Public Power - September 2008 - (Page 16)

10 Questions body through which we take any market proposal or transmission project proposal. The stakeholders have their own voice down at the FERC, so I think that brings about a nice check and balance for our marketplace. We also have a very strong collaboration with NECPUC, which is the New England Conference of Public Utilities Commissioners. They participate in NEPOOL proceedings and we have direct contact with them. When it comes to any market rule change that we want to make or any large transmission project that we want to bring forward, we always take it through these two stakeholder bodies. With that very robust process, you flesh out all the different points of view and do the best job you can of solving for them. Of course, not everyone is always going to be happy, but the goal is 9 example of how something worked through the stakeholder process, where compromise was reached on what was originally proposed. You may have heard of something called LICAP [locational installed capacity]. Although LICAP was probably a simpler approach to implement by the ISO, many of our stakeholders and the states didn’t like it and we ended up with the forward capacity market—which is generating some very positive results. 10 Your market has been described as very complex and a puzzle to consumers. Doesn’t that, by its nature, exclude new entrants? You wouldn’t expect residential consumers or very small business owners to participate in the wholesale market. Those that enter into the wholesale market are larger entities with some Do you consider the New England electricity market to be “competitive”? Yes. Two of our market monitors have just published reports to that end. Both of the market monitors are independent of management; they report to the board Markets Committee, which is a committee of our independent board of directors. The board has responsibility for oversight on the functioning of the markets. The internal market monitoring unit is composed of ISO employees. The external market monitor is currently Dr. David Patton of Potomac Economics. He does his own independent assessment of the New England markets. Both of them have to produce an annual report that speaks to the very question that you asked—are the markets competitive? If not, what should be done about it? From those reports, you will see that Back in 2001, we made a decision to copy the PJM market design because it didn’t make sense to reinvent the wheel. to try to get to the place that brings the most benefit to all of our stakeholders. Another thing we’re quite proud of is the stability of our markets. We’ve been very systematic in our region in terms of creating a solid foundation for our markets and building upon it. Back in 2001, we made a decision to copy the PJM market design because it didn’t make sense to reinvent the wheel. Rather, as a cost saving measure, we would take a marketplace foundation that was working elsewhere, implement it, and then improve upon it. So we took the PJM market design, implemented what we call standard market design and made some pretty significant improvements to it as we have adapted it to the New England region. That’s not to say that PJM hasn’t made improvements; they haven’t been standing still. One of our improvements is the forward capacity market. It’s showing a lot of promise right now, although it’s a little early to declare victory. That is an 16 SEPTEMBER 2008 specialization, training, and experience in the wholesale marketplace. We try to simplify things, where possible. Nonetheless, the ISO markets are complex. But, one needs to look at what are you getting for the complexity. The efficiency gains, the availability improvements, the fact that we are attracting all this new entry into the marketplace—those are the results of the market. From a public power point of view—and I’ve heard this mentioned often by your colleagues up here in New England—they wish to see it simpler than it is. There are ways to reduce the complications, like entering into contracts or owning your own resources. These are strategies a number of public power entities in New England seem to be pursuing to lessen some of the complexity and risks associated with the marketplace. But I think the complexities are there for a reason, as they are bringing about products and services that were never there before. in certain areas in New England, there are transmission constraints, so there isn’t a 100 percent competitive marketplace. When the market monitors say that the ISO New England markets are workably competitive, it’s a generalization because we have specific areas in New England where there are transmission constraints combined with maybe only one or two generators. This situation creates the potential for market power. That’s why there’s market monitoring and that’s why there are mitigation thresholds in place. It is the job of the market monitors to make sure that the result of the bids by the generators in those constrained areas is consistent with what a competitive market would have produced. There are other checks and balances in place to make sure the end result is just and reasonable and, of course, the final check is the FERC. They have oversight and they have their own market monitor watching what’s going on in New England. ❚ PUBLIC POWER

Table of Contents Feed for the Digital Edition of Public Power - September 2008

Public Power - September 2008 Contents Perspective 10 Questions What’s Good About RTOs? Capturing Coal’s Carbon Carbon Safety Valves Greater Glass, Greater Savings Getting Customers to Embrace Compact Fluorescent Lights LEEDing Green Kansas City Shows How to Build Green For Governing Boards Safety Community Broadband Hometown Connections Parting Shot

Public Power - September 2008

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