PowerFacts

PJM 2006 State of the Market Report: Supply Up, Prices and Congestion Costs Down

�Coal-fired units accounted for 70 percent of marginal units�

Increased Supply

�During the June to September 2006 summer period, the PJM Energy Market received an hourly average of 155,600 MW in net supply, including hydroelectric generation, excluding realtime imports or exports. The summer 2006 net supply was 1,160 MW higher than the summer 2005 net supply. The increase was comprised of 400 MW of increased hydroelectric power generation and a 760 MW increase in net capacity in the regional transmission organization (RTO) footprint.� (PJM Market Monitoring Unit, �2006 State of the Market Report, Volume 1: Introduction,� March 8, 2007, p. 10)


Reduced Prices

�PJM real-time energy market prices decreased in 2006. The simple average system LMP was 15.2 percent lower in 2006 than in 2005, $49.27 per MWh versus $58.08 per MWh. The load-weighted LMP was 15.9 percent lower in 2006 than in 2005, $53.35 per MWh versus $63.46 per MWh. The fuel-cost-adjusted, load-weighted, average LMP was 5.6 percent lower in 2006 than in 2005, $59.89 per MWh compared to $63.46 per MWh.� (p. 12)


Coal-Fired Plants Account for Majority of Marginal Units

�The concentration of ownership of all marginal units in the Energy Market provides additional information about market structure. The higher the level of concentration of ownership of marginal units the greater is the potential market power issue. In 2006, the top four companies accounted for 49 percent of the load-weighted, system average locational marginal price (LMP). In 2006, coal-fired units accounted for 70 percent of marginal units and natural gas-fired units accounted for 25 percent of all marginal units.� (p. 11)


Reduced Congestion Costs

�Total congestion costs decreased by $489 million or 23 percent, from $2.092 billion in calendar year 2005 to $1.603 billion in calendar year 2006. Day-ahead congestion costs decreased by $650 million or 28 percent, from $2.357 billion in calendar year 2005 to $1.707 billion in calendar year 2006. Balancing congestion costs increased by $161 million or 61 percent, from -$265 million in calendar year 2005 to -$104 million in calendar year in 2006. Total congestion costs have ranged from 7 percent to 10 percent of PJM annual total billings since 2002. Congestion costs were 8 percent of total PJM billings for 2006, compared to 9 percent in 2005. Total PJM billings for 2006 were $20.945 billion, a 7 percent decrease from the $22.630 billion billed in 2005.� (p. 36)


Installed Capacity by Fuel Type and Generation Fuel Mix

�At the end of 2006, PJM installed capacity was 162,143 MW. Of the total installed capacity, 41.0 percent was coal, 29.0 percent was natural gas, 18.5 percent was nuclear, 6.6 percent was oil, 4.4 percent was hydroelectric and 0.4 percent was solid waste.� Mix: �During 2006, coal was 56.8 percent, nuclear 34.6 percent, natural gas 5.5 percent, oil 0.3 percent, hydroelectric 2.0 percent, solid waste 0.7 percent and wind 0.1percent of total generation.� (p. 17)


Net Revenues Did Not Cover Fixed Costs of Generation

�During the eight-year period 1999 to 2006, the data lead to the conclusion that net revenues were less than the fixed costs of generation and that this shortfall resulted both from lower, less volatile energy market prices and lower capacity credit market prices in the last several years.� (p. 15)

The full PJM report, Volumes I and II, is available at http://www.pjm.com/markets/market-monitor/som.html.

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.