Fuel Cost Policies, as defined in PJM Operating Agreement (OA) Schedule 2 and in the PJM OATT (Tariff), document the process by which a PJM generating resource (Market Seller) calculates the fuel cost component of a generating resource’s cost-based energy market offer. Pursuant to OA Schedule 2, a Market Seller may only submit a non-zero cost-based energy market offer if it has a PJM-approved Fuel Cost Policy consistent with each fuel type on which the resource can operate. On an annual basis, Market Sellers are required to either submit to PJM and the Independent Market Monitor for PJM (IMM) an updated Fuel Cost Policy that complies with OA Schedule 2 or confirm that their currently effective and approved Fuel Cost Policy remains compliant. PJM may assess a penalty, under OA Schedule 2, if PJM determines, with the agreement of the IMM, that a resource has submitted a cost-based offer that does not comply with the Fuel Cost Policy or if a cost-based offer is not in compliance with the OA Schedule 2. All Market Sellers were required to have a PJM-approved Fuel Cost Policy for each fuel type by May 15, 2017. Updated Fuel Cost Policies were required as part of the move to Hourly Offers on November 1, 2017. Based on the first year of experience with PJM Fuel Cost Policies, there may be potential improvements to the rules and process governing Fuel Cost Policies and potential improvements to the current PJM approach to establishing cost-based offers.