Fortnightly Magazine - August 2006

Utilities are eager to invest in new power capacity—in part to build rate base and in part because they recognize the danger of relying too much on a single fuel source. Environmental issues, however, are adding greater complexity to company strategies for achieving fuel diversity.

Constellation Energy CEO Mayo Shattuck has complained that he and the utility have unfairly been demonized in the public and in the press. In one interview with a Maryland paper, Shattuck showed distress over the verbal abuse his executives had received from angry ratepayers. And who can blame him?

Joseph Bowring, PJM Market Monitor: ”Pondering PJM's Energy Price Run-Up” by Howard Spinner of the Virginia State Corporation Commission staff raises the question of whether the observed increase in PJM average system prices in the second half of 2005 was the result of fuel-price increases and increased loads, or the result of market power. The results reported in the Spinner article are incorrect; see PJM Energy Prices—2005: Response to Howard M. Spinner Paper.”

Although much work remains before all its benefits will be realized, the Forward Capacity Market satisfies the criteria for a capacity system that works, while avoiding the need for the centralized planning and control that Larry Kellerman appears to advocate in “Mending Our Broken Capacity Markets.”