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FERC's Proposed Wholesale Competition Rule Represents a Critical Step Toward Clear, Independent Price Formation, Says EPSA
WASHINGTON, D.C. - The Electric Power Supply Association (EPSA) expressed strong support and provided specific recommendations for the Federal Energy Regulatory Commission's (FERC) proposed rulemaking on regional organized electricity markets in comments filed today with the Commission. FERC's proposed rulemaking seeks ways to improve competition in organized wholesale electricity markets, with particular attention to price formation and demand responsiveness, long term contracts, market monitoring and regional transmission organization (RTO) responsiveness.
John E. Shelk, president and CEO of EPSA, said, "FERC's proposal to improve organized electricity markets is the culmination of more than a year of careful consideration and leadership by the Commission. The Commission listened to the comments of all stakeholders before issuing its proposal. It's now time to move forward to make this a final rule so that organized markets can continue to be improved and refined to the ultimate benefit of customers."
In its comments, EPSA said, "In order to continue the realization of market efficiencies and technological innovations, it is critical that organized electricity markets in the U.S. continue to facilitate robust wholesale competition. EPSA supports the Commissions proposals to improve the operation of these markets without disrupting them or disabling their ability to provide demonstrable benefits to consumers."
EPSA said, "It is particularly important to look at how to refine the market's approach to price formation during periods of operating reserve shortages in order to appropriately address the general issue of transparent, competitive market-based price formation at all times. While a fully competitive wholesale market is the desired end state, EPSA acknowledges that we are progressing along a continuum to that market design. The proposals in the NOPR for periods during operating reserve shortages represent a critical step beyond intrusive administratively-determined mitigation on our way toward clear, independent price formation during all periods of operation."
Below are excerpts from EPSA's comments concerning each of the four issues in the rulemaking:
PRICE FORMATION AND DEMAND RESPONSIVENESS IN RTO/ISO MARKETS
"Preventing prices from reflecting the true value of energy at a given time contributes to underinvestment in new and existing generation, particularly for peaking resources. Price mitigation may also limit demand participation by preventing prices from reaching legitimately higher levels when appropriate, particularly during periods approaching or during operational shortages Increasing the responsiveness of demand to price will help improve market efficiency and reduce the need for administrative intervention. As a result, markets will produce more efficient price signals for plant operation, investment and consumption Therefore the proposals outlined by the Commission to further eliminate barriers to demand response in organized markets are appropriate at this time to move the markets forward incrementally."
EPSA said it fully supports the Commission's findings and its proposal to require modifications to market rules to allow the market-clearing price to accurately reflect the value of energy during periods of operating reserve shortage: this will allow demand to respond to price when most needed and valuable for the reliability of the grid.
EPSA also noted: "Deference to the regions, as proposed in the NOPR, is a logical and reasonable approach based on market design and rule variations of the organized markets." EPSA said, "It is important that the Commission not bias the market toward a particular outcome, but rather allow the market to determine the most cost-effective balance of supply and demand, consistent with comparability and ensuring long-term resource adequacy."
LONG-TERM CONTRACTS
"The proposal in the NOPR correctly promotes the regional development of long term products while not imposing strict federal mandates, thereby allowing for market participants in each region to develop longer term contracts as is appropriate for their market situation. EPSA supports the NOPR's proposals to promote regional long-term contracting forums and the Commission's deference to market participants on this issue, but does remain concerned about the proposal to mandate online bulletin boards, as its formation should be heavily informed by regional stakeholder processes."
MARKET MONITORING
"EPSA continues to agree that market monitors have played an integral role in the organized wholesale electric markets, and should be implemented in every region of the country, including both organized and non-ISO regions. These proposed changes will not only strengthen market monitoring policies within RTOs, but may also serve as an excellent model for those regions currently without independent market monitors." EPSA added that MMUs should not assist the RTO in its tariff administration nor should they be required to actively monitor for Standards of Conduct violations. Finally, EPSA recommends that MMUs should report to the RTO board rather than its management in order to better ensure the independence of the MMU from the operation of the market.
RTO RESPONSIVENESS
"EPSA supports [FERC's] approach and continues to believe that with FERC guidance, the RTO and its stakeholders can work together to develop the governance structure that works for the region, based on certain basic principles standard to all regions It is critical that the Commission establish responsiveness criteria and hold the RTOs accountable to upholding both the letter and the spirit of the Commissions minimum requirements." EPSA said "RTOs should always be held strictly accountable for adherence to their Tariff."
EPSA Comments on Proposed Rule on Wholesale Competition in Regional Organized Markets
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.