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Wholesale Competition: The Big-Bang Effect

Consider the opening of the PJM market, and its effect on prices.

Fortnightly Magazine - September 2005

year of integration in 2004. To quantify the benefits associated with a full year of integration, we performed the analysis as if ComEd, AEP, and DPL had joined PJM on Jan. 1, 2004. The estimated annualized savings for PJM and the Eastern Interconnect were $69.8 million and $85.4 million, respectively.

While the debate rages on over whether to continue to open wholesale power markets to competition through the promotion of FERC-proposed RTOs, the markets have voted. The clearly demonstrable savings produced in PJM by adding more competitive merchant generating resources from ComEd, AEP, and DPL, plus the elimination of the pancaked transmission costs with the expansion of the market, shows results. Wholesale competition is working to lower costs and expand market opportunities for all customers.

 

Endnotes:

  1. "Putting Competitive Power Markets to the Test," Global Energy Decisions, July 2005, available to download at www.globalenergy.com.
  2. The PJM power prices referenced here are load-weighted average power prices. The simple, hourly average PJM LMP was 10.8 percent higher in 2004 than in 2003, according to PJM.

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