| On June 1, 2007 the Reliability Pricing Model (RPM) will
be implemented in the PJM. The purpose of the RPM is to provide a long-term
pricing signal for capacity resources and Load Serving Entity (LSE) obligations
that is consistent with the PJM Regional Transmission Expansion Planning
(RTEP) Process .
The RPM includes a Base Residual Auction (BRA) that is held during the
month of May three (3) years prior to the start of the delivery year.
In addition, the RPM includes three incremental auctions that are held
prior to the delivery year and a bilateral market that is facilitated
through the eRPM system. The BRA allows for the procurement of resource
commitments to satisfy the region’s unforced capacity obligation
and allocates the cost of those commitments among the LSEs through a Locational
Reliability Charge. Incremental auctions allow for an incremental procurement
of resource commitments to satisfy an increase in the region’s unforced
capacity obligation due to a load forecast increase or a decrease in the
amount of resource commitments.
In the RPM, the cost of procurement is allocated to LSEs through a Locational
Reliability Charge in the case of an increase in the region’s unforced
capacity obligation or to resource providers that caused additional resources
to be procured. The bilateral market provides LSEs the opportunity to
hedge against the Locational Reliability Charge determined through the
BRA and Second Incremental Auction. The bilateral market also provides
resource providers an opportunity to cover any auction commitment shortages.
PJM Market Participants who are interested in understanding the RPM,
and the requirements to participate.
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