Monitoring Analytics is the Independent Market Monitor for PJM Interconnection
Our Role as PJM's Market MonitorSince 1999, the PJM Market Monitoring Unit has been responsible for promoting a robust, competitive and nondiscriminatory electric power market in PJM by implementing the PJM Market Monitoring Plan. Under the PJM Market Monitoring Plan, the PJM Market Monitoring Unit has been responsible for monitoring compliance with the rules, standards, procedures, and practices of PJM markets. We observe and comment on actual and potential design flaws in market rules, standards, and procedures, and identify structural problems in PJM markets that may inhibit robust and competitive markets. We monitor the potential of market participants to exercise undue market power, the behavior of market participants that is consistent with attempts to exercise market power and the market performance that results from the interaction of market structure with participant behavior. We monitor the actions of PJM and the impact of those actions on market outcomes.
Monitoring Analytics collects available data, designs market metrics based on the available data and proposes the collection and creation of new data items as necessary. Monitoring Analytics develops and employs metrics and analytic tools applicable to market structure, participant behavior and market performance. Monitoring Analytics analyzes measures of market structure, participant conduct and market performance, including market size, concentration, residual supply index, price-cost markup, net revenue and price. Where established metrics and thresholds do not exist or do not apply, Monitoring Analytics has the expertise to develop new metrics based in the actual operations of markets. For example, Monitoring Analytics developed and led the effort to implement the three pivotal supplier test as a structural test for market power in PJM. This test incorporates detailed real-time information on market structure, the demand for constraint relief and the availability of generating units to respond in order to measure the structural competitiveness of power markets. Monitoring Analytics analyzes the impact of PJM’s operation of the market on market results. For example, Monitoring Analytics monitors PJM’s implementation and application of the three pivotal supplier test in PJM’s energy market and in PJM’s capacity market (RPM), reviews PJM’s implementation of interface pricing, reviews PJM’s operation of the RPM auction and validates the RPM auction results and reviews PJM’s operation of ancillary services markets. We have published the results of our reviews of PJM’s impact on markets and communicate regularly with PJM and PJM members on these issues.
Monitoring Analytics, in its role as the Independent Market Monitor for PJM, has monitored and reported on PJM’s administration of its Financial Transmission Rights (FTR) auction and its Monthly Balance of Planning Period FTR auction since their inception. Monitoring Analytics has also monitored PJM’s administration of the secondary bilateral market to allow participants to buy and sell existing FTRs. In this role, Monitoring Analytics has examined the auctions and markets for FTRs in terms of their structure, the behavior of the participants and the performance of the auctions and markets. Monitoring Analytics examines supply and demand fundamentals, credit issues, patterns and concentration of ownership, trade volumes, prices, revenue, revenue adequacy, participant bids, market structure test results, the application of offer bid caps and other relevant metrics. The results of these monitoring efforts can be seen in Monitoring Analytics' State of the Market reports.