PJM, Voltus and the RTO’s Independent Market Monitor presented proposals to establish penalties for demand response and price-responsive demand (PRD) resources that fail to perform during a pre-emergency load management event.
Penalties are being considered after a summer of poor performance in 2025, when six pre-emergency load management events totaling 30 hours had a weighted average performance of 67%. PJM has no penalties in place for poor performance outside a performance assessment interval (PAI). (See “PJM Proposes Performance Penalties for Non-emergency Load Management,” PJM MIC Briefs: Jan. 7, 2026.)
The PJM proposal would penalize resources with poor performance at half the rate for PAI events, which is around $2,300/MWh for the 2027/28 delivery year. That would be accomplished by mirroring the PAI penalty formula but doubling the number of expected deployments for pre-emergency events to 60.
PJM’s Pete Langbein suggested the modeled number of deployments might be worth considering further, noting there have already nearly been 60 events this delivery year. He presented the PJM solution to the Market Implementation Committee on Feb. 4.
The allocation of revenue collected through the penalties was revised since the January MIC meeting so bonuses would be evenly split between load-serving entities (LSEs) and curtailment service providers (CSPs) if overall performance were deficient. If the fleet overperformed during an event, the bonuses would be entirely allocated to CSPs.
Monitor Proposal Seeks to Withhold Market Revenues
The Independent Market Monitor proposal would withhold daily capacity payments from underperforming resources going back to the last event or test where they met their obligations to their next successful deployment. The payments would be pro-rated to scale with the shortfall.
The Monitor argued that PJM’s proposal undermines the incentive to improve performance by allowing lagging resources to continue collecting significant revenues. It gave an example of a 100-MW resource that does not curtail at all during a 12-hour deployment; it would be assessed a $1.4 million penalty under the PJM proposal, which is 12.2% of its annual capacity revenues.
For proposals including a penalty, the Monitor wrote that the associated revenues should be allocated entirely to LSEs.
The proposal would adjust the effective load-carrying capability (ELCC) rating for individual resources based on their historic performance, and PRD accreditation would be set at the lesser of a unit’s summer or winter nominated installed capacity.
Voltus Reworks Proposal
The Voltus proposal would set the penalty rate at 8.3 to 25% of the PAI rate, depending on the number of non-emergency load management hours modeled and the share of net cost of new entry (CONE) it was designed to recover. Net CONE would be reduced by a quarter to half to account for the reduced reliability risks with a pre-emergency event, and the number of events would be assumed to be two to three times greater than 30 PAI hours.
The penalty revenues would be allocated to overperforming resources with a cap 1.2 times the penalty rate; any remaining funds would go to LSEs.
Voltus proposed reducing the penalty and increasing the bonus cap should the number of non-emergency events exceed the amount modeled to reduce dispatch fatigue. The prospect of deployments becoming increasingly common as the capacity market tightens has led to alarm bells from CSPs who have argued that many participants will drop off if the financial impact of curtailments exceed their capacity market revenues.
