The wholesale electricity markets operated by PJM Interconnection produced competitive results in 2004, according to the 2004 State of the Market Report released this week by the independent Market Monitoring Unit (MMU) of PJM.

The report assesses the competitiveness of the markets managed by PJM during 2004, including market structure, participant behavior and market performance.

The MMU reported that:

· PJM average energy market prices increased 10.8 percent in 2004 over 2003 largely as a result of increased fuel costs;

· After accounting for increased fuel costs, the fuel-cost-adjusted, load-weighted average price was 4.2 percent lower in 2004 than in 2003;

· In 2004, net revenues from all PJM markets would not have covered the first year fixed costs of a new natural gas-fired combustion turbine, combined-cycle generator or coal-fired generator; and

· Real-time spot market activity averaged 35 percent of electricity usage for all hours.

· The MMU recommends the retention of key market rules and the enhancement of those rules for continued competitive results in PJM markets and for continued improvement in the functioning of the markets.

PJM Interconnection ensures the reliability of the high-voltage electric power system serving 45 million people in all or parts of Delaware, Indiana, Illinois, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

PJM coordinates and directs the operation of the region's transmission grid; administers a competitive wholesale electricity market, the world's largest; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

3/11/2005