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plants,are more of a problem inside RTO regions than outside American Public Power Association Position RTO regions.' The Association has long had concerns about the RTO markets, FERC initiated a new effort in late 2014,in response to particularly related to cost to electricity customers and market generation owner recommendations,to examine price formation manipulation.In recent years,APPA has focused intensely on in the energy and ancillary services markets.This docket has led the problematic mandatory capacity markets operated by the to two final rules that could significantly increase prices.In June Eastern RTOs.As discussed above,many questions have been 2016,FERC approved its first rule under the price formation raised about whether these markets can provide reasonably effort.One problematic component of the rule is to require all priced and reliable long-term service to electricity customers.In RTOs to trigger price spikes,known as shortage prices,during response,the Association has developed detailed proposals for any time period when a shortage of energy or operating reserves both long-and short-term solutions to the problems in these occurs,rather than requiring a shortage to have a minimum markets.For the long-term,APPA's Competitive Market Plan duration before such shortage pricing occurs.APPA and NRE- proposes to retain the RTO functions that are working well— CA filed comments,as did many other parties,questioning the principally those associated with planning for and operating benefits of shortage pricing for such transient shortages relative the regional transmission grid—and replace or minimize those to the costs.A second rule,issued in November 2016,would al- functions that are not benefiting consumers,mainly the design low energy market offers to exceed the current cap of$1,000 per and operation of the capacity markets.The Association has also megawatt-hour(MWh),as long as the seller of energy believed developed a policy proposal to more immediately address issues its costs are likely to exceed that amount.APPA and American with capacity markets.See APPA's issue brief,"RTO Capacity Municipal Power(AMP)have requested a rehearing of that Markets and Their Impacts on Consumers and Public Power," problematic rule because the removal of the offer cap represents for more information. the elimination of a key protection against market power abuses. Finally,APPA continues to support congressional oversight of FERC market policies including,but not limited to,the problems associated with capacity markets and lack of transpar- Congressional Action ency in RTO dealings. Congress needs to delve into the intrica- The Association and other like-minded organizations continue cies of FERC policies to ensure fairness.Association staff have to encourage the leadership in both the Senate Energy&Natu- met with members of Congress and their staff regarding these ral Resources and House Energy&Commerce Committees to issues and will continue to conduct such outreach to increase investigate the functionality of these RTO-run electricity mar- their understanding of RTO-related problems. kets themselves.They have also urged FERC to undertake an in- vestigation of these markets. On September 7,2016,the House Energy&Commerce Committee held a hearing,"Federal American Public Power Association Power Act:Historical Perspectives,"to begin an inquiry into the Contacts blurring of lines between historic federal and state jurisdictional Elise Caplan,Senior Manager,Electric Market Analysis, divides;how regulated and competitive markets continue to fare 202-467-2974/ecaplan@publicpower.org under both FERC's and the states'oversight;how reliability and security of the grid,innovation,and distributed energy resources John Godfrey,Senior Government Relations Director, are prioritized in the current system;and how other external 202-467-2929/jgodfrey@publicpower.org factors,such as tax policy and renewable mandates factor in to the functioning of competitive markets.The committee may continue to look at these matters under new Chairman Greg A Description of the RTOs Walden(R-OR). There are seven RTOs operating in the U.S.:ISO New England (ISO-NE);New York ISO(NYISO);PJM Interconnection '"Five nuclear power plants have retired in recent years,amounting to 4.7 (PJM);Midcontinent ISO(MISO);California ISO (CAISO); gigawatts of capacity.Owners of nuclear power plants claim that reduced elec- Southwest Power Pool(SPP),and Electric Reliability Council tricky prices in RTO-operated markets are a primary factor in lowering needed of Texas(ERCOT). Of the seven only ERCOT,which operates nuclear plant revenue and spurring retirements.Such price drops have resulted entirely within the state,is not subject to FERC jurisdiction. from decreases in the price of natural gas and growth of wind power,Because of these lower earnings,nuclear plant owners have sought to increase their revenues through state programs to direct additional revenue to the plants,such as recent- California ISO(CAISO) ly passed legislation in Illinois and an order from the New York Public Service CAISO operates only in California,but it is under FERC's Commission;and for overall changes in the wholesale markets that would boost electricity rates." jurisdiction because the state's transmission grid is interconnect- ed with the rest of the West.Some public power utilities in the PubUcPower.org 53 235