Two authors beg to differ with Goldman Sachs’ Larry Kellerman on what needs mending in the Northeast.
Randall L. Speck heads the Energy Regulatory Practice in the Washington office of Kaye Scholer LLP. He was lead counsel for the Connecticut Department of Public Utility Control in the Devon Power proceeding before FERC. Dr. Miles Bidwell is president of Bidwell Associates Inc. and a principal of Power Economics Inc. He holds a Ph.D. in Economics from Columbia University and has written extensively on capacity markets. Speck can be reached at rspeck@kayescholer.com. Bidwell can be reached at mbidwell@powereconomics.com.
The “food fight in the New England Power Pool”—recently cited as emblematic of “our broken capacity markets” (Larry Kellerman, “Mending Our Broken Capacity Markets,” Public Utilities Fortnightly, June 2006)—appears to have been quelled.
New England’s innovative approach, dubbed the Forward Capacity Market (FCM) in the Devon Power settlement (FERC Docket No. ER03-563-055, approved June 16, 2006), was probably unavailable when Larry Kellerman made his observations in these pages, but it promises to confer new vitality on competitive markets. When fully implemented, the FCM should ensure the right amount of capacity at the right time and the right place, without instituting Kellerman’s proposal for a “planned, organized, long-term capacity acquisition model,” which sounds suspiciously like a return to the traditional regulatory model.
Although much work remains before all its benefits will be realized, the FCM satisfies the criteria for a capacity system that works, while avoiding the need for the centralized planning and control that Kellerman appears to advocate.