The PJM Market Implementation Committee endorsed an RTO proposal to establish penalties for load management and price-responsive demand (PRD) resources that underperform during pre-emergency deployments.
Penalties are being considered after six pre-emergency load management events during the summer of 2025 saw a weighted average performance of 67%. (See PJM Stakeholders Considering Load Management Performance Penalties.)
The penalty would be set at half the rate levied against resources that don’t meet their capacity obligation during a performance assessment interval (PAI), which amounts to about $1,150/MWh based on capacity prices for the 2027/28 delivery year. The formula mirrors the calculation for PAI penalties but doubles the number of expected deployment hours each year to 60. They would count toward the annual stop-loss for Capacity Performance penalties.
PJM’s Pete Langbein said the lower rate reflects that pre-emergency deployments are less severe than PAIs.
Penalty revenues would be awarded to overperforming curtailment service providers (CSPs) if the fleet-wide response meets or exceeds the amount committed. If demand-side resources under-respond, a pro-rated share of the revenues would be allocated to load-serving entities.
The PJM proposal received 86.1% support, while an alternative offered by Voltus received 39.3% and two packages from the Independent Market Monitor received 25.7% and 14.4%.
Voltus
Voltus adopted a similar formula to PJM, but it added a 50% derate to account for the diminished reliability risk associated with pre-emergency events and increased the number of expected deployment hours to 90. The resulting penalty would have been 16.7% of the PAI rate, or about $383/MWh.
Revenues would have been allocated to overperforming demand-side resources at 120% of the penalty rate, pro-rated for the amount they exceeded their assignment. The 20% adder is intended to create an incentive to overperform without allowing a windfall if the bulk of the response is from a small number of CSPs. Any excess would be provided to LSEs.
If the number of pre-emergency load management hours exceeded expectations, the package would have increased the overperformance bonus to 150% to counteract potential fatigue. The possibility of load management deployments becoming more regular as reserve margins tighten has become a frequent subject for stakeholders concerned it could drive away participation.
Monitor
The Monitor’s proposals would have required demand-side resources to curtail according to PJM instructions. Rather than a set penalty rate, it would have withheld daily capacity payments from the latter of the start of the delivery year or their last successful performance or test, spanning to the next successful performance or test. The amount withheld would have been based on resources’ shortfall and the revenues would be entirely allocated to loads rather than to other demand-side resources.
“Load pays for these resources, and load should receive the penalty revenue when the resource fails to perform,” Monitor Joe Bowring said in an email to RTO Insider.
The Monitor’s alternative proposal would have measured performance for each registration and prevented CSPs from netting performance across sites.
David Mabry, representing the PJM Industrial Customer Coalition, argued the Monitor was misconstruing what load management and PRD resources are expected to provide. Rather than provide a set reduction in load, they must maintain their load below a pre-defined level when dispatched.
Bowring said the Monitor’s proposals would prevent resources from being paid for being capable of curtailing when they do not do so when requested.
Pamela Wildstein, a market analyst with the Monitor, said the requirement is to reduce demand when dispatched and cited the tariff provision that states the requirement.
The alternative package was introduced during the meeting to define the performance obligations of demand-side resources with the intention of clarifying what the penalties are for. Bowring said there are several key weaknesses in how PJM defines the obligations of demand resources as capacity resources. Those include “not actually requiring a reduction in load when called to respond by PJM; not measuring the current load and therefore not accurately measuring reductions in load by the resources; simply ignoring actual increases in load by demand resources when called to respond; and allowing aggregation across hours and resources rather than calculating penalties by hour and by individual registration.”