The Brattle Group has been commissioned by PJM Interconnection L.L.C. (“PJM”) to evaluate the performance of its Reliability Pricing Model (“RPM”), as required periodically under the PJM tariff. The scope of our evaluation includes: (1) a review of all Base Residual Auctions (“BRAs”) and Incremental Auctions (“IAs”) conducted to date to assess RPM’s effectiveness in encouraging and sustaining sufficient capacity investments for reliability; (2) stakeholder interviews to identify key areas of concern; (3) an engineering cost estimate of the Cost of New Entry (“CONE”) for each of five CONE Areas; (4) an evaluation of individual RPM design elements, including the Variable Resource Requirement (“VRR”) curve, the Energy and Ancillary Service (“E&AS”) offset methodology, and other design elements identified by stakeholders; (5) a probabilistic simulation analysis of RPM’s performance; and (6) development of recommendations for possible modifications to improve the effectiveness of RPM.

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