WASHINGTON, March 8 /PRNewswire/ -- The wholesale electricity markets
operated by PJM Interconnection produced competitive results in 2004,
according to the 2004 State of the Market Report, released today by the
independent Market Monitoring Unit (MMU) of PJM.
The report assesses the competitiveness of the markets managed by PJM
during 2004, including market structure, participant behavior and market
performance. PJM Market Monitor Joseph Bowring discussed findings of the
report during a March 8 briefing in Washington, D.C.
"PJM's markets grew substantially in 2004 and remained competitive,"
Bowring said. "Continued enhancements to market rules and design will guard
against the exercise of market power and will help maintain competitive
results."
High levels of supply, moderate demand and market participants'
competitive behavior have offset market structure issues in the PJM Energy
Market, the report said.
The MMU concluded there was no exercise of market power in the PJM
Capacity Market during 2004. The State of the Market Report notes that the
structure of the Capacity Market remains a concern. The report recommends
enhancing the Capacity Market design to stimulate competition, to provide
locational price signals and to incorporate explicit market power mitigation
rules.
The report concludes that, with one exception, PJM's ancillary service
markets should continue operating on a cost basis. The exception is the
Regulation Market in the PJM Mid-Atlantic Region, which operates on the basis
of market-clearing price offers. PJM operates regional ancillary service
markets in regulation and spinning reserves.
The MMU also observed that:
-- PJM average energy market prices increased 10.8 percent in 2004 over
2003 largely as a result of increased fuel costs;
-- After accounting for increased fuel costs, the fuel-cost-adjusted,
load-weighted average price was 4.2 percent lower in 2004 than in
2003;
-- In 2004, net revenues from all PJM markets would not have covered the
first year fixed costs of a new natural gas-fired combustion turbine,
combined-cycle generator or coal-fired generator; and
-- Real-time spot market activity averaged 35 percent of electricity
usage for all hours.
The MMU recommends the retention of key market rules and the enhancement
of those rules for continued competitive results in PJM markets and for
continued improvement in the functioning of the markets.
The MMU assesses the state of competition in each of the markets operated
by PJM, identifies specific market issues and recommends potential
enhancements to improve the competitiveness and efficiency of the markets. In
particular, the MMU is responsible for monitoring the compliance of members
with PJM's market rules and for monitoring PJM's policies to ensure those
rules remain consistent with the operation of a competitive market.
The 2004 State of the Market Report is the seventh such annual report.
The MMU submits the report to the PJM Board of Managers and to the Federal
Energy Regulatory Commission. The seven markets that the MMU assesses are
the: Day-Ahead Energy Market, Real-Time Energy Market, Daily Capacity Market,
the Monthly and Multi-Monthly Capacity Markets, Regulation Market, Spinning
Reserve Market and the Financial Transmission Rights Auction Markets.
For a copy of the State of the Market Report, visit PJM's Web site at
http://www.pjm.com > Markets > Market Monitoring > State of the Market.
PJM Interconnection ensures the reliability of the high-voltage electric
power system serving 45 million people in all or parts of Delaware, Indiana,
Illinois, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania,
Tennessee, Virginia, West Virginia and the District of Columbia. PJM
coordinates and directs the operation of the region's transmission grid;
administers a competitive wholesale electricity market, the world's largest;
and plans regional transmission expansion improvements to maintain grid
reliability and relieve congestion. Visit PJM at http://www.pjm.com.
SOURCE PJM Interconnection
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