FERC Chasing the Uncatchable

Deck: 

Trying to fix mandatory capacity markets like trying to win at Whack-A-Mole, Part II

Fortnightly Magazine - June 2016
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Editor's note: Authors Patterson and Reiter provide us this perspective on capacity markets in two parts. The second part is here. Part I appeared in the May 2016 issue. A more comprehensive version of the entire article, both parts, with extensive references, is available here.
 

There are six regional transmission organizations, RTOs or ISOs, but only three deploy mandatory capacity markets. That FERC has not directed the remaining RTOs to follow suit is seemingly its tacit acknowledgment that they aren't necessary. The more important question, though, is not whether there is reason to expand the use of mandatory capacity markets. Rather, it is whether the existing mandatory capacity markets do more harm than good.

Nearly eight years ago, FERC approved plans by the Midcontinent Independent System Operator, MISO, to require its load-serving entities to maintain specified reserve margins. But FERC left as voluntary a capacity auction which
it describes as: "an additional mechanism to procure needed capacity and increase transparency in the procurement of capacity." 1

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