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| Northern Illinois Hub (NI Hub) Peak Daily Electricity Futures |
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The Northern Illinois Hub (NI-Hub) offers buyers and sellers a trading point for the location-price-based energy market and a common price index that provides certainty about the price reference point. The hub consists of pricing points from a large number of generation and load buses across the former market zone for Commonwealth Edison Co. (northern Illinois, including the greater Chicago area) which was incorporated into the PJM Interconnection LLC Western Region in 2004.
The PJM Interconnection, LLC, administers the largest electricity market in the world serving more than 44 million customers in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and Washington, D.C.
The power companies within PJM operate more than 1,000 generating units, representing more than 137,000 megawatts of capacity, fueled with natural gas, oil, coal, nuclear, and hydro power. This generating and distribution network is tied to the power grids of the Midwest, New York State, and other areas in the mid–Atlantic states.
The competitive market has developed through structural changes in the power industry that have evolved in recent years, resulting in opportunities, price volatility, and market risk.
Electricity lends itself to futures trading. It meets the three broad criteria needed for successful futures markets: prices are volatile; there is a large, diverse universe of buyers and sellers; and the physical product is fungible. The Exchange clearinghouse provides a system of guarantees that mitigates counterparty credit risk. The Exchange provides financially settled futures contracts for on-peak and off-peak electricity transactions based on the daily floating price for each peak or off-peak days of the month.
The daily floating prices are the arithmetic average of real-time locational marginal price. Peak prices are determined for the 16 peak hours of each peak day, provided by the PJM Interconnection, LLC. Peak hours are from 7:00 AM to 11:00 PM (the hour ending 0800 to the hour ending 2300) prevailing local time. Peak days are Monday through Friday, excluding North American Electric Reliability Council (NERC) holidays.
Off-peak hours are from midnight to 7:00 AM (the hour ending 0100 to the hour ending 0700) and 11:00 PM to midnight (the hour ending 2400) Mondays through Fridays. Also, all day Saturdays and Sundays (the hour ending 0100 to the hour ending 2400) and North American Electric Reliability Council holidays.
Locational marginal pricing is the marginal cost of supplying the next increment of power demand at a specific location on the network, taking into account the marginal cost of generation and the physical aspects of the transmission system.
Electricity futures contracts are available for trading via the NYMEX ClearPortsm electronic trading platform. Off-exchange transactions can also be submitted for clearing only. |
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