2015 State of the Market Report for PJM: January through March

MARKET MONITOR FINDS PJM WHOLESALE ELECTRICITY MARKETS COMPETITIVE

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May 18, 2015, 01:12 ET

EAGLEVILLE, Pa., May 18, 2015 /PRNewswire/ -- PJM Interconnection's wholesale electric energy, capacity and regulation markets produced competitive results during the first 3 months 2015, according to the 2015 State of the Market Report for PJM: January through March, released today by Monitoring Analytics, LLC, the Independent Market Monitor for PJM.

The Independent Market Monitor, Joseph Bowring, announced findings of the report today. The report is the Independent Market Monitor's assessment of the competitiveness of the wholesale electricity markets managed by PJM in 13 states and the District of Columbia. The report includes analysis of market structure, participant behavior and market performance for each of the PJM markets.

"Our analysis concludes that the results of the PJM Energy, Capacity and Regulation Markets in the first three months of 2015 were competitive," Bowring said.

Energy market prices decreased significantly from the first three months of 2014 as a combined result of lower fuel prices, lower demand and improved grid operations. The load-weighted average real-time LMP was 45.2 percent lower in the first three months of 2015 than in the first three months of 2014, $50.91 per MWh versus $92.98 per MWh. But the load-weighted average LMP in the first three months of 2015 was 36.1 percent higher than in the first three months of 2013 and was higher than the load-weighted average LMP in the first three months of 2009 through 2013 and for 11 of 16 first quarters since the markets began in 1999.

Energy prices in PJM in the first three months of 2015 were set, on average, by units operating at, or close to, their short run marginal costs, although this was not always the case during the high demand hours in February and March. This is evidence of generally competitive behavior and resulted in a competitive market outcome.

Net revenue is a key measure of overall market performance as well as a measure of the incentive to invest in new generation to serve PJM markets. While net revenues were uniformly lower in the first three months of 2015 than in the first three months of 2014, net revenues were higher than in the first quarter of 2013. The comparison to the first three months of 2014 reflects the high net revenues in January 2014. In the first three months of 2015 compared to the first three months of 2014, average net revenues decreased by 50 percent for a new combustion turbine, 44 percent for a new combined cycle, 61 percent for a new coal plant, 72 percent for a new diesel unit, 50 percent for a new nuclear plant, 26 percent for a new wind installation, and 13 percent for a new solar installation.

While total energy uplift charges decreased by $560.6 million or 75.0 percent in the first three months of 2015 compared to the first three months of 2014, from $747.5 million to $186.9 million, total uplift was still high compared to prior years, reflecting, among other things, inflexible gas supply arrangements.

Congestion costs decreased in PJM by $603.6 million or 48.8 percent, from $1,236.1 million in the first three months of 2014 to $632.5 million in the first three months of 2015. Congestion reflects the underlying characteristics of the power system, including the capability of transmission facilities, the fuel cost and geographic distribution of generation facilities and the geographic distribution of load. Congestion is neither good nor bad, but is a direct measure of the extent to which there are multiple marginal generating units dispatched to serve load as a result of transmission constraints and the costs of operating those units. ARRs and FTRs serve as an effective, but not total, offset against congestion. ARR and FTR revenues offset 88.5 percent of the total congestion costs in the Day-Ahead Energy Market and the balancing energy market within PJM for the first ten months of the 2014 to 2015 planning period.

The Independent Market Monitor (also known as the Market Monitoring Unit or MMU) evaluates the operation of PJM's wholesale markets to identify ineffective market rules and tariff provisions, proposes improvements to market rules and tariff provisions when needed, monitors compliance with and implementation of the market rules, identifies potential anticompetitive behavior by market participants and provides comprehensive market analysis critical for informed policy and decision making. Joseph Bowring, the Market Monitor, ensures the independence and objectivity of the monitoring program.

For a copy of the State of the Market Report, visit Monitoring Analytics at: http://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2015.shtml

SOURCE Monitoring Analytics, LLC