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2009 State of the Market Report

Transmission Congestion

over its system (loop flow incurs no congestion costs).20 For the purposes of the analyses in this subsection, we calculate an implied “value” of real-time congestion. This value is equal to the marginal cost of a constraint (i.e., the shadow price) times the flow over the constraint in a given dispatch interval. Figure 54 shows the value of real-time congestion by region and the average number of binding constraints in 2008 and 2009. The average monthly congestion value and number of binding constraints over each year is shown on the left side of the chart.

Figure 54: Value of Real-Time Congestion by Coordination Region 2008 – 2009

$240

2.40

RT Congestion Value ($ Millions)

$210

$180

$150

$120

$90

$60

$30

$

Central WUMS West East

Average Number of Binding Constraints

2.10

1.80

1.50

1.20

0.90

0.60

0.30

0.00

Average Number of Binding Constraints

08 09 J F M A M J J A S O N D J F M A M J J A S O N D

2008

2009

Real-time congestion totaled $863 million in 2009, a reduction of eight percent from $938 million in 2008. These values exceed the day-ahead and real-time congestion costs collected by the Midwest ISO. This is because (1) loop flows use some of the transmission network capability without reimbursing the Midwest ISO, (2) PJM is entitled to use some of the Midwest ISO system (referred to as Firm Flow Entitlements, or “FFE”), and (3) there was poor price convergence in western areas of the footprint affected by congestion.

20

In our discussion, congestion refers generally to the cost of a particular constraint. The term “congestion costs” specifically refers to the component of a generator’s LMP that is collected by the Midwest ISO.

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