CAP

Six months back, when ISO New England was mulling over various reforms that FERC had mandated last fall in Order 719 for the nation’s six regional transmission organizations and independent system operators (RTOs and ISOs are interchangeable terms in this column), the ISO refused point blank to include in its mission statement a proposal by stakeholders that it should operate the bulk power system at the “lowest reasonable cost.”

Should the power industry adapt its approach to capital markets in this environment? The answer, of course, is yes. Multiple frameworks are necessary to establish a power company’s or project’s current cost of capital, especially under volatile capital market conditions. The analyses reveal that in today’s capital markets, it is critical to balance or combine the alternative approaches to the cost of capital in order to develop a long-term view.

While enthusiastic equipment vendors and zealous environmentalists push for the comfort of mandated modernization requirements, more thoughtful industry stakeholders are seeking to develop a technically and economically rational approach to modernize the T&D network. The core of this challenge lies in making modernization a financially attractive investment and it has two essential ingredients.

American utility consumers face a compelling generational challenge: satisfy the need for a reliable power supply, at a reasonable price, while also reducing greenhouse-gas emissions and building a sustainable energy industry. How the government structures green-energy mandates will determine how long existing power plants remain viable.

A recent survey conducted by the U.S Office of Personnel Management and reported by the Washington Post on March 13 ranked the Federal Energy Regulatory Commission as eighth best of some 37 federal agencies in terms “talent,” and third in “leadership and knowledge.”

Despite political challenges, the EPA and Congress have made strides toward a more coherent and integrated approach to regulating air emissions. The time is right to reach consensus on a multi-pollutant strategy.

The greatest benefits of time-of-use pricing come from avoided costs of peaking power and T&D capacity—but only if hourly retail prices accurately model the true costs of delivered energy, including scarcity rents. Restoring the missing price signals will encourage economic investments in AMI, conservation and system capacity.

Pumped-storage technology allows utilities to defer the time value of energy, but project developers have struggled to make their economics work. Increased demand for ancillary services and standby capacity might make pumped storage more viable.

Who says ratepayers must accept the traditional measure of electric reliability—a single one-hour outage every ten years? If shown the bill ahead of time, might they decide otherwise; that such luxury is no longer affordable? Consumers are making similar decisions about gasoline and mortgages. Why not electricity?

Who knew coal-supply issues in countries far away from U.S. markets could have a massive impact on domestic supply and pricing, helping to increase prices for Appalachian coal by 260 percent in the past year? Despite what might have appeared to be an isolated U.S. coal market, recent events throughout the globe, such as supply disruptions in Australia and South Africa and increasing demand in some Asian countries, have shown that U.S. markets indeed are a major part of the global coal economy.