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2009 State of the Market Report

Executive Summary

Additionally, over 94 percent of total congestion was captured in the day-ahead market in 2009, a slight decline from the 98 percent in 2008 but a significant improvement from 2006 and 2007. Residual real-time congestion costs generally arise when the day-ahead modeling of the network is not consistent with the real-time system. Hence, the reduction in residual real-time congestion indicates that the Midwest ISO’s day-ahead modeling has improved.

One of the significant issues in the area of congestion management is the frequency with which the real-time market model was unable to reduce the flow below the transmission limit – that is, the congestion was not manageable. This generally occurred for brief periods when the market had insufficient redispatch capability due to the amount of generation that affected the constraint, or the lack of flexibility of that generation. The presence of an unmanageable constraint does not mean that the system is unreliable (reliability standards require the flow to be less than the limit within 30 minutes). Twenty-one percent of internal congestion in 2009 was not manageable on a five-minute basis, which is an improvement from nearly 28 percent in 2008. The Midwest ISO implemented two recommendations in 2009 that contributed to this improvement in manageability. Importantly, however, the congestion reflected in LMPs was inefficiently dampened in many cases when constraints were unmanageable due to a software algorithm that “relaxed” the transmission constraint. We continue to recommend that the ISO discontinue the use of this algorithm.

1.

Market-to-Market and Coordination with PJM

This report evaluates the market-to-market process under the JOA with PJM that is instrumental in efficiently managing constraints affected by both RTOs. Overall, the market-to-market coordination has resulted in more efficient management of congestion and more efficient LMPs in each RTO’s energy market. The frequency of jointly-managed constraints increased in 2009 for Midwest ISO-managed flowgates and decreased for PJM-managed flowgates. Payments from PJM to the Midwest ISO decreased by 17 percent in 2009, while payments from the Midwest ISO to PJM decreased almost 30 percent. Net payments were made by PJM to the Midwest ISO in each month of 2009. This suggests that the Midwest ISO generally provides more relief on PJM constraints than PJM does on Midwest ISO constraints.

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