Executive Summary – “Organized wholesale electricity markets were created to address burgeoning costs of new power generation under the traditional regulatory scheme and to encourage innovation through free-enterprise competition. The discipline of the marketplace promised lower costs and greater efficiencies. Two decades of experience and numerous studies have demonstrated competitive wholesale markets in PJM and elsewhere bring increased operational efficiency and innovation, resulting from transparent market prices and the benefits of single, independent dispatch across a broad region. These benefits are realized through economies of scale that permit optimization of a large and diverse set of resources and load. The resulting efficiencies are measured in reduced heat rates and increased capacity factors . However, as a host of organic and external factors change the power supply landscape, some have questioned the efficacy of competitive wholesale markets at promoting the most efficient entry and exit of resources – especially compared to traditional utility regulation with administrative planning and direction, such as under a state-integrated resource plan. Various forces, including federal and state public policies, low- priced domestic natural gas and static or declining levels of wholesale electricity consumption, have challenged incumbent or “legacy” generation resources by increasing operating costs, creating capital investment needs and reducing revenues realized in PJM’s energy, capacity and ancillary service markets. For the least efficient of these resources – older, small coal units, single-unit nuclear stations and older, high-heat-rate natural gas and oil-fired generation– these cost and revenue pressures have threatened their ongoing viability and not unexpectedly have led to retirements in many cases. Consequently, some observers have questioned whether wholesale markets have forced premature retirements of viable legacy generating resources and whether markets can be relied upon to ensure adequate power supplies in light of the retirements. The questions raised with regard to decisions and outcomes related to the changing nature of the supply portfolio in PJM can be summarized as: Can we rely on PJM’s organized wholesale electricity market to efficiently and reliably manage the entry and exit of supply resources as external forces create tremendous uncertainty and potential industry transformation…”