Power Lines Blog

Consider customer benefits first in CAISO changes

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An issue that had been dormant since last year — expanding California’s energy markets to other parts of the Western United States — resurfaced at a hearing in the Assembly on June 7. Despite a major push by the Governor and significant public attention in the past year, “regionalization” of the grid had been placed on the back burner except for a few discussions in wonky energy policy circles. With the issue rising again, it’s important to revisit the facts and arguments on regionalization with the goal of finding consumer benefits.

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Is increase in merchant generation capacity a positive?

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Since 2011, the Association has been conducting analyses of the financial arrangements behind new electric generation facilities constructed each year. In past years, the vast majority of new capacity was constructed under long-term bilateral contracts or utility or customer ownership, with almost no project developers choosing to rely on more volatile wholesale market revenues. But in 2015, that trend shifted significantly, with almost 20 percent of the new capacity constructed under merchant arrangements. (A merchant plant is one that is not owned by a utility or end-use customer, and does not have a long-term bilateral contract for the sale of the power. These plants earn their revenues entirely from the wholesale electricity markets.)

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Demystifying arcane electricity markets

Demystifying Self-supply and Other Arcane Electricity Market Concepts

Where there are no RTO-operated capacity markets, utilities either build their own generation or enter into contracts with generators to buy adequate capacity, keeping prices low for customers. These utilities are able to provide a reliable supply of electricity at a reasonable cost. There is no evidence that capacity markets are necessary. Instead, they primarily serve to create windfall profits for certain merchant generation owners.

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MISO and PJM: A sad tale of two markets

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This is not a blog about investment advice. While I may have an acceptable level of knowledge and modest skills in a number of areas, offering investment advice is a quick way to turn good friends into ex-friends. No, this is not about the stock market. Rather, it is about the capacity markets in the Midcontinent Independent System Operator and the PJM regional transmission organization (RTO) regions.

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