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Noble Americas Retail Provider Warns Capacity Market in Texas Will Lead to Customer Dissatisfaction with REPs, Competition
"The inability to manage the cost associated with a capacity obligation combined with the lack of demonstrative goods realized by customers in regions with such obligations should lead the Commission away from any type of capacity construct," Noble Americas Energy Solutions LLC said in comments to the Public Utility Commission of Texas opposing a capacity market.
"Noble Solutions participates in markets that administer the capacity obligation through a centralized market and in those that impose the capacity obligation by way of mandate on the load serving entity. Neither of these constructs provides greater reliability than has been experienced in ERCOT; however, it is certain that costs are higher for retail customers when there is an administrative requirement to purchase capacity," Noble Solutions said.
"Many consumers view the higher costs from capacity surcharges as a tax and the REP as a tax collector. This reaction can lead to negativity toward the overall market and general customer dissatisfaction," Noble Solutions said.
"Accordingly, Noble Solutions encourages the Commission to assess the cost impacts of any additional capacity surcharge on customers and weigh the value of such cost against tangible benefits. Additionally, if customers are to be presented with a significant surcharge for new capacity, customers should be assured the new capacity is provided," Noble Solutions said.
"Another major source of customer dissatisfaction is the constant controversy over the administrative inputs that determine the capacity price as stakeholders fight over how to achieve their aims. This is a far cry from the operation of the forces of competition setting price, and the resulting uncertainty limits the choices that REPs can provide to consumers. It is also Noble Solutions' experience that the process is heavily influenced by the incumbent stakeholders with existing generation, resulting in a capacity construct that tends to extend the life of older, inefficient generation units to the determent of newer more efficient resources. Implementation of a capacity market would substantially move Texas away from a market design that relies upon competitive forces to dictate electricity prices toward a design that relies upon regulatory determinations," Noble Solutions said.
"The existing framework in Texas has resulted in the most successful competitive retail market in the United States. A retail market can only be successful where the wholesale market is driven by the forces of competition. ERCOT has been just such a market since restructuring took place. The market has survived and thrived over the last twelve years in the face of cyclical input prices, changing demand, and once in a hundred year weather. In the face of that volatility, the market has delivered reliable and competitively priced power, just as it was designed to do. ERCOT is making progress in improving its load forecast, and the Operating Reserve Demand Curve (ORDC) is just being implemented. Noble Solutions believes the Commission should allow the recent changes to the market design an opportunity to achieve the targeted objectives before evaluating any further modifications to the ERCOT market. In the meantime, Noble Solutions urges the Commission to support the current energy-only market and avoid any type of administrative capacity construct. Such constructs are not seen as successful in other regions, have not provided any more reliability than exists in ERCOT, are more costly, and represent a step backward from competition towards regulation," Noble Solutions said.
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December 19, 2013
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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