Advocating the power of competition


PJM Independent Market Monitor Continues to Find Markets Competitive

The PJM Interconnection produced competitive results in its markets in 2008, according to the annual independent assessment of the market by the Independent Market Monitor, Monitoring Analytics, LLC. PJM State of the Market - 2008 analyzed extensive market data and found competitive results for the wholesale electric energy and forward capacity markets in PJM. The annual assessment analyzes market structure, participant behavior, and market performance. This marks the tenth year in a row - and notably, the first since the market monitor became completely external to the PJM staff - that the market monitor has found the PJM energy markets to be competitive.

  • "The Market Monitoring Unit (MMU) in 2008 concludes that the Energy Market, Capacity Market, Synchronized Reserve Market, Day Ahead Scheduling Reserve Market, and Financial Transmission Rights Auction Market results were all competitive." - Volume 1, p. 2

  • "The overall market results support the conclusion that prices in PJM are set, on average, by marginal units operating at, or close to, their marginal costs. This is evidence of competitive behavior and competitive market outcomes. The MMU concludes that the PJM Energy Market results were competitive in 2008." - Volume 1, p. 13

  • "Energy Market results for 2008 generally reflected supply-demand fundamentals. Higher prices in the Energy Market were the result of higher fuel costs Higher coal, gas and oil prices in 2008 resulted in higher prices in 2008 than would have occurred if fuel prices had remained at 2007 levels." - Volume 1, p. 13

  • "The MMU analyzed measures of market structure, participant conduct and market performance for 2008, including market size, concentration, residual supply index, price-cost markup, net revenue and price. The MMU concludes that the PJM Energy Market results were competitive in 2008." - Volume 1, p. 8

  • "PJM markets are designed to promote competitive outcomes derived from the interaction of supply and demand in each of the PJM markets. Market design itself is the primary means of achieving and promoting competitive outcomes in PJM markets." - Volume 1, p. 8

  • "In a competitive market, prices are directly related to the marginal cost of the most expensive unit required to serve load. [Locational Marginal Pricing (LMP)] is a broader indicator of the level of competition. While PJM has experienced price spikes, these have been limited in duration and, in general, prices in PJM have been well below the marginal cost of the highest cost unit installed on the system." - Volume 1, p. 12

  • The MMU found no exercise of market power in the PJM Capacity Market despite some structural challenges and noted that "Explicit market power mitigation rules in the RPM construct offset the underlying market structure issues in the PJM Capacity Market under RPM. The PJM Capacity Market results were competitive during 2008." - Volume 1, p. 38

The full report can be found at

PJM Independent Market Monitor Continues to Find Markets Competitive

(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.