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Coal's Raw Deal

The bias in RTO markets, and how FERC might fix it.

Fortnightly Magazine - September 2005

gaining a hedge.

Perhaps the last word on this problem should belong to one Neal A. Fitch, a regulatory specialist at Reliant Energy Inc.

Mr. Fitch suggests that RTO skill in managing real-time grid operations may not translate to the speculative world of financial derivatives:

"While it has historically been reasonable," he writes, "for the RTO to [act] as the market operator and/or clearinghouse in short-term markets … it is less clear whether or not the RTO should pay a significant role in long-term financial markets that ... deal exclusively with risk management.

"It may be the case that [others] can provide ... long-term FTRs without the added complexity."