PJM, the regional organization that manages wholesale electricity and the transmission grid in 13 eastern states, recently proposed a number of changes to its operating reserve market in an effort to improve its pricing mechanism. We submitted comments to the Federal Energy Regulatory Commission (FERC) supporting PJM’s proposal and recommending additional changes.
The current design of PJM’s reserve market has been the cause of substantial inefficiency and price distortion. Our comments encourage FERC to adopt rules following the general approach PJM has outlined but incorporate additional key changes. In particular, PJM should ensure that the changes to reserve market are also reflected in the design of its capacity market, given that the two markets are closely interconnected. We also recommend that FERC conduct an interim review of the new rules and require PJM to provide more detail on the eligibility criteria for what resources would participate in operating reserves.