Electric Markets in the United States. W. Scott Miller, III Executive Director, Market Applications PJM Interconnection, L.L.C. EDF (France). 80,190 MW Peak 608 Generating Units. Tokyo Electric. 64,300 MW Peak 147 Generating Units. PJM. 63,726 MW Peak 594 Generating Units.
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Electric Markets in the United States
W. Scott Miller, III
Executive Director, Market Applications
PJM Interconnection, L.L.C.
80,190 MW Peak608 Generating Units
64,300 MW Peak147 Generating Units
63,726 MW Peak 594 Generating Units
60,157 MW Peak
555 Generating Units
54,430 MW Peak212 Generating Units
PJM / PJM West ISO Worldwide Comparison
PJM is currently the largest centrally dispatched Control Area in North America
Title VII of Energy Policy Act of 1992
“to promote greater competition in bulk power markets...”
1996: Order 888
“put in place the foundation necessary for competitive wholesale power markets in this country - open access...”
1999: Order No. 2000
“ensure that customers have the benefit of competitively priced generation...”
“…markets don’t always
operate efficiently because buyers and sellers don’t always have access to the information they need to make optimal choices.”
Akerlof, Spence, & StiglitzNobel prize winners for economics
PJM eData Services Main Screen
Magnitude of Consumer Base Reached
Local Control Centers
Load Serving Entities
2001 Gross Domestic Product by Industry
(Dollars in Billions)
Energy Industry = $221 Billion Annually; 2% of Gross Domestic Product
Source: Bureau of Economic Analysis, Dept. of Commerce
4/97 - Opened bid-based market based on Market Clearing Price
4/98 - Implemented LMP and FTRs (with overlying zones and trading hubs)
10/98 – Implemented capacity markets
1/99 - Implemented full customer choice in PA
– Implemented daily capacity market
4/99 - Market-based pricing authority granted
4/99 - PJM FTR Monthly Auction market
6/00 - PJM Day-Ahead Market and
4/02 – PJM West implemented
12/02- PJM Spinning Reserve Market
Average Day-Ahead and Real-Time LMPs
($ per megawatt hour)
The fundamentals of supply and demand are reflected by the prices in the daily and monthly capacity markets.
PJM Regulation Market
PJM is the most liquid Trading Hub
Wholesale Power Purchases as a Percentage of Purchases and Self-Generation (1989 – 2001)
Source: Platts POWERDAT Database
Wholesale Energy Prices Reduced
Wholesale prices dropped to $35.33/MWH in 2002 from $43.63/MWH in 2001 – 25% hotter in 2002.
Nine all-time peaks in summer of 2002 – peak load served at an average of $150/MWH as compared to $900/MWH on peak days in 2001 (savings of about $10 million to wholesale energy customers).
Demand Response Empowered
PJM’s demand response programs enabling customers to manage their own electricity costs grew 300 percent in 2002.
The most active 2002 demand side management hour lowered prices by more than 12%.
“Creation of common MISO-PJM-SPP market results in …
Lower energy price for region as a whole – Effects estimated at up to $7 billion over ten years”
“As effective power markets mature, the spread between forward price and the ultimate spot price should diminish.”
Every $1 forward premium reduction from MISO-PJM-SPP common market is ultimate consumer savings of $1.7 billion per year.
ESAI July 11, 2002 Report to Standard Market Design Forum
Over 35,000 megawatts scheduled will facilitate robust, competitive markets and may further reduce congestion.
Scheduled in Service
Megawatts of Generation Capacity
Scheduled In-Service Date
Futures market necessary for hedging and assist in price discover
Lack of highly liquid futures market in the US
Failed COB/Palo Verde contract in Western US
New York Mercantile Exchange (NYMEX) recently launched renewed “PJM West” futures market
Open interest increasing and price dropping
“The future requires
a higher sophistication
and dealing with
Peter F. Drucker