How does LMP differ from New Englands first market system?
LMP provides a more precise and efficient method for pricing energy in New England. In the original market, one energy clearing price—that is the economic price at which generators can be dispatched to meet demand—is set for all of New England. When transmission constraints block the most economic dispatch of the system, the entire New England region pays for the costs associated with relieving that congestion. LMP prices energy by location. This price first takes into account the basic cost of energy. It then considers the additional costs associated with congestion. Should congestion occur within a specific location, the cost of that congestion will be contained to the area in which it occurs.
