Industry 101 | Market Settlements: Settlements Fees

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The prices generated for day-ahead and real-time markets are made up of several categories and fees associated with each. The figures below represent two independent system operators (ISOs) wholesale energy costs for a full or partial year and also show the significance of each fee on the total cost.

Wholesale Energy Cost 2002

Shown at right is a breakdown of several of the main fees that most often make up energy costs.

Ancillary Services – Ancillary services are needed to support the transmission of electric power from seller to purchaser. Obligations of control areas and transmitting utilities within those control areas make them necessary in order to maintain reliable operations of the interconnected transmission system.

Some ISOs pay generators for their capacity on top of the cost of energy. These capacity charges serve as an incentive for the generator to meet energy requirements in the market at all times. These prices are then bundled into energy prices for customers. Capacity charges are usually calculated based on a customer’s peak load contribution (PLC), which is their peak monthly demand, the price that a load serving unit must pay to guarantee capacity for its customers and the installed capacity (ICAP), the peak monthly demand during a specific time. Unforced capacity (UCAP) represents the actual available ICAP at any given time.

Congestion Prices are transmission charges when the market becomes congested. Actual congestion cannot occur in an energy transmission system as pushing the system beyond its limits can result in line faults and electrical fires. The term “congestion” in this context refers to higher demand, which leads to waiting markets. This can result in higher prices.

Losses refer to the energy lost due to physical resistance in the transmission network. Marginal loss costs are determined by adding the load loss charges, net explicit loss charges, and net inadvertent loss charges, then subtracting the generation loss credits from this total.

Unaccounted for energy (UFE) represents deviations due to unforeseen errors such as measurement errors, modelling errors, energy theft, load profile errors, and distribution loss differences.

UFE is calculated from the difference between the net energy delivered and the total metered demand.

PJM Wholesale Cost Full Year 2008


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