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FERC’s Market-Power Test: First, Do No Harm

Why a new market-power screen—accounting for the relationship between customers and suppliers in the wholesale marketplace—is a necessity.

The philosophy of "first, do no harm" has served the medical profession well for more than 2,000 years. Today, it may be equally good advice for FERC as it seeks to create fair and accurate screens to determine who does and does not have market power. One of the two interim screens FERC is using to evaluate applications for market-based rate authority may create a large number of false positives—power suppliers judged to have market power when in reality they do not. To remedy this, FERC should add a new market-power screen based upon an analysis of the actual relationship between customers and suppliers in the wholesale marketplace.
Byline: 

Louis R. Jahn

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RPS: Should States Get Credit?

The risks in renewable portfolio standards.

State-mandated renewable portfolio standards are being adopted across the country to facilitate the development of renewable energy projects. Nineteen states have enacted renewable portfolio standards, but significant barriers remain to fulfill the potential of RPS. Will RPS actually result in a substantial amount of new project construction?
Byline: 

Gary L. Hunt

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LICAP and Its Lessons: A Kink in the Curve

Doubts intensify over New England’s radical new market for electric capacity.

What began nearly two years ago as a simple request by power producers to boost their chances for recovering fixed costs for several power plants in Connecticut has mushroomed into the single most complicated case now pending before FERC.
Byline: 

Bruce W. Radford

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PJM/Midwest Market: Two Rival Groups Battle Over Grid Pricing

Should transmission owners get paid extra for distance and voltage?

While the Midwest now appears set on competitive bidding for the electricity commodity, taking from PJM such tried-and-true elements as locational marginal pricing, financial transmission rights, and a day-ahead market with a security-constrained dispatch, the region remains split over the pricing of transmission.
Byline: 

Bruce Radford

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RTOs: The Creditworthiness Conundrum

IOUs, RTOs duke it out over standardization.

Have regional transmission operators (RTOs) and independent system operators (ISOs) asked for excessive levels of credit from customers? The Federal Energy Regulatory Commission (FERC) must face that difficult question as it investigates whether to institute a rulemaking on credit-related issues for service provided by ISOs, RTOs, and transmission providers.
Byline: 

Lori A. Burkhart

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A Market-Access Plan for Vertically Integrated Utilities

Assimilating the best of the regulated-utility and merchant models.

We propose a market-access plan (MAP) that does not advocate sweeping changes. It instead builds on existing VIU frameworks with structural improvements that are technically feasible, cost-effective, and politically practicable. The result assimilates the best of the VIU and merchant models; benefits the industry investment climate; increases the level of low-cost, efficient, and environmentally friendly power supplies; and promises to save customers millions of dollars.
Byline: 

Larry Eisenstat, Pat Alexander, and Don Gelinas

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Facing the Death Penalty

Did FERC's market power ruling go too far?

Market-based sales put at risk are the financial lifeblood of some utilities, especially those of the multi-billion-dollar, vertically integrated variety. Those that fail FERC's market-power test will be forced to sell their excess generation at cost-based rates — a "death penalty," according to some utility CEOs.
Byline: 

Richard Stavros

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ROE: The Gorilla Is Still at the Door

Incentive regulation is not a cure-all for the continuing controversy over return on equity.

Incentive regulation can provide benefits both to utility shareholders and customers by encouraging greater efficiency. But even if incentive regulation supplants traditional COS regulation, regulators and utilities still will need to confront the same basic ROE questions that have vexed both for many years. Because the base ROE under incentive regulation will be an integral part of the incentive structure itself, it ought not to be done as an afterthought. The approach described here is one way to address this important issue.
Byline: 

Jonathan A. Lesser

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Commission Watch: The Tyranny of FERC

The commission's power grab over bankruptcy courts condemns merchants to a corporate netherworld.

A new district court decision out of Texas tilts the field in favor of FERC's assertion of exclusive authority over who decides whether a debtor can terminate unprofitable power contracts. For merchant energy companies struggling with dwindling capital and mounting credit risks, this change could mean bankruptcy is no longer a viable option for reorganizing.
Byline: 

Kenneth Irvin and Robert Loeffler

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