Dodging capacity payments might become an art form among load-serving entities and large electric consumers, as evidenced by Duquesne’s plan to exit PJM, as well as alternative market-designs...
Viewpoint: In Defense of Markets
The latest resistance to deregulation is built on a foundation of lies.
will need to be countered in its turn. The competitive reform of electricity markets eventually will be seen, in retrospect, as an historical inevitability. Until then, it is essential to stay the course.
1. For example: George Stigler, “The Theory of Economic Regulation,” The Bell Journal of Economic and Management Science, Spring 1971.
2. Remarks made at CERA Executive Summit, “Restructuring at the Crossroads,” March 5, 2002.
3. Center for the Advancement of Energy Markets, “Estimating the Benefits of Restructuring Electricity Markets: An Application to the PJM Region,” September 2003, version 1.1.
4. For further information on the blackout and its causes, refer to: U.S.-Canada Power System Outage Task Force, Final Report on the Aug, 14, 2003, Blackout in the United States and Canada: Causes and Recommendations, April 2004.
5. First Energy is part of the Midwest ISO, whose markets didn’t commence until April 2005.
6. Larry E. Ruff, “Where California Went Wrong,” unpublished paper, Jan. 27, 2001.
7. Since the failure of the initial market, and collapse of the California Power Exchange, there has been a fundamental redesign of the California electricity market.
8. The final report on the 2003 Blackout stated, “It is not clear that small control areas are financially able to provide the facilities and services needed to perform control area functions at the level needed to maintain reliability.”
9. It is possible for markets with separate market and system operators to have tight integration between these functions— e.g., New Zealand. By contrast, many believe that the lack of this integration was one of the principal market design faults of the original Californian market (Ruff, op. cit.).
10. Darrell Huff, How to Lie With Statistics, W.W. Norton & Co., 1954.
11. Huff, op. cit.
12. Comments by Craig Glazer, VP of Government Policy, PJM Interconnection, as reported in the New York Times, Aug. 23, 2003
13. The United States has, in some regions, managed to bring about competition through regulatory means alone, e.g., PJM, New York. At the same time, however, most legislative talk at the federal level has focused on retrograde measures to roll back competition.
14. NEMMCO’s operating expenses have not changed appreciably since 2002, with wholesale market costs stable for longer than this (increases in 2000/2001 were driven by the addition of responsibilities related to the retail market).
• The system is predominantly hydro…but so is Nord Pool, Brazil, New Zealand.
• There are complex inter-state and state/federal issues…as in Australia, ISO New England, PJM.
• The system spans multiple countries and currencies…as do the Midwest ISO and Nord Pool.
• The market is too small…though New Zealand has only 4 million people, and Singapore 4.5 million.
• Complex environmental regulations need to be accommodated…as in almost every jurisdiction.
• …insert excuse of the month here.