Overview of the PJM RTO
John Gdowik
Sr. Trainer
State and Member Relations
April 28,2009
PJM ©2007
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Presentation Outline
• Geography and Statistics
• Roles and responsibilities of a Regional Transmission Organization (RTO)
• Governance
• Historical Background on PJM and US deregulation
PJM ©2007
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Key Statistics
PJM member companies 550
millions of people served 51
peak load in megawatts 144,796
MWs of generating capacity 165,303
miles of transmission lines 56,070
GWh of annual energy 728,000
generation sources 1,271
square miles of territory 164,260
area served 13 states + DC
26% of generation in
Eastern Interconnection
23% of load in
Eastern Interconnection
19% of transmission assets
in Eastern Interconnection
19% of U.S. GDP produced in PJM
6,038
substations
PJM as Part of the US Eastern Interconnection
PJM ©2007
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Number of PJM Members Members: 541
Ex-Officio Members: 9
Total: 550
Metered End Use Customers 21.3 million
Population of Territory 51 million
Square Miles of Territory 168,500
Annual Energy Delivered 758,832 GWh
Average Monthly Billing (2008)
($ billion)
$2.9
Cumulative Billing Since 1997
($ billion)
$137.5
PJM Statistics
PJM ©2007
Coal6665040%
Nuclear3100019%
Natural Gas2649816%
Oil14671
9%
Gas / Other Secondary
1755810%Water
76945%
Other14761%
3
www.pjm.com
As of 12/31/08
Capacity By Fuel Type -- 165,547 MW installed capacity
Installed Capacity By Fuel Type
1
2
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2008 Generation By Fuel Type
55.6
34.9
6.8
0.30.4
1.4
0.7
Coal Nuclear Natural Gas Oil Wind Hydro Solid Waste
GAS
COAL
NUCLEAR
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The Transmission Owners within the PJM RTO
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PJM as an RTO
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PJM Functions
• Operate the bulk electric power grid for reliability
• Facilitate various electric markets
• Plan for transmission expansion
• Share best practices with neighboring and international system operators
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What is PJM?
Air Traffic Controllers for the
Transmission Grid….Operators of a Stock Exchange for
Energy…
Match Generation to Load
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Communicating Information
Giving Direction
PJM Control Center
TO
Gen
Gen
Gen
Gen
IPP
Market
Operation
Center
TO
TO
TO Gen
IPP
Voice & Data
TO = Transmission Owner
GEN = Generator
IPP = Independent Power Producer
Local Control Centers
Market
Operation
Center
GenGen
©2003 PJM
Market Design Details
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Different Types of Markets in Wholesale Electricity
•Generation Capacity Markets
•Long-Term
• Energy Markets
•Forward (i.e. Day-Ahead)
•Real Time
•Financial Transmission Rights Market
•Ancillary Services Markets
•Regulation
•Spinning Reserve
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What is the Day-Ahead Energy Market?
• A day-ahead hourly forward market for energy
• It provides the option to ‘lock in’:
– scheduled MW quantities at day-ahead
prices
– scheduled energy deliveries at day-ahead
congestion prices
• Provides additional price certainty to Market
Participants by allowing them to commit to
prices in advance of real-time dispatch
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Two Energy Markets
• Day-Ahead Energy Market
– develop day-ahead schedule using least-cost
security constrained unit commitment and
dispatch
– calculate hourly LMPs for next operating day
using generation offers, demand bids and
bilateral transaction schedules
• Real-Time Energy Market
– calculate hourly LMPs based on actual
system operating conditions
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Day Ahead
Market
Real-time
Market
100 MW
Scheduled Demand Actual
Demand
105 MW
= (105 - 100)* 23.00 = $115.00
Real-time LMP = $23.00Day Ahead LMP = $20.00
= 100 * 20.00 = $2000.00
if Day-ahead Demand is 105MW = $2100.00
as bid = $2115.00
Liquidating Day-Ahead Position
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Options for Energy Supply
A Voluntary Market
Commercial
Bilateral
Transactions
PJM
Spot Market
Load serving entities
obtain energy
to serve customers
Self-scheduleown resources
ResidentialIndustrial
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Locational Marginal Price
Generation
Marginal
Price
Transmission
Congestion
Price
Cost of
Marginal
Losses
Price to serve the next MW of load at a specific location,
using the lowest production cost of all available generation,
while observing all transmission limits
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Investment Incentives in PJM Market
• Local Marginal Pricing (LMP) provides the real-time
pricing signals which indicate where to build new
generation or transmission
• Reliability Pricing Model (RPM) provides long term $
incentives to build new generating capacity in
congested areas, along with a benchmark for
bilateral contracts
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How Are LMP Values Calculated ?
• The following examples demonstrate how
LMP values are determined at all locations
• The LMP values are a result of security-
constrained economic dispatch actions
• LMP values are calculated based on
generation offer data and the power flow
characteristics of the Transmission
system.
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LMP Example - 2 Bus Transmission Grid
400 MWGen. Capacity
Economic Dispatch Ignoring Transmission Limitation
Area 1 Area 2
LMP$10
240 MWDeer Creek
($10/MW)250 MW
Actual Generation
240 MW
LMP$10
Wild Run
($20/MW)
200 MWGen. Capacity
0 MW
Key
LoadFlowGeneration
ThermalLimit200 MW
10 MW
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LMP Example - 2 Bus Transmission Grid
400 MWGen. Capacity
Security-Constrained Economic Dispatch
Area 1 Area 2
LMP$10
200 MWDeer Creek
($10/MW)210 MW
Actual Generation
240 MW
LMP$20
Wild Run
($20/MW)
200 MWGen. Capacity
40 MW
Key
LoadFlowGeneration
ThermalLimit200 MW
10 MW
Actual Generation
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LMP Example - Wholesale Market Settlements
Customer MW LMP Energy1
Settlement
Congestion
Credit
Area 1
Demand
10 $10 $100 -
Area 2
Demand
240 $20 $4800 $20002
Deer Creek 210 $10 ($2100) -
Wild Run 40 $20 ($800) -
Totals 0 $2000 $2000
1. Positive indicates charge, negative indicates credit
2. Congestion Credit is due to ownership of 200 MW Financial Transmission Right from
Area 1 to Area 2, FTR Settlement = 200 MW ($20 - $10)
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Fuel-Cost Adjusted LMP
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2005 vs. 2006 Summer Peak Load Comparison
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www.monitoringanalytics.com26
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
140,000
150,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Rea
l-tim
e LM
P ($
/MW
h)
Dem
and
(MW
)
Hour ending (EPT)
08-Aug-07 PJM load
09-Jun-08 PJM load
08-Aug-07 PJM average real-time LMP
09-Jun-08 PJM average real-time LMP
08-Aug-07 1600 EPT - PJM 139,428 MW
09-Jun-08 1700 EPT - PJM 130,100 MW
2007 vs. 2008 Peak Load Comparison
©2003 PJM
Governance
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The Members have the following limited roles and
authorities:
– Elect the PJM Board (9)
– Provide advice and recommendations to the PJM
Board
– Amend the Operating Agreement subject to FERC
approval
Members Committee – Role & Authority
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ElectricDistributors
Members Committee Sector Voting
GenerationOwners
TransmissionOwners
Other Suppliers
End-UseCustomers
PJM Independent Board
Governance
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PJM Committee Structure
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US Deregulation – Key Milestones
1996
FERC Order 888/889
1997
PJM Real-Time Energy
Market, OASIS
1999
PJM FTR Auction
Market
2000
FERC Order 2000
2000
PJM becomes an RTO
1998
PJM Locational Marginal
Pricing
2006
PJM Reliability Pricing
Model (RPM), Demand
Response (DR)
2002 - 2005
PJM grows from 60,000 MW to
166,000 MW Capacity*
* Total available generation capacity
1927
PJM Power Pool
Created
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Deregulation vs. Regulation
Regulating agencies:
– Federal Energy Regulatory Commission (FERC)
– State Public Utility Commissions (PUC)
– Transmission Citing approved at the State level, can be overridden
by FERC for DOE designated transmission corridors
Before Competition the Regulatory System:
• Guaranteed return on assets, once approved and costs built in the
rate
• Ultimately, rate payer (the customer) bears the risk
• No incentive to operate assets efficiently
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Economic Benefits
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Economic Benefits
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Economic Benefits
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Regional Transmission Expansion Planning Report
Highlights
www.pj
m.com
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m.com
Regional Transmission Expansion Planning Process
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$13.2 Billion in Approved UpgradesSince RTEPP inception in 1999 to December 2008
PJM ©2007
RTEP Project Construction Status
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