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FERC Seeks To Raise Wholesale Market Electric Energy Rates Via Shortage Pricing, Under Guise of "Reform"

September 18, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FERC proposed two measures meant to raise electric rates in wholesale energy markets, under the pretext that the markets are not properly reflecting scarcity when warranted (Docket RM15-24)

Of course, FERC's action is largely applicable to RTOs with centralized capacity markets, whose justification (and cost to customers) is premised on the elimination of scarcity and scarcity pricing -- particularly with new, more expensive "performance" requirements implemented in PJM and ISO-NE. Therefore, if such capacity markets functioned correctly, FERC's concerns and actions would appear to be moot; the fact that neither are in another indictment in such mandatory capacity purchases.

Specifically, FERC issued a notice of proposed rulemaking that would:

• Require that each organized market align settlement and dispatch intervals by settling real-time energy and operating reserves transactions financially at the same time interval that it dispatches energy and prices operating reserves, and

• Require that each organized market trigger shortage pricing for any dispatch interval during which a shortage of energy or operating reserves occurs.

One problem, FERC said, is that while all markets dispatch resources sub hourly, some settle those transactions based on an hourly integrated price – a price that equals the average price for all individual dispatch intervals across an hour.

Also, in some markets a shortage is required to last a minimum time period before shortage pricing is triggered. As a result, there is a delay between the time when a system experiences a shortage of energy and operating reserves and the time when prices reflect those shortages, FERC said

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