FERC Filings
COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION-Comments Regarding Retail Electric Competition-V010003
VII. Generation Supply
Competition in the wholesale electric generation business is quickly becoming the principle way additional demand for electricity is being managed across the county. Merchant power plants have become the dominant source of new power generation throughout the U.S. Merchant plants are designed to compete in the wholesale and retail markets, as well as to help maintain and enhance the reliability of regional electricity systems.
Regulators and legislators must develop rules that (1) relieve merchant power plant developers of the requirement to obtain a certificate of need and necessity; (2) encourage consistent, fair, non-discriminatory and workable interconnection policies; and, (3) control and mitigate market power problems. Adopting rules and policies that promote the development of merchant power plants provides numerous benefits, ranging from lower costs, environmental improvements, as newer facilities replace older generation assets, minimizing incumbent utilities’ vertical and horizontal market power, to providing the liquidity needed to support robust wholesale trading. Further, market signals are much faster than regulatory processes, so market incentives are a more efficient means of ensuring that sufficient capacity exists to meet demand on the system.
Generating facilities that competitive power suppliers construct are built at stockholder risk. This shifting of risk from utility ratepayers to merchant power investors indicates that, with respect to development projects financed by new entrants, certificates of need are obsolete. Experience with the emerging markets has demonstrated that the competitive pressures of supply and demand are an effective substitute for a regulatory certification process, particularly where private stockholders, not ratepayers, are at risk. In light of the availability and willingness of competitive power suppliers to meet the nation’s electricity needs, there is no reason to require utility ratepayers to bear the risks associated with utility investment in power generation when other market participants can insulate consumers from those risks.