- Nov 17, 2020 4:10 pm GMT
I'm a bit biased by my time working in ISO/RTO markets so it's not surprising that my views differ from the Author of this article. The author makes a point that many of the States within wholesale market service areas have higher utility rates than those residing in areas that do not implement wholesale markets. I know this to be a fact in Massachusetts, where I live. However, the reason for these higher rates has little to do with wholesale market based electricity prices, in many cases the higher utility rates seen by consumers are the result of State level decisions to charge consumers for programs and initiatives that the State deems worthwhile, such as the SMART program and MASS Save, which add costs to customer bills. These charges are not imposed by wholesale markets, they are imposed by State regulators - the author fails to point this out in his article.
Wholesale Markets contribute three components to a consumers utility bill; The per unit energy charge ($.kWh) - this is the cost of energy, capacity charges - shown on my bill as a fee; this ranges from a few cents to a couple of dollars, depending on capacity charges from the markets and lastly charges related to delivering energy via the transmission network - this includes charges to cover ISO/RTO operating costs, this is usually a few cents.
The fact is that today's wholesale capacity and energy markets are broken and need to be fixed or replaced. Generators are paying to generate energy during the increasing number of hours when negative LMP's set the clearing price. An over abundance of capacity is driving the capacity prices so low that ther eare not sufficient revenues being provided to generators to commit to being available. Something clearly needs to happen to address these difficult challenges. The solution may be a return to a cost of service model or it may be to fix/replace the wholesale market models that are broken. The author seems to be endorsing a State based return to a cost of service model as the solution. I suggest that the industry take a very serious, methodical and collaborative approach at assessing the options available, recognizing the powerful forces of creative destruction that are reshaping the industry and then decide on which way to go on a State by State basis.
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