Trying to fix mandatory capacity markets like trying to win at Whack-A-Mole, Part II
Delia Patterson is the General Counsel of the American Public Power Association, and before that she was the Assistant General Counsel of APPA. She assists APPA and its members in energy policy formulation and with policy advocacy before FERC, federal courts, and other governmental and industry policy forums. She can be reached at firstname.lastname@example.org. Harvey Reiter is a partner in the Washington, D.C. office of Stinson Leonard Street LLP. He also serves as executive articles editor for the Energy Law Journal, and is an instructor at the Institute of Public Utilities’ annual Camp NARUC program. For over thirty years, Mr. Reiter has represented clients before the FERC, FCC and the federal Circuit Courts of Appeal. He can be contacted at email@example.com.
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