Settlement Intervals and Shortage Pricing in Markets Operated by RTOs and ISOs

Order 827 required RTOs and ISOs to shorten their market settlement intervals from 60 minutes to 15 minutes in wholesale electricity markets. Hourly settlement intervals were creating financial incentives misaligned with actual grid operations, which are managed on 5-minute dispatch intervals. The shorter settlement intervals better align market participant incentives with real-time grid conditions, improving dispatch efficiency and reducing artificial price volatility. This change particularly benefited energy storage and demand response resources that can respond quickly to short-term market signals, enabling them to capture value from intra-hour price variation that was previously invisible under hourly settlement.