The latest dispute over PJM’s bidding rules has raised the level of uncertainty in organized electricity markets. Efforts at reform have created a market structure so jumbled that it can’t produce...
FERC says it won’t ‘change’ the native-load preference, but don’t bet on it.
- million customers.
Nevertheless, as the report shows on p. 22, some dispatch areas (MEAG Power, Western Farmers Co-op, Nebraska Public Power District, Portland General Electric) claim less than 4,000 MW in resources, according little or no flexibility to LSEs and ratepayers. Why emulate that?
In submitting input for the report, Southern Co. advised that “areas smaller than approximately 10 times the largest generating unit in the dispatch area would be exposed to unacceptable risk from unit trips and failures of other equipment that could impose dispatch step changes greater than can be accommodated by available ramp capacity.” ( See p. 27 of the report. )
Congress and Politics
Why preserve the native-load “preference,” as it appears that native load is getting no favors?
Former FERC Commissioner William Massey, representing the American Wind Energy Association (AWEA), submitted a remarkably concise analysis of past history and possible problems that should be must reading for anyone seeking to understand Order No. 888 and the OATT. His analysis supports much of what AWEA has been saying recently: that the promise of wind energy and other new technologies warrant a new way of looking at things, rather than a litany of why they won’t work under current rules.
According to Massey, “Simply tinkering at the ends will not solve today’s serious problems related to grid balkanization, transmission pricing, congestion management, planning, discrimination in grid access, and market foreclosure of competitors.”
Massey adds: “I am not suggesting a resurrection of standard market design. Rather, I am saying that given the reality of slow RTO development, we cannot escape the need to address … the inadequate rules in effect today.”
FERC’s notice promises that the commission “is not proposing to change the native load preference established in Order No. 888.”
Nevertheless, FERC does ask for comments on giving up the contract-path model, and abandoning a need- and load-based right to grid capacity, in favor of a contract-demand tariff keyed to reservations.
A contract-demand tariff would work in similar fashion to FERC’s ill-fated Capacity Reservation Tariff of 10 years ago, which, as Massey explains, “would have put all customers on the same service.”
All of this sounds suspiciously like the end of the native-load preference, as we have come to know it. In fact, such a change, if imposed today, would not appear to violate EPACT Sec. 1233 (Federal Power Act sec. 217) , which defines the native load preference. That section states only that:
“The commission shall … meet the reasonable needs of LSEs to satisfy [their] service obligations … and to secure firm transmission rights (or equivalent tradable or financial rights) on a long-term basis for long-term power supply arrangements made, or planned, to meet such needs.”
Thus, grid access rights for native load must prove sufficient to cover need, but nothing in the law says that FERC cannot require native load to acquire those rights by way of reservation.
1. For the study, the DOE surveyed state regulators and industry stakeholders in late August 2005, with assistance from industry associations. FERC also has convened and