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2009 State of the Market Report

Transmission Congestion

Shadow prices on most constraints decreased and move toward convergence over the duration of an event, indicating that the market-to-market process is achieving its objective. In a well functioning market-to-market process, the shadow prices of the two RTOs should converge after a coordinated constraint is activated. In most cases, the shadow prices should decrease from the initial value as the two RTOs collaborate to manage the constraint.

The percentage of active intervals coordinated is lower than in prior years. The amount requested varies considerably by constraint, as well as over the course of each coordinating event. In 2009, both the Midwest ISO and PJM used automated software to determine dynamically the appropriate relief request based on market conditions. However, the software has not always provided reasonable relief values, and work is underway by both RTOs to improve the software. Nevertheless, the Midwest ISO’s response to PJM relief requests has contributed to large reductions in PJM’s shadow price in the period that the RTOs are coordinating.

Figure 71 shows the same analysis for the most frequently called market-to-market constraints on the Midwest ISO system.

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