Texas Commissioner Anderson Says Marginal Cost Includes Long-Run Marginal Cost, PUCT Approves Voluntary Mitigation Plans

Yesterday, Texas Public Utility Commissioner Kenneth Anderson said that when reviewing appropriate generator offer behavior under the Commission's rules, marginal cost should be interpreted as long-run marginal costs, rather than short-run marginal costs.

"I'm inclined to view marginal cost under the rule as the long-run marginal cost, not short-term marginal cost," Anderson said.

Anderson's discussion came as the Commission addressed several voluntary mitigation plans with generation owners, which cover permissible bidding behavior.

The PUCT adopted without substantive modification stipulated voluntary mitigation plans between Staff and Calpine, and Staff and GDF SUEZ Energy North America.

The stipulated plans provide the companies with an absolute defense against an allegation pursuant to PURA § 39.157(a) and P.U.C. SUBST. R. 25.503(g)(7) of an abuse of market power through economic withholding, with respect to the specific behaviors permitted by each plan, as provided in PURA § 15.023(f) and P.U.C. SUBST. R. 25.504(e).

Click the following links for background on each voluntary mitigation plan: Calpine and GDF Suez