By some measures, merchant power assets look like a bargain, selling for well below their replacement cost. But whether low prices signal a buying opportunity or a value trap depends on the...
Parochial Power Play
Northeastern politicians declare war on capacity auctions.
within their state borders—never mind the fact that PJM is a regional market, with a regional resource adequacy planning process. And never mind the unintended consequences that result from this kind of market manipulation. All politics are local, the greater good be damned.
It’s OK, however, because in the big picture, parochial politics are simply part of the game.
It’s taken more than 30 years of complex legislation and regulation for market structures to reach their current state. Starting with the Public Utility Regulatory Policies Act (PURPA) in 1978, regulatory changes at the federal and state levels have recreated America’s wholesale power markets, while sending a host of other policy signals. One way or another, they all get priced in, and the same will be true of capacity dumping schemes in New Jersey and Maryland.
In short, the markets aren’t broken, they just take time to allocate resources efficiently; two years is hardly a sufficient test for something this big and complex. And they certainly haven’t failed, because the lights are still burning—and companies like LS Power and CPV are eager to get into them, by whatever means necessary.
It’s business as usual, just as it’s been for 30 years in America’s contentious, imperfect, quasi-deregulated power market.