PowerFacts

Independent Market Monitor Once Again Finds PJM Markets Competitive

For the 11th year in a row the PJM markets for 2009 have been found to have produced competitive results for 51 million consumers in 13 states and the District of Columbia. The 2009 State of the Market Report for PJM, released by the RTO's independent Market Monitoring Unit (MMU), Monitoring Analytics, LLC, analyzed extensive market data to examine the PJM markets to ensure competitive outcomes for consumers. The repeated competitive findings of such independent analysis coupled with the recent announcements by ISO New England and the New York ISO of wholesale electricity prices in 2009 falling to their lowest levels since 2003, and 2000, respectively, confirm that wholesale prices are largely driven by input costs as well as supply and demand fundamentals. Such independent oversight and analysis of the marketplace only exists in the so-called "organized markets," that serve over two-thirds of the country. Such transparency should be extended to all regions of the country.

"Prices are a key outcome of markets. Prices vary across hours, days and years for multiple reasons. Price is an indicator of the level of competition in a market although individual prices are not always easy to interpret... The overall market results support the conclusion that prices in PJM are set, on average, by marginal units operating at, or close to, their marginal costs. This is evidence of competitive behavior and competitive market outcomes." Volume I, P. 18-19

"The MMU analyzed measures of market structure, participant conduct and market performance for 2009, including market size, concentration, residual supply index, price-cost markup, net revenue and price. The MMU concludes that the PJM Energy Market results were competitive in 2009." P. 13

"PJM markets are designed to promote competitive outcomes derived from the interaction of supply and demand in each of the PJM markets. Market design itself is the primary means of achieving and promoting competitive outcomes in PJM markets." P. 13

"The RPM Capacity Market design explicitly allows competitive prices to reflect local scarcity without relying on the exercise of market power to achieve the objectives of the Capacity Market design and explicitly limits the exercise of market power via the application of the three pivotal supplier test." P. 9

"In the 2010/2011, 2011/2012, and 2012/2013 [capacity] auctions, new generation increased 3,271.9 MW; 651.9 MW came out of retirement and net generation deratings were 2,994.9 MW, for a total of 928.9 MW. DR and Energy Efficiency (EE) offers increased 9,409.3 MW through June 1, 2012. A decrease of 890.3 MW was due to higher [forced outage rates]... The net effect from June 1, 2009, through June 1, 2012, was an increase in total internal capacity of 12,635.1 MW (8.0 percent) from 157,318.2 MW to 169,953.3 MW." P. 42

"PJM and the MMU should continue efforts to ensure that market power is not exercised on the demand side of the market, particularly via gaming of the measurement and verification process. There are significant issues with the current approach to measuring demand-side response MW, which is the basis on which program participants are paid. Recent changes to the settlement review process represent clear improvements, but do not go far enough." P. 10

CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.