Nelson: Nail's in the Coffin for Capacity Markets in ERCOT

Although PUCT Chairman Donna Nelson had not been entertaining adoption of a capacity market in ERCOT, despite the constant drumbeat from some asset owners for such a design, Nelson said that recent comments from a major PJM generation owner has put the nail in the coffin for her appetite for a capacity market in Texas.

Nelson said that at a weekend conference, "the CEO of PPL Corporation ... said we can't make a pro forma work on a new power plant."

"That's in a capacity market," Nelson noted.

"I got the impression from the generators that it [challenges to new build] was a Texas issue because we have an energy-only market, but apparently it's not just a Texas-only issue," Nelson said.

"For me, that put the nail in the coffin [of capacity markets]," Nelson said.

Commissioner Kenneth Anderson likewise noted that a representative from a major manufacturer of power plant components recently told him that the manufacturer does not see any private generation investment in the Northeast capacity markets, with the only generation development that is occurring resulting from the direction of regulatory bodies.

Anderson said that the only capacity market he would be willing to accept would be a design that only includes payments for new generation, with no capacity payments to existing generation, which Anderson noted would not be favored by the incumbent asset owners clamoring for a capacity market.

The PUCT continues to consider improvements to its energy-only market design.