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Texas Capacity Market Supporter Warns Customers of Added Costs from ISO-NE's Need to Procure "Backup Generation" (Capacity Market Not Providing Reliability)
Direct Energy, a supporter of a centralized capacity market in Texas, has warned business customers in ISO New England that this winter customers will be subject to, "additional costs associated with procuring backup generation [that] will result in higher electricity bills during these months."
Direct Energy was discussing ISO-NE's winter reliability program, which as previously reported by Matters, is an out-of-market, backstop program which ISO-NE has said is needed, despite already procuring capacity ostensibly to meet its mandated reserve margin through a forward capacity market, after the ISO, "concluded that New England could face a reliability gap of approximately 1.1 – 1.5 million MWh," this winter.
In a blog posting, Direct Energy summarized the program by stating, "It's apparent that interim short-term action is required to maintain reliability."
"This program is intended to aid ISO-NE in maintaining reliability during the 2013-2014 winters by procuring up to 2.4 million MWh of energy through a competitive bid process from a combination of oil-fired generators, dual-fuel generators, and demand response assets. The Program has four components: demand response, oil inventory service, dual-fuel testing, and market monitoring changes," Direct Energy said.
Direct Energy continued that, "The Federal Energy Regulatory Commission (FERC) approved the socialization of costs among all market participants being served by their local utility or retail electric supplier."
"Businesses located in Massachusetts, Maine, Rhode Island, and Connecticut — whether being served by their local utility or retail electric supplier — will be impacted by the cost of this program during its duration: December 2013 through February 2014," Direct Energy said
Of most note is Direct Energy's warning to customers that, "The additional costs associated with procuring backup generation will result in higher electricity bills during these months."
While in the blog post Direct Energy blames natural gas pipeline constraints for the need for the program, if the billions paid by ISO-NE customers to meet a mandated reserve margin through the Forward Capacity Auction had any value, the winter reliability program would not be needed, and capacity suppliers would be appropriately managing around pipeline constraints in order to meet their capacity supply obligations. Instead, customers in ISO-NE are paying billions to meet a mandated reserve margin, but have not been assured resource adequacy absent an out-of-market, backstop procurement which just piles costs onto customers' bills.
The cost of the winter reliability program had been pegged at about $80 million.
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November 18, 2013
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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