Public Power - September 2008 - (Page 25)

he fears they will get worse as load grows. He also worries about his ability to sign new bilateral contracts for generation. In New England, the Independent System Operator (the region’s FERC-approved RTO) introduced capacity markets, a market mechanism intended to create a pool of capital for investment in new generation. The first iteration of capacity markets proposed by ISO-NE, called “LICAP” (locational installed capacity), drew the ire of wholesale customers, state regulators and political leaders. LICAP was replaced by the “forward capacity market,” which was developed after intensive negotiations among stakeholders. (See Public Power magazine, September-October 2006, page 40). The mechanism appears to be working as expected, said Brian Forshaw, director of energy markets for Connecticut Municipal Electric Energy Cooperative. The first auction for new capacity took place last February. New generating resources cleared at a floor price that was negotiated as part of the settlement, with a surplus of options left unclaimed, Forshaw said. “So it worked the way it was designed,” he said. “It has also brought a lot of demand resources [conservation and load management] from behind the meter into the market.” The biggest mistake in New England was the effort to unbundle all of the individual components. “We tried to create a market for each and every reliability requirement (i.e., capacity, energy, reserves, black start) on the system and price that separately and independently as a separate service, rather than treating electricity as a bundled product,” Forshaw said. “At one time there were seven discrete markets that basically provided a revenue stream to generators and suppliers, but it was all coming from the same mix of assets, so there were just different revenue streams to the same set of assets. That’s not competitive; that’s just structural.” The unbundling did not improve reliability in the region, Forshaw said. Transmission facilities in New England are expanding, Forshaw said. A few years ago, the region’s transmission investment had a value of $1 billion. New facilities have come on line and others are under construction www.APPAnet.org and the value of transmission infrastructure in the region is expected to grow to as much as $7 billion over the next five years. But whether that new capacity opens up new power supply options for the region “remains to be seen,” Forshaw said. Meanwhile, transmission rates increased from $28 to $44 per kilowatt-year in the past year. Public power utilities in New England yearn for the market they had in the 1990s, with a pay-as-bid cost-based regional dis- patch, run by New England Power Pool, the predecessor of ISO-New England. Conditions then were much better for consumers, Forshaw said. “We are very concerned about costs that electric consumers in New England have to pay,” he said. “A majority of those costs flow through the ISO and the ISO settlement system. How much of that is directly attributable to the ISO versus just circumstances, I’m not sure I can say.” ❚ Vertex’s Acquisition of Alliance Data’s Utility Services Division is the Perfect Fit at the Perfect Time Vertex North America Utilities – Discover the Value of Our Strength 70+ electric, gas & water clients 2,500 dedicated professionals 18 centers of excellence Complete meter-to-cash solutions Vertex is uniquely positioned to help utilities in the era of energy conservation and demand response. Outsourcing Meter to Cash Customer Management Billing & Remittance Debt Management Technology Applications Management Infrastructure Management IT Strategy & Transformation CIS Software Consulting Systems Implementation Operational Optimization Process Re-engineering Customer Relationship Management For more information, contact Angie Hill, Marketing Manager Vertex Outsourcing. 1.888.258.5872 | e-mail: info@vertexoutsourcing.com www.vertexoutsourcing.com SEPTEMBER 2008 25 http://www.vertexoutsourcing.com http://www.APPAnet.org

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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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