The market monitor for PJM Interconnection said that during 2017, it was mostly higher natural gas prices that brought about the year-over-year increase in power prices. While it found market results to be competitive, it raised concerns about market power mitigation looking ahead.
According to its 2017 State of the Market Report for PJM, the grid operator's market monitor, Monitoring Analytics, said load-weighted average real-time power prices were 6% higher year over year in 2017 at $30.99 per MWh.
"Energy prices in PJM in 2017 were set, on average, by units operating at, or close to, their short-run marginal costs, although this was not always the case," the market monitor said in a March 8 statement.
During a March 8 press briefing, Monitoring Analytics President Joseph Bowring said markup accounted for 8.2%, or $2.55/MWh, of the 2017 load-weighted average locational marginal price, a 7.3% year-over-year increase in its share of LMP.
"Markup, being the difference between a price-based offer and a cost-based offer — one could think of that as a metric of market power," Bowring said.
"If you look at the top five owners of capacity in PJM, they own the significant majority of the units," Bowring said, adding that it is unsurprising that at times you need energy from only three owners to clear the market. "There have been a lot of changes in the underlying structure [of the market]. There have been a lot of sales and purchases. … There probably has been aggregate market power for quite some time, and we've just begun to develop this metric and focus on it."
"Historically it was less of a concern because markup was low," Bowring said. "But we've seen bumps in markup during particular hours and so it has raised a concern. So we simply want a metric and a rule so if there really is market power and it's being exercised there's a rule to deal with it."
