Did You Know

Consumers Enjoy Superior Benefits From Organized Markets,
Study from FERC’s Office of Market Oversight and Investigations Finds

A recent analysis by the Federal Energy Regulatory Commission’s (FERC) Office of Market Oversight and Investigations found that both organized electricity and natural gas markets had a solid performance over an assessment period covering Jan. 1, 2002, through June 30, 2003, despite significant challenges.

Commission staff found that consumers in wholesale electricity markets, such as the PJM Interconnection (PJM), the New York ISO (NYISO) and the New England ISO (ISO-NE), enjoyed lower prices, greater market and price transparency, and superior services. Regions with organized markets also experienced less price volatility and lower levels of concentration of generation ownership than in regions without organized markets.

Organized markets, both operating and in the formative stages, serve 67 percent of the U.S. population. According to the study, these consumers had superior options available to them than if they lived in regions that haven’t embraced wholesale competition, in the form of forward bilateral contract markets working in combination with organized spot markets administered by regional transmission organizations.

The PJM, NYISO and ISO-NE markets allow consumers to benefit from access to real-time and day-ahead exchanges, ancillary services and capacity markets. Those services allow participants to better manage their risks and give buyers the opportunity to obtain the lowest price available for power.

The study also found that over the assessment period, electricity price volatility declined in regions with organized markets, while increasing in regions without them. In regions without competition, prices were much less transparent.

Finally, FERC staff found that the concentration of generation ownership was lower in organized markets than in other regions. While the highest level of installed capacity generation ownership in organized markets was in the Electric Reliability Council of Texas, or ERCOT, at between 20 percent to 30 percent, the concentration of ownership in regions without organized markets was significantly higher.

The presentation can be found on FERC’s Web site at www.ferc.gov in “Staff Reports” under “Legal Resources.” A full report based on the staff’s findings will be issued in the coming weeks. For more information, contact EPSA’s Douglas Austin at daustin@epsa.org, or call (202) 628-8200.