does not have any knowledge of confidential information relative to the bidding strategy of another bidder; it will not disclose confidential information relative to its own bidding strategy; it is not the purchasing party in any contract for any product that would require the disclosure of any confidential information relative to bidding strategy or confidential information regarding the Auction Process to the counterparty, or that would provide instructions to act in a way determined by the counterparty; and that no entity has agreed to defray the Qualified Bidder’s costs of participating in the auction. Certainly, the fact that you are entering in this arrangement prior to the list of Qualified Bidders being established facilitates your ability to make the certification that you have not disclosed information regarding the list of Qualified Bidders since qualification of bidders has not yet occurred.  Similarly, the fact that you are entering in this arrangement with an entity that will not be a Qualified Bidder in the auction also facilitates your ability to make the certifications required by the Association and Confidential Information Rules in the Part 1 and Part 2 Applications (note, however, that if unexpectedly the entity becomes a Qualified Bidder, you may be unable to make or uphold some of the required certifications).  While your ability to make such certifications is facilitated by these circumstances, such circumstances do not mean that you can automatically make all certifications required by the Association and Confidential Information Rules.  It is the responsibility of each applicant and bidder to consider each certification carefully in light of the definitions in the Auction Rules and in the Application Forms so as to determine in good faith whether any circumstance, including a transaction or arrangement of the type in which you have entered, may prevent the applicant or bidder from making or upholding any of the certifications in the Part 1 and Part 2 Applications.

Yes.  As explained in FAQ-49, care must be exercised so that the marketer can make and uphold the certifications in the Part 2 Application that state that the marketer will not disclose confidential information relative to its bidding strategy or regarding the Auction Process.  These certifications apply to disclosure of confidential information not just to other Qualified Bidders, but to anyone, including a broker.

Please note that FAQ-49 referred to quotes for energy only, while the question posed here refers to “power products that may be used as components of BGS-RSCP supply.”  The marketer is asked in its Part 2 Application to certify and uphold the certification that it will not disclose confidential information regarding the Auction Process.  Confidential information regarding the Auction Process includes the fact that the marketer is a Qualified Bidder in the BGS-RSCP Auction.  To make and uphold this certification, the marketer must take care not to reveal that it is a Qualified Bidder indirectly by seeking quotes for products that would only be of use to a Qualified Bidder in the BGS-RSCP Auction.  As an example, power products tied to serving a BGS-RSCP tranche for a particular EDC, such as the full-requirements service for a percentage of the EDC's BGS-RSCP load, would only be useful to a bidder in the BGS-RSCP Auction.  Asking for quotes for these products would reveal confidential information regarding the Auction Process (namely, the fact that the entity asking for the quote is a Qualified Bidder) to the broker.  We note that we believe this situation unlikely since, to the best of our knowledge, products that are directly tied to BGS-RSCP supply are not traded in the broker market.

It is possible for the marketer to ask for quotes in a way that avoids revealing confidential information relative to its bidding strategy or regarding the Auction Process so that it can make or uphold certifications in the Part 2 Application.  The marketer can ask for quotes for energy blocks only and the marketer can ask for quotes for multiple EDC zones rather than for a particular EDC.  Further, the marketer can take all due care in its contact with the trading desk not to state that it is a Qualified Bidder for the auction (which would reveal confidential information regarding the Auction Process) and not to otherwise reveal confidential information, relative to its bidding strategy or regarding the Auction Process.

The marketer's preference to serve one EDC over another is considered confidential information relative to the marketer's bidding strategy under the Association and Confidential Information Rules. The fact that the marketer asks for quotes for energy blocks for multiple EDC zones, regardless of its true preferences, means that the marketer will not reveal its preference for one EDC over another.  Energy is only one component of BGS-RSCP supply, and energy blocks are traded independently of the auction, so that obtaining quotes for energy blocks alone is unlikely to provide confidential information regarding the marketer’s or the wholesaler’s valuation of the auction product (see for instance, FAQ-44 for a discussion of transactions involving products other than energy blocks).  It is possible that both Qualified Bidders and entities that are not Qualified Bidders in the BGS-RSCP Auction may ask for these quotes to obtain information concerning current market prices.

Please note that if the precautions above are not followed, for example because the marketer makes the request in a way that reveals a preference for one EDC over another, the wholesaler, who is also a Qualified Bidder for the BGS-RSCP Auction, would be required to disclose that it had such knowledge regarding the marketer's bidding strategy in its Part 2 Application.  The marketer would have to disclose in its Part 2 Application that it had revealed such confidential information to another Qualified Bidder in the BGS-RSCP Auction.  The Auction Manager would consider these disclosures in assessing whether these entities can become Registered Bidders in the auction.

The Association and Confidential Information Rules and the Part 1 and Part 2 Applications ask each Qualified Bidder to make a number of certifications, including that the Qualified Bidder certify that it does not have any knowledge of confidential information relative to the bidding strategy of another bidder; that the Qualified Bidder will not disclose confidential information relative to its own bidding strategy; that the Qualified Bidder is not the purchasing party in any contract for any product that would require the disclosure of any confidential information relative to bidding strategy or confidential information regarding the Auction Process to the counterparty, or that would provide instructions to act in a way determined by the counterparty; and that no entity has agreed to defray the Qualified Bidder’s costs of participating in the auction.

The Association and Confidential Information Rules do not specifically allow or preclude specific types of transactions; see, for instance, FAQ-26, FAQ-27, FAQ-41, FAQ-42, FAQ-43, FAQ-44, FAQ-45, FAQ-46, and FAQ-47.  These questions and answers are intended to help bidders better understand the certifications of the Part 1 and Part 2 Applications so that bidders are better able to reach their own determination as to whether a certification can be made.  A Qualified Bidder considering a unit-contingent transaction or other generator-related transaction with another Qualified Bidder will need to determine in good faith if such a transaction would prevent the Qualified Bidder from making or upholding any of the certifications in the Part 1 and Part 2 Applications.

To the extent that such a transaction is contingent upon you, Qualified Bidder A, winning at the auction, it would reveal Qualified Bidder A’s contractual arrangements for purchasing power to serve BGS load were Qualified Bidder A to be a winner at the auction.  Indeed, a Qualified Bidder’s contractual arrangements for power with a party to serve the BGS load are part of the confidential information relative to the Qualified Bidder’s bidding strategy.  This means that the transaction would disclose such confidential information and that Qualified Bidder A would be unable to make or uphold all its certifications in the Part 2 Application.

To the extent that it is known to the market that Qualified Bidder A is serving default supply service load elsewhere in PJM or that Qualified Bidder A has routinely engaged in unit-contingent or generator-related transactions of the same type for these and other purposes, perhaps even with the same party, it is possible that such a transaction for a term that does not coincide with the BGS supply period would not reveal Qualified Bidder A’s sources of supply were Qualified Bidder A to win at the auction.  To the extent that any of these conditions do not hold, it becomes more difficult to envision how the transaction would not reveal confidential information relative to Qualified Bidder A’s bidding strategy.  Ultimately Qualified Bidder A must make this determination.

No.  Each Qualified Bidder in its Part 2 Application is asked to certify that it will not, at any time, disclose any confidential information regarding the Auction Process with some narrow exceptions (i.e., the Qualified Bidder may reveal such information to bidders with which it is associated as disclosed in this Part 2 Application, and to its Advisor). This is certification (13) of each of Insert #P2-1 and Insert #P2-3. The purchase of a win-contingent product, once bidding has begun but before the Board has rendered a decision on the auction results, would likely reveal confidential information regarding the Auction Process, such as the status of the Qualified Bidder’s participation in the auction and the status of the auction itself.  Thus, if a Qualified Bidder entered into a win-contingent transaction, it would likely mean that the Qualified Bidder would be unable to uphold one or more of its certifications in the Part 2 Application.

You are correct in your interpretation that the portion of certification (4) quoted in your question, which states that a Qualified Bidder may, during negotiations prior to the BGS-RSCP Auction for contractual arrangements for power to serve BGS-RSCP load were the Qualified Bidder to be a winner at the BGS-RSCP Auction, discuss with the counterparty to such arrangements the nature of the products to be purchased, the volume, and the price at which the Qualified Bidder is willing to buy these products, applies only if the counterparty in question is not a Qualified Bidder in the BGS-RSCP Auction.  This portion of certification (4) recognizes that a Qualified Bidder may buy in the wholesale market, from a counterparty that is not a Qualified Bidder in the BGS-RSCP Auction, products from which could be inferred information regarding the Qualified Bidder’s valuation of the BGS-RSCP Auction opportunity or interest in one EDC over another.  This exception does not apply to purchases from another (selling) Qualified Bidder as such purchases would mean that the other (selling) Qualified Bidder would have confidential information relative to the bidding strategy of the (purchasing) Qualified Bidder.  This exception only applies before the auction as any such negotiation from the time at which the auction begins to the time at which the Board renders a decision on the auction results would reveal confidential information regarding the Auction Process.  Transactions after the Board has rendered a decision on the auction results are not within the ambit of the Association and Confidential Information Rules (see, for instance, FAQ-38 and FAQ-45).

While the Qualified Bidder may discuss with the counterparty to an arrangement the nature of the products to be purchased, the volume, and the price at which it is willing to buy these products, the Qualified Bidder should take all measures to ensure that the counterparty will keep such information strictly confidential.  Further, such a transaction, or the negotiations toward such a transaction, should reveal no confidential information regarding the Auction Process beyond the possible inference that the Qualified Bidder is participating in the auction.  The Qualified Bidder should consider putting in place confidentiality agreements that would prevent the counterparty from providing information possibly revealed during negotiations to any other entity or that would prevent the counterparty from inadvertently revealing to the Qualified Bidder confidential information that it may have about another Qualified Bidder.  The Qualified Bidder should also take all due care to reveal the minimum amount of information and only in the context of negotiations of contractual arrangements for power to serve load won at the auction were it to be a winner, and only in the context of discussions with the counterparty as to the nature of the products to be purchased by the Qualified Bidder, the volume of any such products, and the prices of such products.

Transactions with a party that is not a Qualified Bidder based on negotiations as described above and with the safeguards discussed above, may allow the Qualified to make and uphold all certifications of the Part 2 Application even if the products transacted do not have realistic and feasible uses in addition to supplying load for BGS-RSCP load, or even if the products transacted constitute a product that is substantially informative of a bidder's valuation of the opportunity for serving BGS-RSCP load.

Such transactions could include, for example, the purchase of a load-following product coincident with the term of the supply period.  Such a transaction could reveal confidential information relative to the Qualified Bidder’s bidding strategy, as a load-following product may be a non-standard product that would substantially inform as to the Qualified Bidder’s valuation of the BGS-RSCP product for an EDC, and the safeguards discussed above are important in ensuring that the Qualified Bidder can continue to abide by its certifications even if it engages in such negotiations and transactions with a party that is not a Qualified Bidder.  Such transactions could include an arrangement that is contingent on the Qualified Bidder winning supply obligations in the auction and the Board approving the auction results.  All care must be taken so that such an arrangement or the negotiation toward such an arrangement reveals no confidential information regarding the Auction Process beyond the possible inference that the Qualified Bidder is participating in the auction.

We emphasize that the transactions and negotiations discussed in answer to this question apply before the auction (i.e., before bidding begins) as any such negotiation during the auction or immediately after (that is, prior to the Board rendering a decision on the auction results) could reveal confidential information regarding the Auction Process.

It is clear that any type of transaction negotiated and executed after the Board has rendered a decision on the auction results cannot possibly influence the auction outcome or the competitiveness at the auction.  These transactions are not within the purview of the Association and Confidential Information Rules and such transactions would not violate certifications made in the application process.  (Please note, however, that bidders do make undertakings that extend beyond the time at which the Board renders a decision on the auction results; for example, bidders do undertake not to disclose confidential information regarding the Auction Process.  Please consult the Association and Confidential Information portion of the Auction Rules to review the time period during which each certification must hold.)

It is also clear that transactions during the auction are most likely problematic.  A bidder that makes all certifications in its Part 2 Application undertakes not to reveal the status of its participation in the auction at any time.  Furthermore, a Qualified Bidder undertakes not to take any action that would undermine the certifications that it made in the Part 2 Application.  Any transaction made during the auction would need to avoid revealing the bidder’s continued participation in the auction, any confidential information relative to the bidder’s strategy, or any confidential information regarding the Auction Process.  We find it difficult to see how any transaction during the auction, other than the purchase and sale of standard traded products that the parties would trade in the normal course of business (see, for instance FAQ-26, FAQ-27, FAQ-31, FAQ-34, and FAQ-43), would allow the Qualified Bidder to continue abiding by all its certifications.

Transactions before the auction may or may not prevent a Qualified Bidder from making or upholding all certifications in the Part 2 Application.  As emphasized in FAQ-26 and FAQ-27, the Association and Confidential Information Rules do not provide a list of permitted or prohibited transactions as a given transaction may in one context allow the bidder to make all certifications, while the same bidder may be unable to make one or more certifications with respect to the same type of transaction in another context.  One consideration is whether the counterparty is also a Qualified Bidder.  For additional information, see, for instance, FAQ-41, FAQ-42, FAQ-43, FAQ-44, FAQ-46, FAQ-47, and FAQ-48. 

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