One RTO, Two Systems

Deck: 

By trying to placate regulated states—letting utilities “opt out” from its capacity market—PJM finds its RPM idea under fire.

Fortnightly Magazine - August 2006
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While the PJM Interconnection has made no major changes to its prototype capacity market since it proposed the idea a year ago in August, and though it has won a tacit OK from federal regulators for many of the plan’s key elements, don’t expect to see a slam dunk when the time comes for a final review of the controversial idea, known as the Reliability Pricing Model, or RPM.

Instead, consider the fate of RPM’s closest cousin, the divisive LICAP plan once proposed for New England that has now crashed and burned. As with PJM’s RPM market, New England’s location-specific ICAP plan had begun with the idea of a sloping demand curve, as pioneered in New York, envisioned as a purely administrative construct designed as a market surrogate to mimic a theoretical market-based demand by consumers for electric generating capacity, assuming such demand exists.

But the New England model proved far too complex and expensive to gain the trust of local regulators or politicians, and the same could prove true for PJM.

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