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What To Know About the New Balancing Congestion Charge in PJM

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Changes are coming to supply costs for consumers and businesses in the PJM region.

On January 31, 2017, the Federal Energy Regulatory Commission (FERC) issued an order assigning the cost of “balancing congestion” to competitive load serving entities – including Direct Energy Business – effective June 1, 2017. The FERC order essentially creates a new charge for load serving entities and raises the cost of serving customers in the PJM region.

Here’s what you should know about this development in the PJM region.  

What is "Balancing Congestion?"

Simply put, “balancing congestion” represents money generators earn for operating to PJM’s real time dispatch instructions.

In PJM’s markets, the vast majority of load and generation are scheduled through the day ahead market. In the day ahead market, load and generators clear in advance of the operating day based on expected operating conditions, setting Day Ahead “schedules.” Generators and load settle those day ahead schedules based on day ahead market clearing prices. The real time market (or balancing market) is used to correct for differences between operating conditions as expected when the day ahead market is cleared and real time (i.e. actual) operating conditions, including changes to generator availability, transmission system availability and load levels. 

When generators or load deviate from their day ahead schedules due to changes in operating conditions, PJM modifies its generation dispatch from what was set in the day ahead market.  Generators that operate in real time that were not scheduled in the day ahead market are paid the real time market prices, and the generators or loads that deviated from their day ahead schedules that caused PJM to modify its generation dispatch are charged real time market prices.


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However, when PJM  modifies its generation dispatch from what was set in the day ahead market because of reasons other than generator or load deviations from day ahead schedules (e.g. because of transmission system limit changes), generators are owed money for such operations, but there are no load or generator day ahead schedule deviations to which to assign those costs. The resulting difference is “balancing congestion.”

What Has Changed?

On January 31, the Federal Energy Regulatory Commission (FERC) issued an order assigning the cost of “balancing congestion” to competitive load serving entities – including Direct Energy Business – effective June 1, 2017. 

Previously, balancing congestion was pooled with other congestion costs that are used for funding Financial Transmission Rights (FTRs), but FERC determined that balancing congestion was more appropriately assigned to load serving entities. The FERC order essentially creates a new charge for load serving entities that did not previously exist and raises the cost of serving customer load in the PJM region.

How Will the Change Impact Consumers? 

This change will result in higher energy prices for consumers and businesses in PJM’s footprint, since balancing congestion charges were not previously added to your supply charges. This impacts all energy consumers in the region, regardless of who supplies their power. 

PJM is enacting this change on June 1, 2017, which means that consumers will begin to see an increase in their supply costs soon thereafter. In the coming weeks, Direct Energy Business will send customers a letter with additional details around the timing and impact to their specific product and invoice structure.

We are committed to keeping you informed and up-to-date on these impending changes. To have updates delivered directly to your inbox: 

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Posted: May 25, 2017

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