This issue concerns the development of an improved shortage pricing mechanism, or set of alternative mechanisms, that are fully compliant with the criteria set forth in FERC Order 719. PJM’s current scarcity pricing mechanism is not compliant will all criteria set forth by FERC in this Order. The goal of the new shortage pricing design is to accurately price energy and ancillary services commensurate with the state of the system during times of reserve shortages. The new pricing mechanism, and joint optimization of energy and ancillary services will provide better, more reliable pricing signals that will enhance operational reliability and facilitate demand response and price responsive demand.