Contact:
Tracy Warren, NRECA
703-907-5746
Mobile: 703-517-3411
Arlington, VA, August 31, 2007 – An NRECA-commissioned “report card” on the nation’s Regional Transmission Organizations (RTO’s) forecast that RTO’s will continue to experiment with different approaches to market design, resulting in periodic modifications of basic market rules.
“Consequently, market participants will continue to face uncertainty in the rules of the game, and to incur costs in adapting to changes in market design and rules,” the report said.
The report also was uncertain whether the grid groups and the wholesale markets in which they operate are providing net benefits for consumers.
According to the authors, if long-term benefits exist, it is difficult to say whether retail consumers may be sharing in them.
However, the authors added, the report will help policymakers and RTO participants, including NRECA and member co-ops, better understand the performance of the RTO market and operational elements.
The report card particularly aims to identify structural and design problems that transcend RTO boundaries and might indicate fundamental design or operational problems requiring attention.
“The Regional Transmission Organization Report Card: Wholesale Electricity Markets and RTO Performance Evaluation, Second Edition” was prepared for NRECA by Christensen Associates Energy Consulting, LLC.
The report card focused on the New York, New England and Midwest independent transmission system operators and PJM Interconnection.
The paper reported that among these groups, the New York ISO had gone the furthest toward market-based pricing, as its energy, regulation, reserve and capacity services are priced mostly on a market basis.
The Midwest ISO priced all services other than energy on the basis of their costs, while the New England ISO and PJM were at intermediate stages of market-based approaches.
The report found “serious cause for concern over energy market competitiveness in some times and places” in the four regions. All the RTOs monitor the performance of their wholesale markets on a daily basis, it said.
“These are very complex markets with complex rules,” said Paul McCurley, NRECA manager of power supply, “so there is a lot of potential for those inclined to take advantage of the rules for their own benefit, at the expense of consumers.
“This makes market monitoring a crucial component of overall RTO operations,” he added.
In general, the report noted, the grid groups have found only partial solutions to the challenge of encouraging investments in generation and transmission.
The effectiveness of the RTOs’ grid planning process is hampered by their lack of authority to mandate the building of economic upgrades, or even to determine that the most economic upgrades should be built first, it said.
The report card “is a valuable tool for guiding our future policy initiatives focused on RTOs and organized markets,” McCurley said. “Its objective focus helps give NRECA considerable credibility in both the regulatory and market debates that continue to surround the RTOs.”
For further information, contact Paul McCurley of NRECA’s Energy Policy department, 703-907-5867, e-mail paul.mccurley@nreca.coop.
Printable Version