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PJM Interconnect L.L.C. - The Commissioning of an FRT Auction System
Situation
PJM Interconnection L.L.C., the largest centrally dispatched electric control area in North America, serves all or part of the customers in the area including Pennsylvania, New Jersey, Maryland, Delaware, the District of Columbia, and North Virginia. This area accounts for some 8.7 percent of the total US population. From its Norristown Pennsylvania facility, PJM runs an open, transparant, non-discriminatory, and competitive electricity market, while maintaining secure, reliable, and continuous operation of the transmission system. When it came time to develop a complete system that would appeal to both marketers and engineers, PJM sought the services of a company that understands both the production and trading sides of the business: ALSTOM ESCA Corporation.
The ALSTOM ESCA Solution
ALSTOM ESCA designed and implemented a Fixed Transmission Right (FTR) Auction Software System for PJM, which began operating on April 15, 1999. FTRs are financial instruments to hedge against the risks of transmission congestion charges. This systems allows PJM market participants to readily buy and sell FTRs, which facilitates a more robust and liquid market for transmission entitlements. The FTR Auction System developed in partnership with ALSTOM ESCA includes Internet-based bidding and publishing, a market-clearing engine, a Simultaneous Feasibility Test (SFT) engine, a FTR markets database, and a Web-based secondary market for FTRs.
Advantage to PJM: On-time Implementation
ALSTOM ESCA's on-time implementation of the FTR Auction System provides PJM's transmission customers with an efficient method to manage their FTR portfolios. The new system facilitated a forward energy market by providing a way to manage basis risk caused by transmission congestion. Because the system was operational by April 15, PJM was able to conduct the industry's first successful auction for spring and summer transmission rights.
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