Chart 8 Chart 8 describes the historical term structure of volatility. Use of daily or hourly prices leads to even higher volatilities for the leftmost bars. The chart was developed using more than one season of pricing, but was not adjusted for the effects of seasonality. Chart 9 Chart 9 describes the historical volatility of a prompt-continuous monthly block of power in PJM through time. Index sampling limitations may have contributed to this large volatility range.
Volatility is high during the summer and low during shoulder months.
Chart 10 Chart 10 compares historical PJM physical forward volatility to other Exchange energy instruments. A PJM futures contract may have volatility comparable to other electricity contracts. As these contracts mature, changes in volatility may occur. Changes in PJM pool rules and in direct access legislation may also impact the overall level of future volatility. Chart 11 ECAR and PJM are adjacent, interconnected marketplaces with substantial arbitrage possibilities.