Many see a higher cap as a windfall for nuclear and coal.
Bruce Radford is executive editor of Public Utilities Fortnightly. Contact him at radford@fortnightly.com.
"We’re still debating the need for a cap on prices." – Bruce W. Radford
FERC's new rulemaking proposal would allow generators to tender supply bids higher than $1,000 per megawatt-hour, if it really costs that much to buy fuel to generate power. Some opponents say that may be OK for gas-fired turbines, but it's not needed for nuclear or coal-fired plants.
Many well-known industry groups, such ELCON, ABATE, APPA, and NRECA oppose FERC's proposal. They stress that operating costs approaching the current $1K offer cap occur so rarely, if at all, that it's not smart to design a rule just to accommodate such an unlikely event. Rather, they say it should be enough to reimburse high-cost generators through special out-of-market payments known as uplift, as is done now.
Better to keep the current offer cap and rely on uplift, they explain, than to relax the offer cap and allow higher-cost bids. Because that would push up the market-clearing locational marginal price, creating a windfall for nuclear and gas-fired plants, which don't face such high fuel costs. And which all consumers would end up paying.