Commission Watch

What everybody missed in setting up the regional grids.

While the electric utility industry has largely agreed on what elements to include in a standard market design (SMD) to govern wholesale power trading in a given region, recent experience shows that the regulators from time to time have overlooked a number of things.

These omissions keep cropping up even in the most successful of the regional markets (New York, New England, and PJM in the mid-Atlantic). They are proving difficult to correct or reconcile for the various independent system operators (ISOs) and regional transmission organizations (RTOs) spread out across the country. And the Federal Energy Regulatory Commission (FERC) has not issued much in the way of guidance.

Consider a brief sample of three nagging questions-"holes" in the market, if you will, that few people fully anticipated. These problems undermine the cost efficiencies that we looked for under a market regime, but by no means do they take us to the end of the list:

The Gen Plant Rate Case.

Despite having "deregulated" the generation sector, RTOs now find themselves conducting virtual rate cases for power plants in an effort to set a value for capacity. RTOs can be seen gathering evidence and reviewing all manner of actual and hypothetical costs and inputs for the gen sector, such as labor, taxes, fuel, insurance, maintenance, heat rates, and efficiency profiles. What can be done?