PJM completes first reliability pricing model auction

Valley Forge, PA, April 18, 2007 — PJM Interconnection has completed the first annual capacity auction under its reliability pricing model (RPM). Auction results were posted at the close of business April 13.

Successful bidders in the auction included new generation resources and demand response resources.

“The auction went smoothly and participation was active,” said Andrew L. Ott, PJM vice president of market services. “Because they’re above the cost of new entry, the clearing prices in Eastern and Southwestern MAAC should create considerable interest from the investment community to add resources in these tight areas.”

The auction cleared 311 megawatts (MW) of new capacity (unit upgrades or new generating units) and 127 MW of demand response offers. A key feature of the RPM was the ability of demand response to compete with and to be paid the same as generation.

Resource clearing prices are $40.80 per megawatt-day (MW-day) for most of the market area; $197.67 per MW-day in Eastern MAAC (New Jersey, PECO and Delmarva Power); and $188.54 per MW-day in Southwestern MAAC (Baltimore Gas and Electric Company and Pepco). The RPM allows higher prices for capacity where supplies are short. Actual prices paid by utilities and other load serving entities will be slightly lower, $177 per MW-day in Eastern MAAC and $140 per MW-day Southwestern MAAC, after taking into account the benefits of existing transmission lines to import capacity.

“The RPM clearing prices are slightly higher than expected due to higher load growth and the continuing reduction in available capacity,” Ott noted.

PJM’s first RPM auction began on April 2 and closed on April 6. It was for delivery of capacity during the 2007/2008 planning year (June 1, 2007 to May 31, 2008). The auctions procure needed capacity after participants have specified self-supply and contracted (bilateral) resources. As part of the phase-in to the RPM, two more auctions will be conducted this year. After that, annual auctions will procure capacity three years prior to the required need to provide opportunity for planned resources to compete to supply the needed capacity service.

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