WASHINGTON, DC – The Electric Power Supply Association (EPSA) today filed detailed comments with the Federal Energy Regulatory Commission (FERC) in response to the reports FERC required each Independent System Operator (ISO) and Regional Transmission Organization (RTO) to file last month on energy price formation issues. Comments on the reports are due to FERC today.
“EPSA commends FERC for its leadership in examining many important issues through its energy price formation proceedings,” said John E. Shelk, EPSA president and CEO. “EPSA is encouraged that FERC commissioners told Congress this initiative is a top priority. From its review of the lengthy ISO/RTO reports filed last month, EPSA concludes time is of the essence to move from developing a record to implementing reforms that will actually improve wholesale energy pricing on the ground throughout the country with greater urgency.”
Shelk continued, “The wholesale markets managed by ISOs/RTOs under FERC oversight are the linchpin to providing reliable and efficient electricity service to over two-thirds of the country. These entities continue to expand in geographic scope, including now in the West. However, if grid operator actions and market rules do not properly allow market clearing prices to reflect true system conditions, then these regional markets cannot deliver their full potential for consumers.”
EPSA today filed both general comments (excerpts below) and joined regional competitive supplier partners in separate comments on each ISO/RTO report (all available in full at www.epsa.org.) Excerpts from EPSA’s general comments on energy price formation:
“As EPSA has reiterated in numerous proceedings and forums as far back as 2013, reforming flawed ISO/RTO energy, ancillary services and operating reserve price formation policies and practices in both day-ahead and real-time energy markets is critical to establishing price signals that reflect actual system conditions and support investment which maintains system reliability. The Commission has already held three lengthy technical conferences in this docket, compiled and published numerous staff reports and solicited extensive comments on these important price formation issues. As a result of the extensive record, numerous areas where price formation improvement is needed are well documented. With these reports and corresponding comments, the record is complete. It is now time for the Commission to meaningfully act on these important price formation issues.” (Pages 1-2)
“Putting this extensive record including the six recently-filed reports on the shelf does nothing to advance the Commission’s statutory obligation to ensure just and reasonable rates. Rather, the Commission should finish this important inquiry by requiring the RTOs and ISOs to develop work plans for market reforms that will better incorporate into the market clearing prices all actions necessary to reliably operate the system. If anything, the urgency to take final actions has only grown as market conditions have become more challenging and the resource mix continues to shift, even since 2013.“ (Pages 2-3)
“Failure to do so soon, after years of study, will only make matters worse by signaling to the wholesale market and those who rely on it that flaws will be allowed to fester and identified improvements will not be implemented to positively impact pending investment decisions. At the same time, lack of concrete, comprehensive and constructive steps by FERC and the ISOs/RTOs contributes to the circumstances in which States look to inappropriate subsidies that distort wholesale markets, hurting consumers across a region, not just within that State. FERC has the exclusive responsibility to act to preserve the benefits of wholesale power markets for consumers that it has spent decades of work to achieve.” (Page 3)
“If anything, the passage of time since the inception of this proceeding has only underscored the urgency of instituting improvements to meet today’s challenges, as well as the rapid changes occurring due to technological, economic and policy developments. EPSA has reviewed all six of the reports in detail with our members and regional partners and has found the information to be helpful. However, this very review underscores why over a year ago EPSA urged the Commission to require reports with specific, detailed work plans and timelines from the ISOs/RTOS. It was time to move from analysis to action last spring; if anything the need to move forward has increased exponentially since then, as has the depth of the record to do so.” (Page 4)
“EPSA implores the Commission expeditiously to direct all ISOs/RTOs to develop and implement market rule reforms that will ensure that all costs to reliably operate the system are included in clearing prices, and to submit updates on a specific and compact timeline to ensure price signals accurately reflect system conditions and operations. As EPSA and others urged in previous iterations of this proceeding, each ISO/RTO should submit a detailed work plan to the Commission which identifies the reforms to be undertaken and establishes milestones to be met at specific times in 2016.” (Page 9)
“The power sector is in the early stages of what will likely be a multi-year, even multi-decade, series of profound changes to how electricity is generated and consumed as the resource mix includes greater deployment of resources with low to zero marginal costs, while at the same time conventional central station power plants with significant marginal costs will continue to be necessary. In the face of this rapid and ongoing change, well-designed and properly regulated competitive wholesale markets remain the best model to manage these challenges and risks because markets are inherently more flexible, adaptable and place more risks on investors than consumers. It is FERC’s responsibility and duty to ensure that needed near-term price formation improvements are implemented as soon as possible so that policymakers, industry and consumers can turn attention to longer-term fundamental changes to the economic regulation of the bulk power system that will likely be needed as the resource mix and the proportion of bulk power and non-bulk power supplies and demand-side management shifts over time.” (Pages 10-11)
EPSA is the national trade association representing leading competitive power suppliers, including generators and marketers. Competitive suppliers, which collectively account for 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving power markets nationwide. EPSA seeks to bring the benefits of competition to all power customers.
