To the Editor:
In the October 2006 issue of PUF, I read two articles related to two RTOs—ERCOT and PJM. In their article, “Don’t Mess with Texas,” Hind Farag and Gary L. Hunt, based on Figure 6, conclude that there are some winners and losers with LMP. Could they point out any winner whose power costs have decreased after the implementation of LMP? I can bet they won’t find even one single (real) entity.
In his article, “The Most Effective Way,” Thomas L. Welch states that “a uniform clearing-price market encourages generators to offer electricity at their margins.” Setting aside the theory, could Mr. Welch also provide any actual instances when a generator bid into PJM at its marginal cost? Again, based on my actual experience with PJM, he won't be able to provide many examples, if any, of such instances.