Executive Summary – Review of PJM’s Reliability Pricing Model (RPM)
Published by The Brattle Group, Inc.
The Brattle Group has been commissioned by PJM Interconnection L.L.C. (“PJM”) to review the performance of its Reliability Pricing Model (“RPM”) and assess whether RPM is addressing the infrastructure investment needs that it was intended to address. Specifically, the scope of our assignment was to: (1) assess the overall effectiveness of RPM in encouraging and sustaining infrastructure investments to maintain resource adequacy consistent with reliability requirements; (2) review the key RPM design elements for their effectiveness in achieving RPM goals; (3) review RPM interactions with related PJM market design elements to identify potentially adverse incentives or barriers to entry; and (4) recommend possible modifications to the RPM. The report finds that RPM has been successful in encouraging and sustaining infrastructure investments to maintain resource adequacy consistent with reliability requirements both on an RTO-wide as well as on a local basis. However, the report also identifies a number of concerns and makes recommendations for possible improvements of the RPM design.