PJM’s Capacity Market: A View from Chicago

Michael Giberson

The decision of ComEd, a Chicago-based utility, to join the PJM regional wholesale power market, centered in Pennsylvania, New Jersey, and Maryland a few years ago was always a bit of a stretch. Chicago Business reports on some of the consequences:

The decision to join PJM instead of its Midwestern counterpart, commonly known as Midwest ISO, means the Northern Illinois power market is now tethered to the East Coast, where electricity supplies are far tighter and prices correspondingly higher than in the Midwest.

PJM has reacted to forecasts of supply shortages with a new pricing regime that will increase power prices in the hope of inducing generators to build plants.

Because of PJM’s new regime, Chicago-area households and small businesses will see rates jump by 1 cent per kilowatt-hour by 2009, according to Illinois Commerce Commission staff calculations — 10% above next year’s average rate of 10.2 cents per kilowatt-hour.

Downstate Illinois customers of Ameren Corp. won’t see such an increase because Ameren is part of Midwest ISO….

At issue is a complex series of auctions held this year by PJM to establish higher prices over the next several years for the right to reserve the output from power plants within PJM’s borders. These “capacity payments,” paid by utilities and passed on to ratepayers, are in addition to the cost of energy itself.

There is much more in the article, which is worth reading if you are interested in Chicago or capacity markets (or both). The “new pricing regime” the article is talking about is the PJM’s new forward capacity market, called RPM after the Reliability Pricing Model that serves as the analytical core of the market design. As noted yesterday, capacity market designs remain controversial.

Meanwhile, Pittsburgh-based utility Dusquesne Light wants to leave PJM because of RPM costs.

The California ISO is exploring capacity market issues, too. Last month, the ISO’s Market Surveillance Committee — Frank Wolak, James Bushnell and Benjamin Hobbs — issued their report: “Final Opinion on Long-Term Resource Adequacy under MRTU.”

3 thoughts on “PJM’s Capacity Market: A View from Chicago

  1. I didn’t get to read the article, since Chicago Business wants my name, address, e-mail, phone number, compnay name, etc, before allowing me to read. Nuts.

  2. I didn’t get to read the article, since Chicago Business wants my name, address, e-mail, phone number, compnay name, etc, before allowing me to read. Nuts.

  3. Yes, I had a similar problem. First time I came across the story — probably via Google News or some other information aggregator — the site let me right in. When I went back to it from another machine, it started asking for all the registration information.

    (I gave it an email address, but just clicked through the rest of the process without filling in anything more or agreeing to anything, and after I navigated back to the main page it let me read the article.)

    UPDATE: …and then Crain’s blasted me with emails for a few days before I unsubscribed from all the default email lists I hadn’t agreed to in the first place. Grrr.

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