PJM implements significant changes to the Market Settlements System

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Following a yearlong development and testing program with stakeholder input, on April 1 PJM implemented a market settlements solution that better aligns market credits and charges with real-time dispatch.

This enhanced market settlement solution – also known as Five-Minute Settlements – was developed and implemented in response to Federal Energy Regulatory Commission Order 825, which requires the alignment of market settlement timeframes with dispatch decisions.

The FERC issued Order 825 in June 2016; PJM submitted its compliance filing on January 11, 2017, with a proposed implementation on February 1, 2018. PJM informed the FERC in December 2017 of its intentions to move implementation to April 1, 2018, to complete additional testing with stakeholders.

The changes PJM implemented align settlement and dispatch intervals by:

  • Settling energy transactions in the real-time markets at the same time interval it dispatches energy
  • Settling operating reserves transactions in the real-time markets at the same time interval that it prices operating reserves
  • Settling inter-tie transactions in the same time interval that inter-tie transactions are scheduled

Aligning the dispatch and settlement intervals removes any imbalance of market price signals that could undercompensate market participants. PJM previously settled its markets on an hourly basis with payments based on an average of five-minute prices for an hour. Hourly settlement coupled with five-minute dispatch failed to reflect the actual value of resources responding to operating needs on a five-minute basis.

“This new alignment provides appropriate compensation for resources to respond to the actual operating needs of the market in each five-minute interval,” said PJM Chief Financial Officer Suzanne Daugherty. “It means better alignment between payments earned for following dispatch, which reflects system conditions and constraints.”

After its January 2017 compliance filing, PJM spent a considerable amount of time   working collaboratively with stakeholders and running market trials to develop settlement solutions and reporting options in line with the Open Access Transmission Tariff and PJM Manuals.



For PJM, the biggest changes were in the Real-Time Energy Market, which now settles every five minutes.

Generation resources and demand response providers can continue to submit hourly revenue meter data or change to submit five-minute revenue meter data.  Load is flat-profiled across all five-minute intervals in an hour.

The Day-ahead Energy Market continues to be scheduled and settled on an hourly basis.

Data Miner 2 was enhanced to support five-minute settlements by providing five-minute locational marginal prices (LMP) and ancillary services clearing prices for download. PJM will not post five-minute pricing data on pjm.com as the data volume is too large.

PJM has discontinued posting hourly LMP files for both Real-Time and Day-ahead Energy Markets, as well as the Ancillary Services Markets, on pjm.com.