PowerFacts
New England Electricity Markets Indisputably Competitive
The New England wholesale electricity markets accurately reflect underlying fuel and commodity costs leading to competitive results. As in past years, this was the determination made by the Internal Market Monitor (IMM) for the Independent System Operator of New England (ISO-NE) in the 2009 Annual Markets Report. The report found that electricity prices in the wholesale markets fell by 50 percent from 2008 to 2009, largely based on lower fuel prices. The costs of key inputs drive overall electricity prices with generators offering supply at their marginal cost to serve demand efficiently and reliably. ISO-NE, which serves 6.5 million households and businesses and 14 million people in the region, had more than 400 participants active in one or more markets in 2009 signaling a robust and mature competitive environment.
- "The IMM analyzed the 2009 performance of the ISO-administered markets and determined that the outcomes were consistent with competitive markets. Market concentration is low, new participants seek to enter the market, and energy prices remain at levels consistent with the short-run marginal cost of production." Page 1
- "In 2009, the wholesale markets experienced decreases in electric energy prices, congestion, and reliability costs. These market outcomes essentially are a direct result of changes observed in several key inputs: lower, less volatile fuel prices; a continued near-record level of hydro production; reduced consumption of electric energy; and less need to operate generation for local second-contingency protection." Page 54
- "The results indicate that at the systemwide level, electricity prices continue to move in tandem with input fuel prices, particularly natural gas, supporting the conclusion that the electricity market is competitive." Page 60
- "To assess the competitiveness of the electric energy markets, the IMM examined two types of measures of market competitiveness: structural measures of competitiveness, which analyze the concentration of generation resource ownership in the New England markets; and price-based measures, which compare wholesale market prices to the estimated cost of providing electric energy. The results of the concentration analyses show that the market is structurally competitive, and in instances in which inadequate transmission or peak load levels create the possibility of noncompetitive behavior, mitigation rules provide behavior remedies. Market results show that electric energy prices reflect supplier costs to produce electric energy (i.e., largely fuel prices), which is consistent with the finding that the market is competitive." Page 2-3
- In examining the overall all cost component values ISO-NE includes the cost of electric energy, forward reserves, regulation, capacity reliability commitments, and FERC-approved Reliability Cost-of-Service Agreements (Reliability Agreements). "With the exception of capacity, the cost for all components fell by a combined 48%." Capacity prices increased by just over 9% per kW/month pursuant to approved transition rate increases with the results of the first Forward Capacity Market Auctions to go into effect later this year. Page 22
CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660
EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.