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February 06, 2023
Home » Rule Changes Could Spur $1.4B Jump in PJM Market Costs
An example presented by PJM highlights how its current LMP calculation method fails to represent true incremental cost. When a flexible unit is on the margin, the LMP is its offer price, but when it is an inflexible unit, the LMP drops to the next flexible unit's offer. The inflexible unit receives uplift as an out-of-market payment to compensate for its costs. PJM's proposal would set LMP at the inflexible unit's offer and pay flexible units lower in the stack to follow the reduction in load. | PJM
Rule Changes Could Spur $1.4B Jump in PJM Market Costs
By Rory D. Sweeney PJM on Wednesday released a proposal for revising price formation rules in its energy markets, teeing up stakeholder deliberation on changes that staff estimate could increase market costs by as much as $1.4 billion. The two-part plan focuses on reducing out-of-market payments and changing shortage pricing...
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