VALLEY FORGE, Pa., Oct. 8, 2002 — Above normal temperatures that continued into October have tested wholesale electric markets and proved that they work, says PJM Interconnection, operator of North America’s largest electric power grid.
This summer, the 25 million people in PJM’s region broke the electricity use record they set in 2001. In fact, they broke the 2001 record nine times during this summer. PJM operates the electric grid in all or parts of seven states and the District of Columbia and administers the world’s largest competitive wholesale electricity market.
Record electric use was driven by high heat and humidity. July and August were 25 percent warmer than normal in much of the PJM region, according to National Weather Service data. Temperatures in PJM’s area were 90 degrees or higher on more than half the days in those two hottest months of summer.
Warm weather continued into autumn with much of the region seeing temperatures well above normal as October opened.
“The competitive wholesale electric market worked to attract the generation needed to supply customers at a reasonable cost during repeated periods of record electric demand,” said Phillip G. Harris, president and chief executive officer of PJM. “We must recognize the outstanding performance of generating units operated by our members, driven by market incentives. Our market’s performance this summer and autumn is proof of many of the elements of the standard market design proposed by the Federal Energy Regulatory Commission.
“And, that includes the demand side of the equation,” he added. “Empowering demand reduction to compete in the market with generation allows the laws of supply and demand to moderate prices, as our experience this summer demonstrates.”
PJM’s Emergency Load Response Program pays customers a market-based price for voluntarily reducing their electricity consumption. A customer makes an economic decision to reduce based on the wholesale price for electricity. Reducing demand can reduce the market price of electricity.
During peak days this summer, the maximum average price in PJM was around $150 per megawatt-hour compared to more than $900 last year. PJM said its demand-reduction program together with additional generation contributed to the lower wholesale prices.
PJM’s all-time record demand for electricity was 64,207 megawatts set on Aug. 14, 2002. The comparable record for the previous year was 62,231 megawatts. The increase was equivalent to adding a large city to the grid.
PJM, the country’s first fully functioning regional transmission organization, currently coordinates a pooled generating capacity of more than 71,600 megawatts and operates a wholesale electricity market with more than 200 market buyers, sellers and traders of electricity.
PJM has administered more than $9 billion in energy and energy service trades since the regional markets opened in 1997. More than 70 nations have sent delegates to PJM to learn about its market model and the operation of the grid in a region including all or parts of PA, NJ, MD, DE, OH, VA, WV and the District of Columbia.
With the April 1, 2002, addition of PJM West, for the first time nationally two separate control areas now operate under a single energy market and a single governance structure across multiple North American Electric Reliability Councils. Visit PJM at www.pjm.com.
Source: PJM Interconnection, LLC