6.3 ERMUSR 03-13-2018 - Laserfiche WebLink

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1/1D/1/I.4/ firlinrigolive generation where it is most needed. Mandatory A solution in search of a problem capacity markets do not exhibit any of the Power suppliers in our region have an excellent features of competitive markets, and are instead record of developing new generation resources as administrative constructs requiring elaborate rules needed to meet load growth or make up for the and processes. retirement of old plants that have outlived their usefulness. This has been true through the entire These markets have high costs: in the PJM RTO history of our industry and it continues today as capacity market, approximately $102 billion utilities bring new generation on line and plan for has been paid or pledged to capacity suppliers future additions. There is no need in our region for through the middle of 2021, which works out a mandatory capacity market that would only serve to approximately $1,700 per man, woman, and to artificially raise prices for consumers. child living in PJM's 13-state area. In 2016 the PJM capacity market added $120 per year to the MMUA Position average electric bill of a homeowner, $915 for a One of the important roles Congress fulfills is that retail establishment, and $19,000 for an industrial of a watchdog over federal agencies. FERC created facility. And only a small portion of the $100 billion RTOs and is supposed to control them for the spent or committed is actually financing new benefit of the American public. While there may not generation capacity. be any direct action currently under consideration in Congress to rein in RTOs, it is extremely Artificially inflated prices important for Minnesota's delegation members to Mandatory capacity markets employ a variety of be aware that the concept of mandatory capacity techniques to artificially inflate capacity prices. markets has been creeping westward and has "Minimum offer price rules" (MOPR) require the already been considered by MISO.A mandatory RTO to replace low-cost capacity bids from new capacity market in the MISO region is unnecessary natural gas plants with higher price offers, making and would only lead to increased costs for it more difficult for these new plants to clear consumers. the capacity auctions. "Capacity performance" requirements or"performance incentives" subject rt. generators that are not operating or providing reserves during periods of scarcity to stringent Y ,, 1 w , , penalties encouraging resources to submit higher offers for capacity. 0 '" '1:*04: .,'''y i,,licp....i.11::Piell'41:1°,"',.." Potential impact on public power ,,. 5 ', �11 ` In addition to raising prices for consumers, these ., ` ir r artificially inflated mandatory capacity markets ;p' f could have a devastating effect on a public power ' system that develops its own generation to meet its capacity needs. If self-supplied capacity is required i - ` to be offered at a higher price under buyer-side mitigation rules, that capacity might not clear the auction, but the utility would be required to Electric utility facilities,such as Southern Minnesota purchase capacity that had cleared the auction. Municipal Power Agency's new gas-fired generating facility in Fairmont, are very expensive to build. There is no reason Thus, the buyer-side mitigation rules could force to artificially inflate prices in our region with a mandatory a public power system to pay for capacity twice— capacity market. first in paying for the construction of its own power plant and then again as a capacity payment to a generator that did clear the auction. 2018 Federal Position Statements/11 243