2009 State of the Market Report
Improve the Market-to-Market process by:
Instituting a process to more closely monitor the information being exchanged with PJM to quickly identify cases where the process is not operating optimally;
Clarifying the JOA in several areas, including:
Use of marginal value limits;
Pre-positioning on coordinated constraints;
Use of proxy flowgates;
Obligation to activate a coordinated constraint;
Obligation to test new constraints; and
Flowgate definitions and the thresholds used to identify new coordinated
The market-to-market process plays a vital role in coordinating congestion management between the two areas. These changes should increase the effectiveness and efficiency of this process.
To achieve better price convergence with PJM, we recommend that the RTOs consider expanding the JOA to optimize the interchange between the two areas.
This could be accomplished by allowing participants to submit offers to transact within the hour if the spread in the RTOs’ real-time prices is greater the offer price. This type of change or others that will allow the interface between the markets to be more fully utilized would generate substantial benefits by allowing lower-cost resources in one area to displace higher-cost resources in the other area.
Remove inefficient barriers to capacity trading with adjacent areas by:
Modifying deliverability requirements for external resources to establish a maximum amount of capacity imports by interface that can be utilized to satisfy LSEs’ capacity requirements; and
Working with PJM to identify transmission access, deliverability, and issues related to capacity obligations that may create inefficient barriers to exporting capacity to PJM.
These changes should allow participants to be able to more effectively arbitrage capacity price differences between markets to the extent that the physical transmission capability allows. Ultimately, this will cause both markets to send more efficient long-term price signals and improve the stability of the RTOs by reducing incentives for participants to alter RTO membership.