ISO's new ICAP scheme seen as subsidy for the gen sector.
For evidence that electric restructuring has lost its way, look no further than ICAP — the dubious idea that to guarantee reliability and low prices, regulators should create a market not just for trading the finished commodity, but also for buying and selling ownership rights in the future ability to produce.
How else to describe the idea of forcing utilities (also known as load-serving entities, or LSEs) to buy "capacity" — the present right to the future output of a generating plant — even if they already have purchased enough energy (the product) to sell to customers?
Listen to Francis Pullaro, manager of regulatory affairs for New York State for Strategic Energy, a firm that provides consulting services related to fuel and energy management: "Capacity has no value in today's market. Thus no demand exists for it."
And yet ICAP (installed capacity) has played a prominent role in the design of emerging power markets in New York, New England, and PJM, which typically set a certain level of capacity that utilities must have on hand. Thus, as Pullaro argues, the regulators have had to create "an artificial demand" for ICAP by requiring LSEs to purchase it. "The only value to a purchaser comes from the avoidance of a penalty for not purchasing it," he says.