Solving The Crisis In Unscheduled Power
- , section 9, pp. 7-9) to show FCC as a component of it thus:
- . "The Blohm formula" estimate of price of FCC in order for FCC settlement to be consistent with CPS1. Since it's not being directly subject to compliance, the non-marginal ("infra"-marginal) FCC is not directly subject to the bias obligation bi and the frequency band ±e that the marginal is. Therefore, for the non-marginal FCC, - bi = 0 and the rearranged CPS1 equation in footnote 10 above collapses to:
where I i is BA i's inadvertent interchange. In other words, when a BA i's non-marginal FCC is good on average, FCC p ? 0, which is equivalent to compliance with the CPS1 equation (1) above for infra-marginal FCC. Those with FCCp < 0 are paying to those whose FCCp > 0 to get into compliance with the CPS1 equation (1). Indeed, even if BA i is CPS1 compliant at the margin but its FCCp < 0 because the BA is hurting frequency on average, the BA is contributing infra-marginally to any other BA's non-compliance with CPS1 and should therefore bear a cost.
- While FCCp is a one-month average, it is decomposable to an hourly amount thus: By equation (2) in footnote 11 above
Balancing Authorities: Caught in a Closing Vice
In its , the North American Electric Reliability Council (NERC) documented how a power marketer (Enron) had purchased more than 20 power plants in the Southeastern United States. Enron wanted to form 3 "generation only" control areas so the company could deliberately create unscheduled power and benefit commercially from the NERC rule allowing a control area or balancing authority (BA) to pay back only in-kind accumulations of unscheduled power it has taken from the rest of the interconnected system. Unscheduled power taken when price and frequency are high may be paid back when price and frequency are low but, since payback is not enforced, unscheduled power tends to be "parked" and not even paid back. NERC admitted that market pricing of scheduled energy thereby made payback-in-kind, let alone parking, untenable both from an equity point of view and from a reliability point of view.
Some Midwestern BAs several times have taken unscheduled power at high-price periods from other BAs that were never paid back the economic value of that power. Indeed, the California market meltdown may be attributed in significant part to improper pricing of unscheduled power in regulators' very poorly thought-out "spot-energy" market design and crisis management, as may the legal effort to nullify subsequent imprudent contracts governments signed with Enron, which elected to take unseemly advantage, rather than complain, of the pricing flaws that shouldn't have been there in the first place.
From Bad Connections to Worse
BAs signed bad connection agreements with independent power producers (IPPs) and merchant generators, drafted by lawyers only and sanctioned by FERC, that specify energy only, none of the ancillary services that support frequency, no ramping rate, no charge for hurting frequency, and no payment for supporting frequency. As a result, merchants and IPPs, now accounting for 20 percent of