PJM 101

The Basics

PJM State & Member Training Dept.

PJM©2018 01/23/2018
 Objectives

• Identify the role & responsibility of the PJM RTO

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 Agenda

• PJM Introduction
• Fundamentals of System Operations
• Emergency Procedures Overview
• Load Forecasting
• Transmission Services
• Ancillary Services Markets

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 Agenda

• Energy Markets
‒ Locational Marginal Pricing (LMP)
‒ Two Settlement
‒ Virtual Bids

• FTRs/ ARRs
• Capacity Market – Reliability Pricing Model (RPM)
• Independent Market Monitor
• Regional Planning Process
• Market Settlements

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 Introduction

PJM State & Member Training Dept.

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 PJM as Part of the Eastern Interconnection
Key Statistics
Member companies 1,000+
Millions of people served 65
Peak load in megawatts 165,492
MW of generating capacity 176,569
Miles of transmission lines 82,546
2016 GWh of annual energy 792,314
Generation sources 1,304
Square miles of territory 243,417
States served 13 + DC 21% of U.S. GDP
produced in PJM
• 27% of generation in Eastern Interconnection
• 28% of load in Eastern Interconnection
• 20% of transmission assets in Eastern Interconnection
As of 2/2017

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 Elements of A Regional Transmission Organization

Wholesale
Independent Regional
Electric
Governance Reliability
Markets

Market Information Transmission

Monitoring Resource Planning

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 How is PJM Different From Other Utility Companies?
PJM Authority Provided by Contract
PJM Does:
• Direct operation of the PJM
transmission system Open Access Reliability
• Remain profit-neutral PJM Does NOT: Transmission Assurance
• Own any transmission or Tariff (OATT) Agreement
• Maintain independence generation assets
from PJM members • Function as a publicly-traded company
• Coordinate maintenance • Take ownership of the system’s energy
of grid facilities • Perform maintenance on generators or
transmission systems (e.g. repair power Transmission PJM
lines) Owner (TO) Operating
• Serve or direct any end-use Agreement Agreement
customers (retail)

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 Growth of PJM

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 Nine Major North American RTOs / ISOs

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 PJM Grid Comparison

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 Independence and Governance Process
Independent Board of Managers
Members Committee

• Independent Board of Managers

• Stakeholder process – provide balanced stakeholder input
• Established process for discussion of market evolution

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 Value Proposition

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 Focus on Just 3 Things

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 NERC Regions

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 Industry Standards

• PJM is committed to complete compliance with all applicable NERC and

regional reliability standards as well as NAESB business standards
• On-going communication with Member companies concerning
compliance status and on all related activities is through the “Reliability
Standards and Compliance Subcommittee”

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 NERC Reliability Standards

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 NERC Functional Model
Reliability
Coordinator
Balancing Transmission
Authority Transmission Owner
Operator
Transmission
Service Transmission
Provider Operator
Resource (Neptune) (AEP 138kV)
Planner Interchange
Authority
Distribution Member Generation
Provider Owner
(DP)
Company
Transmission
Service Planning
Provider Coordinator
Generation
Operator
Transmission
Planner Purchasing Selling
Entity (PSE)
Load Serving
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 Three Key NERC Functional Model Definitions

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 Fundamentals of System Operations

PJM State & Member Training Dept.

PJM©2018 01/23/2018
 Objectives

• Describe some of the basic PJM Markets and Operations functions

• Describe some of the basic functions (roles & responsibilities) of PJM

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 PJM Control Room Positions and NERC Responsibilities
Transmission
Operator (TOP)
Generation Power
Dispatcher Dispatcher

Balancing
Shift Reliability
Authority
Supervisor Coordinator
(BA)
The Shift Supervisor (RC)
is responsible for all
activities related to
these NERC
Master functions Reliability
Coordinator Engineer

All operators are NERC and PJM Certified

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 Valley Forge Control Room

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 Milford Control Room

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 Dispatch Functions

• Ensure sufficient generation is available or running to satisfy

the demand at any hour of the day including maintaining
adequate reserves
‒ This is called Generation Control

• Monitor, operate and control the high voltage transmission

system in a reliable manner
‒ This is called Transmission Control

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 Generation Dispatch

Generation is economically dispatch to meet the

demand across the entire RTO at the lowest cost
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 Generation Dispatch Operations
• Maintain System Control
‒ Generation / Demand balance
• Maintain Adequate Reserves
‒ Operate on contingency basis
• Implement Emergency Procedures
‒ To keep the lights on!
• Synchronized Reserve/
Regulation Market
‒ Clear Market
‒ Administer real-time optimization

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 Economic Generation Control

• Purpose is to ensure that the least cost generation is

used to satisfy demand

• Enables power system to follow load as it moves from

valley, to peak, to valley over a 24-hour period

• Adjustments are allocated to generating units to

optimize economy

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 Offers Received from Resources
10MW @$30

40MW @$5

20MW @$10

15MW @$25

25MW @ $15

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PJM©2018
70000
80000
90000
100000
110000
120000
130000
140000
150000
T im e ( E P T )
Load (MW)

0 :3 9

$5
$5
1 :1 9

$10
1 :5 9

2 :3 9

3 :1 9

3 :5 9

4 :3 9

5 :1 9

5 :5 9

6 :3 9

7 :1 9

$10
7 :5 9 $15
8 :3 9
$20

9 :1 9
$25

9 :5 9
Offers Sorted in Increasing Order

1 0 :3 9

11
1 1 :1 9
$30

1 1 :5 9
$35
R T O L o a d (M W )

1 2 :3 9
$40
Resources Scheduled to Meet Demand

1 3 :1 9

1 3 :5 9
$45

1 4 :3 9

1 5 :1 9

1 5 :5 9

1 6 :3 9
$50

1 7 :1 9

1 7 :5 9

1 8 :3 9

1 9 :1 9

1 9 :5 9

2 0 :3 9

2 1 :1 9

2 1 :5 9

2 2 :3 9

2 3 :1 9
01/23/2018
 Events That Take Place

• Units trip – unexpected loss

• Units are delayed
• Contract curtailments
• Weather
• Emergency procedures

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 ACE Graph

0-Line

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 Transmission System Operations
• Ensure Security of the Transmission System
• Monitor Transfer Limitations
• Monitor Thermal Constraints
• Contingency Analysis
• Direct Emergency Operations
• Direct Off-Cost Operations
‒ Generation Shifts
‒ Contract Curtailments
• Coordinate Switching
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 PJM Backbone Transmission

PJM©2018
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15 01/23/2018
 PJM Territory by Transmission Zones

PJM Operates as a
single Control Area
With free flowing
ties between Zones

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 Analysis with State Estimator

Security Analysis
Runs every 2 minutes
Evaluates over 6,000 contingencies
State Estimator – Computer Provides “what if” results
Runs every minute
Calculates flows, voltages
Identifies actual limit violations

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 Power Transfer Limits

Thermal Limits
Voltage Limits
Stability Limits

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 Control Actions for Contingencies

System Reconfiguration
Transaction
Curtailments
Generation Re-Dispatch
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 EMS Identifies a Potential Problem
PJM EMS Says “What If”?

If this line trips…

This line will overload…

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 System Reconfiguration

Line from Bus 2 to Bus 3

switched out to prevent overload

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 Contract Curtailments

Scheduled Contract Path

Actual MW Flow

Curtailing contract could fix problem…………..

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 Generation Re-Dispatch
Total Supply = Demand = 820 MW

790
820MW
MW

0 MW
30 MW

Bus 2 generator - Increase output

Bus 1 generator - Decrease output
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 Viewing Constraints – Data Viewer

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 Emergency Procedures

PJM©2018 01/23/2018
 Objectives

• Identify the basics of PJM Emergency Procedures

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 01/23/2018

Transmission
Security
Sabotage and
Terrorism
3
Weather /
Environmental
Emergencies

Capacity:
Shortage & Excess

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 Emergencies

• Capacity Shortage
• Capacity Excess
Shortage & Excess
Capacity:

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 Emergencies

• Cold Weather Alert

• Hot Weather Alert
• Inter RTO Natural Gas Coordination
Environmental
Weather /
• Thunderstorms and Tornados
• Geo-Magnetic Disturbance

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 Emergencies

• Elevated Threat
• Imminent Threat
Terrorism
Sabotage and

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 Emergencies

• High or Low Voltage

• Transmission Security
• Shortage Pricing
Security
Transmission
• Post Contingency Local Load Relief
• Interconnection Reliability Operating Limits
Manual Load Dump
• Transmission Loading Relief

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 Emergency Procedures - Web Site

Emergency Procedures can be viewed from the PJM Homepage (above)

(Access also available from Data Viewer or Markets Gateway)
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 Summary

• Maintain the integrity of the PJM RTO transmission systems and the
Eastern Interconnection

• Several types of emergencies

• Posted to the Emergency Procedures website

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 Load Forecasting

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 Objectives

• Describe some of the basic functions (roles & responsibilities) of PJM

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 What Affects Load (Customer Demand)?

• Weather
‒ Temperature
‒ Dew point
‒ Wind speed
‒ Clouds
‒ Time of day
• Season
‒ Fall, Winter, Spring, Summer
• Human behavior

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 Summer Load Curve
Megaw at t
120 ,0 0 0 Typ ical
Peak

110 ,0 0 0

10 0 ,0 0 0

90 ,0 0 0 Summer
Curve
80 ,0 0 0
m id nig ht 4 a.m . 8 a.m . noon 4 p .m . 8 p .m . m id nig ht

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 Winter Load Curve
Megaw at t
100,0 0 0 Typ ical
Peak
95,0 00

90,000

85,000
W inter
80,000 Curve
75,000
m id nig ht 4 a.m . 8 a.m . noon 4 p .m . 8 p .m . m id nig ht

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 Transmission Services

PJM©2018 01/23/2018
 Objectives

• Describe some of the basic functions (roles & responsibilities) of PJM

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 Transmission Service Topics

• Types of Transmission Service

‒ Network
‒ Point-to-Point

• Service Priority

• Transmission Service Reservations

‒ PJM OASIS

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 Network Integration Service

Outside the
PJM Area

Within the
PJM Area

Outside the
PJM Area

All load in PJM is served using Network

Integration Transmission Service
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 Point-to-Point Transmission Service

Point-to-Point
Impor
t

Outside the Outside the

PJM Area PJM Area

Expor
t

Wheel Imports, exports and wheels through must

reserve point-to-point service in OASIS
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Point-to-Point Service Periods
January February March April
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat

1 2 1 2 3 4 5 6 1 2 3 4 5 1 2

3 4 5 6 7 8 9 7 8 9 10 11 12 13 6 7 8 9 10 11 12 3 4 5 6 7 8 9

10 11 12 13 14 15 16 15 15 16 17 18 19 20 13 14 15 16 17 18 19 10 11 12 13 14 15 16

17 18 19 20 21 22 23 21 22 23 24 25 26 27 20 21 22 23 24 25 26 17 18 19 20 21 22 23
24
25 26 27 28 29 30 28 29 27 28 29 30 31 24 25 26 27 28 29 30
31

May June July August

Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat

1 2 3 4 5 6 7 1 2 3 4 1 2 1 2 3 4 5 6

8 9 10 11 12 13 14 5 6 7 8 9 10 11 3 4 5 6 7 8 9 7 8 9 10 11 12 13

15 16 17 18 19 20 21 12 13 14 15 16 17 18 10 11 12 13 14 15 16 15 15 16 17 18 19 20

22 23 24 25 26 27 28 19 20 21 22 23 24 25 17 18 19 20 21 22 23 21 22 23 24 25 26 27

29 30 31 26 27 28 29 30 24 28 29 30 31
25 26 27 28 29 30
31

September October November December

Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri

1 2 3 1 1 2 3 4 5 1 2 3

4 5 6 7 8 9 10 2 3 4 5 6 7 8 6 7 8 9 10 11 12 4 5 6 7 8 9 10

11 12 13 14 15 16 17 9 10 11 12 13 14 15 13 14 15 16 17 18 19 11 12 13 14 15 16 17

18 19 20 21 22 23 24 16 17 18 19 20 21 22 20 21 22 23 24 25 26 18 19 20 21 22 23 24
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25 26 27 28 29 30
23 24
25 26 27 28 29
6 27 28 29 30 25 26 27 28 29 30 31
01/23/2018
30 31
Priority of Service

Network and Firm Point-to-Point

Network import willing to pay congestion

Non-Firm willing to pay congestion

Non-Firm over Secondary Points willing to pay congestion

Spot Market Import

Network not willing to pay congestion

Non-firm not willing to pay congestion

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 OASIS

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 Ancillary Services
Synchronized Reserves and Regulation

PJM State & Member Training Dept.

PJM©2018 01/23/2018
 Objectives

• Identify basics of PJM Ancillary Services

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 Ancillary Services Markets
Synchronized Reserve Market Regulation Market
Purpose: Purpose:
To bring generation and load back in balance To provide for the continuous balancing of
after the loss of generation generation and load

• Load Serving Entities have • Generation and Demand

obligation to purchase based Response resources
on Load Ratio Share
• Bilateral
• Transmission customer
• Scheduling owned resources must provide or purchase
• Purchase from Reserve Market • Resources must be able
• Co-optimized with Regulation to respond within 5 minutes
Market • Resources are paid
• Allows for participation by based on their
Demand Side Response performance
resources
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 Reserve Markets
Reserve Services
Each service carries a
reserve requirement
PJM Operates in real-time to
ensure Contingency/Primary
(10 minute) and Synchronized
Reserve Requirements are
Primary Reserve
always maintained

Non- Reserve Products

Synchronized
Synchronized
Reserve Each product has
Reserve (NSR)
a clearing price

Tier 1 Tier 2
resources resources NSR resources

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 Synchronized
Reserves

Tier 1 Tier 2
Resources Resources

• Online units that follow economic dispatch and only partially loaded
Tier 1 (Economic) ‒ Able to increase output within 10 minutes following PJM dispatcher
request to an event
• Resources that offered into the Synchronized Reserve Market
‒ Cleared Condensers (CTs & hydro) transition to online Tier 2
Tier 2 (Non-economic) condense mode
• Steam reduced to provide Tier 2 CTs online at min – operating at a point that
deviates from economic dispatch Demand Response that can drop load
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 What is Regulation?
Regulation is:
‒ A variable amount of generation energy under automatic control
‒ Independent of economic cost signal
‒ Obtainable within five minutes
‒ Responds to frequency deviations

• These generating units or demand resources provide fine tuning that is necessary
for effective system control
• Regulating units correct for small load changes that cause the power system to
operate out of balance (measured as “ACE”)

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 Band of Regulation for Resource
Economic Maximum High Regulation Limit

Basepoint + Capability
Economic
Basepoint
MW Regulation If high and low regulation limits are
Capability not most restrictive, then ASO uses
Offered into Markets Gateway most restrictive min and max*

Basepoint + Capability

Economic Minimum Low Regulation Limit

* Band of regulation must fall within the economic limits of the generating unit

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 Connecting People to Energy:
PJM Markets and LMP

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 How Do The Energy Markets Work?

PJM State & Member Training Dept.

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 Reliability
•Grid Operations
•Supply/Demand Balance
•Transmission Monitoring

Market Operation
• Energy
• Capacity
• Ancillary Services

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 Reflection of actual
operating conditions

Price rationalization

Financial product
development

Information transparency

Market Prices Market Incentives

Transfer capability of
transmission system
is maximized

Transmission hedges
more valuable than
congestion exposure
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 Transparency =

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 Locational Marginal Pricing
(LMP)

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 Generators get paid the Transactions pay the Loads pay the LMP
LMP difference in LMP

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 System Transmission Cost of
= Energy Congestion Marginal
Price Cost Losses

All components are calculated as part of both the Real-Time and Day-Ahead LMP

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 System Transmission Cost of
= Energy Congestion Marginal
Price Cost Losses

 System Marginal Price (SMP)

• Incremental price of energy for the system, given the current dispatch, at the
load weighted reference bus
• Same price for every bus in PJM (no locational aspect)

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 Meet your load/demand with the most
economical generation
Max
$
Peakers Obey Generation limitations: Max MW,
Start times, etc
Small, Old CTs

Older Steam Units

Ignore transmission limitations and
Medium CTs losses
Large CTs

Additional Large Steam

CC Units, Some Large Steam

Must Run & Some Renewables

Relative # of Units Available
*Unit pricing levels are not necessarily
PJM©2018 System Marginal Price: Example accurate, only an example
 System Transmission Cost of
= Energy Congestion Marginal
Price Cost Losses

 Congestion Component (CLMP)

• Represents price of congestion for binding constraints
• Uses the Shadow Price
• Will be zero in an Unconstrained System
• Varies by electrical “location” if system is constrained
• Load pays Congestion Price, Generation is paid Congestion Price

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 System Transmission Cost of
= Energy Congestion Marginal
Price Cost Losses

Marginal Loss Component (MLMP)

• Transmission losses are calculated at a bus and represent the percentage
increase in system losses caused by a small increase in power injection or
withdrawal using penalty factors
• Varies by electrical “location”
• Electrically distant resources appear more expensive
• Electrically close resources appear more economical

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 Unconstrained Transmission Path

System Energy Price = SAME System Energy Price = SAME

Congestion = $0* Congestion = $0*
Losses = - Losses = + Effect
Effect
Total LMP = Total LMP = Higher
Lower

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 Constrained Transmission Path

System Energy Price = SAME System Energy Price = SAME

Congestion = - Effect* Congestion = + Effect*
Losses = - Effect Losses = + Effect

Total LMP = Lower Total LMP = Higher

(Much?) (Much?)

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 References
• Picture Sources:
‒ Slide 1: www.Nasa.Gov
‒ Slide 17, 23, 24: Pixabay.com
‒ Special Thank You to Mike Parkinson &
Billion Dollar Graphics

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 Two Settlement

PJM©2018 01/23/2018
 Objectives

• Explain the Two-Settlement process within the PJM Energy Market

PJM©2018 2 01/23/2018
 What is Two-Settlement?

• It provides PJM Market Participants with the option to participate in a

forward market for electric energy in PJM
‒ Consists of two markets: The Day Ahead and the Real Time
‒ Balancing = Real Time – Day Ahead
‒ Separate settlements performed for Day Ahead and Balancing

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 Two-Settlement Markets

• Day-Ahead Market
‒ Financial market using Bid-In Load
‒ Prices calculated hourly / Hourly settlements
‒ Includes virtual bids and price sensitive demand

• Real Time Market

‒ Physical Market based on actual system conditions
‒ Prices calculated every 5 minutes
‒ Hourly Settlements based on deviations from Day-Ahead position

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 Two Settlement Load Less than Real-Time Demand
Day Ahead LMP Real-Time LMP
= $20.00 = $25.00
= 100 x 20.00 = = (105 - 100) x 25.00 =
$2000.00 Charge $125.00 Charge

Total Charge = $2000 + $125 = $2125

Day-Ahead Market Real-Time Market
Scheduled Demand Actual Demand Greater than Real-Time Demand
Day Ahead LMP Real-Time LMP
= $20.00 = $15.00
= 100 x 20.00 = = (95 - 100) x 15.00 =
$2000.00 Charge $-75.00 Charge
(Negative Number)

Total Charge = $2000 + $-75 = $1925

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 Two Settlement Generation Less than Real-Time Generation
Day Ahead LMP Real-Time LMP
= $20.00 = $25.00
= 200 x 20.00 = = (205 - 200) x 25.00 =
$4000.00 Credit $125.00 Credit

Total Credit = $4000 + $125 = $4125

Day-Ahead Market Real-Time Market
Scheduled Generation Actual Generation Greater than Real-Time Generation
Day Ahead LMP Real-Time LMP
= $20.00 = $25.00
= 200 x 20.00 = = (100 - 200) x 25.00 =
$4000.00 Credit $-2500.00 Credit
(Negative Number)

Total Credit = $4000 + $-2500 = $1500

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 Virtual Bids

PJM©2018 01/23/2018
 Objectives

• Explain how Virtual Bids are used within the PJM Energy Market

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 Virtual Bids

• Financial product existing in the Day-Ahead market only

• Created to foster price convergence between Day-Ahead and

Real-Time and add liquidity to markets

• Settlements based on the difference between Day-Ahead and

Real-Time prices

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 INCS vs. DECS
INCS DECS
• Look like a generator (injects • Look like a load (withdraws MW)
MW) • Specifies a price and quantity
• Specifies a price and quantity • Turns on when the price gets
• Turns on when the price gets low enough
high enough

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 Real vs. Virtual
GENERATOR INC

• A real physical resource • A financial position in the

• Fixed connection point Day-Ahead Market
• Can connect anywhere

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 How Are Virtual Bids Treated?

• INCs and DECs are part of the Day-Ahead Supply curve

• Treated just like generation to clear the market

• Can displace more expensive generators and

set the clearing price in the Day-Ahead Market

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 How Do Virtual Bids Make Money?

INC Sells MW Buys replacement MW

into at
Day-Ahead Market at $50 $40 in Real-Time Market

Gets paid $50 and pays back $40 = $10 profit

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 Auction Revenue Rights
and
Financial Transmission Rights

PJM State & Member Training Dept.

PJM©2018 01/23/2018
 Objectives

• Describe how Auction Revenue Rights are used at PJM

• Describe how Financial Transmission Rights are used at PJM

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 Financial Transmission Rights

Are financial instruments awarded

to bidders in the FTR Auctions
that entitle the
holder to a stream of
revenues (or charges) based
on the hourly Day Ahead
congestion price differences
across the path
System
LMP+ = Energy
Congestion + Marginal
Price Loss Price
Price

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 Why Do We Need FTRs?

• Challenge:
‒ Protect Load Servers from price uncertainty for congestion charges
‒ Redistribute excess congestion charges

• Solution:
‒ FTR credits equal congestion charges on same path
‒ FTRs provide hedging mechanism that can be traded
separately from transmission service

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 Financial Transmission Rights Rationale

• Provide hedging and protection against locational energy price differences

• This design maximizes efficient utilization of transmission capability (no incentive to
‘hoard’) and efficient trading of transmission entitlements (e.g. reconfiguration)

Congestion Charge = MWh * (Day-Ahead Sink Congestion Price - Day-Ahead Source Congestion
Price)

FTR Credit = MWh * (Day-Ahead Sink Congestion Price - Day-Ahead Source Congestion Price)

Timeline
1998: Annual FTR Allocation
1999: Monthly FTR Auction
2003: Added Annual FTR Auction and FTR Options
2008: Added Long-Term FTR Auction

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 Obtaining FTRs

• Annual Auction
‒ Multi-round
‒ Multi-period
‒ Multi-product
‒ Entire System Capability
• Secondary market -- bilateral trading
‒ FTRs that exist are bought or sold
• Monthly & Balance of Planning Period FTR Auction –
centralized market
‒ Purchase “left over” capability

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 Auction Revenue Rights

• Are entitlements allocated annually

to Firm Transmission Service
Customers that entitle the holder to
receive an allocation of the
revenues from the Annual FTR
Auction

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 What Can the Holder Do with the ARR?

• Self Schedule ARR into FTR Annual Auction on

exact same path as ARR

• May retain allocated ARR and receive associated

allocation of revenues from the auction

• Bid in the Annual FTR Auction on any

pathway and product type

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 ARR / FTR Relationship
Annual Allocation
Auction
Entire PJM ARRs Revenue
System Capability Allocated Rights
(MWs)
Annual FTR Auction
FTRs Awarded
to Bidders
(MWs & Price)
Hourly
$
Auction
Revenue

Day- Ahead
Congestion
Charges
$
ARRs provide a revenue stream to the firm transmission customer to
PJM©2018
offset purchase price of FTRs 9 01/23/2018
 Capacity Market
Reliability Pricing Model (RPM)

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 Capacity Performance

Obligation to deliver
Over-performers rewarded;
energy when PJM calls under-performers pay
for it

Small net cost for improved

reliability/price stability

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 Capacity vs. Energy
Capacity Energy
• A commitment of a resource to provide • Generation of electrical power over
energy during PJM emergency under a period of time
the capped energy price
• Energy revenues paid to resource
• Capacity revenues paid to committed based on participation in PJM’s
resource whether or not energy is Day-Ahead & Real-Time
produced by resource Energy Markets
• Daily product • Hourly product

Capacity, energy & ancillary services revenues are expected, in the long term,
to meet the fixed and variable costs of generation resources to ensure that adequate
generation is maintained for reliability of the electric grid
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 Forward Capacity Market Objectives

• Provide transparent price signal to quantify cost of reliability requirement in

time for actionable response
• Obtain resource commitments to meet system peak loads three years in the
future
• Align pricing with reliability requirements and promote competition
between resource alternatives
• Provide longer-term price signal and stable revenue stream for generation
resources to incent investment where needed

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 Common Terminology in RPM

• Installed Capacity (ICAP) value of a unit is based on the summer net dependable
rating of a unit as determined in accordance with PJM’s Rules and Procedures
• Unforced Capacity (UCAP) value of a unit is the installed capacity rated at summer
conditions that is not on average experiencing a forced outage or forced derating
UCAP = ICAP x (1-EFORd)

• Equivalent Demand Forced Outage Rate (EFORd) is a measure of the probability of a

generating unit will not be available due to forced outages or forced deratings when
there is demand on the unit to operate

UCAP Concept is extended to value demand resources, energy efficiency resources,

qualifying transmission upgrades in RPM

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 Resource Adequacy Requirement

• Determines the amount of capacity resources required to serve the

forecast peak load and satisfy the reliability criterion
• The reliability criterion is based on Loss of Load Expectation (LOLE) not
exceeding one event in ten years

An Installed Reserve Margin (IRM) = 16.9% satisfies the reliability criterion for the
2020/2021 Delivery Year Base Residual Auction

Resource Adequacy ICAP Requirement = Forecast Peak Load * (1+ IRM)

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 What is a Supply Resource in RPM?

In RPM, Resources are =

Energy Qualifying
Demand Efficiency
Generation Transmission
Resources Resources
Resources Upgrades
(DR) (EE) (QTU)
(Effective with 11/12 DY)

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RPM Auction Schedule
3 Years

May 20 months

Sept 10 months

July 3 months

Feb June May

Delivery
EFORd
Base Fixed Year
Residual
Auction First Second Third
Incremental Incremental Incremental
Auction Auction Auction

Ongoing Bilateral Market

 Variable Resource Requirement (VRR) Curve

A VRR Curve is defined for the PJM Region & each LDA
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 Independent Market Monitor (IMM)

PJM State & Member Training Dept.

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 Objectives

• Explain the role & responsibilities of the PJM Market Monitor

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 MMU Independence

Market Monitoring Federal Energy Regulatory

Unit Commission

Board of Members
Managers PJM Committee

OC PC MRC

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 Market Monitoring Objectives

• Monitor compliance with rules, standards, procedures

and practices of PJM

• Monitor actual or potential design flaws

• Monitor structural problems that may inhibit a robust

competitive market

• Monitor the potential of market

participants to exercise market power

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 What Does the IMM Look at?

• Market Structure
‒ Market Share
‒ Affiliate Relationships/ Contractual Relationships

• Participant Conduct
‒ Bidding Behavior

• Market Performance
‒ State of the Market Report

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 Corrective Actions of IMM

• Discussion of issues with relevant Market Participants; informal resolution

• Issue referral to FERC

‒ FERC Office of Enforcement will evaluate and decide on corrective actions

• Recommend modifications to rules, standards,

procedures and practices of PJM
‒ Make recommendations to PJM Committees or to PJM Board
‒ Make regulatory filings

• Additional enforcement mechanisms

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 State of the Market Report
• IMM’s annual assessment of the
competitiveness of the PJM
markets
• Analyzes market structure,
participant behavior, market
performance
• Provides details, charts, and
graphs of various market
activities and prices

http://www.monitoringanalytics.com/home/index.sht
ml
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 Regional Transmission Expansion Planning

RTEP

PJM State & Member Training Dept.

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 Objectives

• Describe the background and evolution of the Regional Planning Expansion

Process (RTEP)

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 Regional Planning Objectives

• Identifies transmission system enhancements

• 15 year outlook to identify reliability standards violations
• Test the transmission system against mandatory national standards
and PJM regional standards
• Reliability and economic efficiency drivers

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 RTEP Development Drivers

Regional Planning
• 15-Year Outlook

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 Projects cover a range of power system elements
New lines and transformers
Existing line reconductoring increase power flow capability
Bus reconfigurations

New reactive devices like provide voltage support and

shunt capacitors and SVCs improve generating unit stability

New substation equipment like

circuit breakers, switches and
help protect transmission lines
wave traps

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 Comprehensive Analysis
• PJM power flow analysis incorporates:
‒ latest load forecast
‒ generating resources
‒ transmission topology
‒ demand resources
‒ known transactions with adjoining systems
• Regional planning analysis addresses:
‒ reliability
‒ market efficiency
‒ public policy initiatives by states

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 RTEP Process Windows
During each window PJM seeks transmission proposals to address one or more identified needs –
reliability, market efficiency, operational performance and public policy.

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 New Service Requests
Generation Interconnection
Merchant Transmission Interconnection
Long-term Firm Transmission Service

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 Generation Interconnection Request Process
Current Process

Feasibility Customer Return SIS Customer Return Time to Facilities

Study 90 SIS Agreement Agreement Facilities Study Execute ISA Study
Days 30 Days 120 Days Agreement 30 Days 60 Days 180 Days

Total time estimated above: 17 months

 20 MW Process

Thermal/Short Circuit/Stability Customer Return

Facilities Study Time to Execute
Analysis/Engineering Studies Facilities Study Type
180 Days ISA 60 Days
6 Months Agreement 30 Days

Total time estimated above: 15 months

About 10 percent of requested capacity megawatt reaches commercial operation. Queue activity simply reflects ongoing
business decisions by developers in response to changing public policy, regulatory, industry, economic and other
competitive factors.

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 PJM Queued Generation Fuel Mix – December 31, 2016

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 Cost Allocation

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 PJM Cost Allocation – New Service

• New Service Requests – “participant funded” projects

‒ Generation and Merchant Transmission interconnection requests

‒ Attachment facilities – developer’s responsibility

‒ Network enhancements - developer responsible

for all “but for” costs

‒ Long-term Firm Transmission Service

Requests handled likewise

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 PJM Transmission Cost Allocation Methodology
• Regional Facilities and Necessary Lower Voltage Facilities ≥ $5 Million
‒ 50% -- all system users, per peak load ratio shares
‒ 50% -- project beneficiaries, per solution-based DFAX
• “Regional Facility” -- double circuit 345kV, single circuit 500kV or 765 kV

• Lower Voltage Facilities ≥ $5 Million

‒ 100% -- project beneficiaries, per solution-based DFAX

• Facilities ≤ $5 Million
‒ Assigned to zones in which facilities are located

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 Accessing the PJM RTEP Report

14
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 Market Settlements

PJM State & Member Training Dept.

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 Objectives

• Describe the PJM Billing & Payment Process

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 Market Settlements

Billing Week

Weekly Bills
issued

Payments
due to PJM

Payments
made to
participants

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 Market Settlements Process

Inputs Customer Invoice Charges/Credits for:

Market Energy Markets
to Transmission Service
Settlements
Settlements System
Ancillary
Reliability Pricing Model
Miscellaneous categories

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 Charges and Credits

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 Settlement Information
Detailed Settlement Reports (both Monthly and Weekly)
are provided electronically via the PJM MSRS System
(Market Settlement Reporting System)

Overdue balances are subject

to interest charges

Weekly settlements (as opposed to monthly settlements) will

reduce the default exposure for all PJM members

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 Additional Training Resources

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 Training Resources

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 References
• PJM. (2017). PJM Manual 3: Transmission Operations. Retrieved from:
http://www.pjm.com/~/media/documents/manuals/m03.ashx
• PJM. (2017). PJM Manual 11: Energy & Ancillary Services Market Operations. Retrieved from:
http://www.pjm.com/~/media/documents/manuals/m11.ashx
• PJM. (2017). PJM Manual 12: Balancing Operations. Retrieved from:
http://www.pjm.com/~/media/documents/manuals/m12.ashx
• PJM. (2017). PJM Manual 13: Emergency Operations. Retrieved from:
http://www.pjm.com/~/media/documents/manuals/m13.ashx
• PJM. (2017). PJM Manual 14B: PJM Region Transmission Planning Process. Retrieved from:
http://www.pjm.com/~/media/documents/manuals/m14B.ashx

PJM©2018 9 01/23/2018
 Contact Information:
PJM Client Management & Services
Telephone: (610) 666-8980
Toll Free Telephone: (866) 400-8980
Website: www.pjm.com

The Member Community is PJM’s self-service portal for members to search for answers to their
questions or to track and/or open cases with Client Management & Services

PJM©2018 10 01/23/2018