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.”