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FERC's Market Design: The End of a 'Noble Dream'

How state opposition cowed the feds and turned a powerful rule into just a set of talking points.
Fortnightly Magazine - February 15 2003

tried to do and failed).

Now, however, the PUC claims that its Market Oversight Division has developed and implemented a system for congestion management that is based not on nodal locational marginal pricing (LMP) but on an administrative assignment of hypothetical congestion charges needed to achieve a pre-determined, formulaic optimization of the transmission grid.

Texas fears that, like California, zonal congestion management method in ERCOT has led to a "dec game" (manipulation of decremental bids). Also, a huge amount (nearly 900 MW) of wind-powered generators has located unexpectedly in West Texas, on the wrong side of a major local transmission constraint, in reliance on faulty locational market signals supplied by the old zonal congestion system.

The PUC now says it has visions of creating an energy DAM with ex- ante pricing that would be operated privately, because with its newfangled congestion management system, the DAM could receive bids and execute dispatch without a security-constrained protocol.

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