In the current PJM market design, pool-scheduled
generation resources that operate as requested by PJM are guaranteed to fully recover their daily day-ahead offer amounts in order to ensure adequate Operating Reserves and to support the PJM Real-Time Energy Market. Day-ahead and real-time
operating reserve credits are paid to
generation owners; these credits are paid by PJM market participants as
operating reserve charges.
The
Market Implementation Committee (MIC) created the Reserve Markets Working Group to develop proposed modifications to the
Operating Reserve mechanism. The working group identified a set of modifications that could improve the
Operating Reserve mechanism. Revised business rules were endorsed by the
Members Committee in November 2007. They are scheduled for implementation in Fall 2008, pending
FERC approval.
The modified
Operating Reserve Business Rules are designed to:
- Provide incentives for participants to bid their day-ahead quantities as closely as possible to what they expect in the Real-Time Market, thereby leading to increased convergence between day-ahead and real-time prices and enhanced market efficiency;
- Provide incentives for generators to follow PJM dispatch instructions while offering flexibility, thus increasing market efficiency and system reliability; and
- Collect the costs of balancing operating reserves and appropriately allocate the costs to transactions in the areas that contribute to the costs.