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APEx The Mature PJM Market Kenneth W. Laughlin PJM October 31, 2005 Orlando, FL

APEx The Mature PJM Market Kenneth W. Laughlin PJM October 31, 2005 Orlando, FL. PJM as Part of the Eastern Interconnection. KEY STATISTICS PJM member companies 350+ millions of people served 51 peak load in megawatts 135,000 MWs of generating capacity 165,738

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APEx The Mature PJM Market Kenneth W. Laughlin PJM October 31, 2005 Orlando, FL

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  1. APEx The Mature PJM Market Kenneth W. Laughlin PJM October 31, 2005 Orlando, FL

  2. PJM as Part of the Eastern Interconnection KEY STATISTICS PJM member companies 350+ millions of people served 51 peak load in megawatts 135,000 MWs of generating capacity 165,738 miles of transmission lines 56,070 GWh of annual energy 700,000 generation sources 1,082 square miles of territory 164,260 area served 13 states + DC

  3. The Economics Of Power In Balance Supply the Demand at Any Price Supply the Demand at the Regulated Price Supply and Demand Respond to Price

  4. “…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

  5. Connecting To What’s Important • Connecting Data to Information • Connecting Information to People • Connecting People to Their Needs

  6. Data to Information Key User-Selected Data Aggregated prices Specific prices Available transfer capability Transmission limits Forecasts Loads Public Information Markets Prices Available transfer capability Transmission limits & flows Forecasts Data trends Data Silos Agencies Customers Generators Transmission Owners Utilities Environmental Regulatory Traditional Processes Models Forecasts Actual Markets Reports Investigative PJM transforms data toinformationin real time PJM systems process 3,000 Items 1,000,000 Items 10 Items

  7. Continual and Steady Progress

  8. PJM’s Operational Markets • Day-Ahead Energy Market • Real-Time Energy Market • Capacity • Financial Transmission Rights • Ancillary Services Markets • Regulation • Spinning Reserve Market • Black Start Services • Reactive Services

  9. Market Incentives • PJM market supports reliability because generation isincented to follow real-time dispatch instructions: • If generation is following real-time dispatch instructions then it is eligible to set LMP, otherwise it become a price taker. • If generation is scheduled by PJM and is following real-time dispatch instructions then it receives a revenue guarantee of at least its specified offer data, otherwise there is not a revenue guarantee. • As a result of the incentives, no penalties need to be imposed for over or under generation

  10. Operational Efficiency of Larger Market Pre-Integration Price Pattern Post-integration Energy Price Pattern • Lower Energy Prices across the Expanded PJM Region • ESAI’s technical study: region-wide energy price without integration would be $0.78/MWh higher in 2005 than with integration. • Spreading these savings over the total PJM RTO’s energy demand of 700 terawatt-hours (TWh) per year yields aggregate savings of over $500 million per year.

  11. Efficiency Indicators • Market heat rate • Provides fuel adjusted measure of efficiency • Equivalent heat rate at Western Hub reduced from 11 MMBTU/ MWh in 1999 to 7.3 MMBTU/MWh in 2004

  12. 2004 PJM hourly system average LMP

  13. Figure 4-13 - Trends in PJM equivalent demand forced outage rate (EFORd): Calendar years 1994 to 2004

  14. Efficiency Indicators • Regional security constrained economic dispatch impacts • Higher level of regional reliability • More efficient transmission utilization • Power Transfers • Allegheny Power Integration in 2002 - Average on-peak transfers increased by 500 MW • AEP Integration in 2004 - Average on-peak transfers increased by 750 MW

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