6.6. ERMUSR 01-11-2005 - Laserfiche WebLink

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Generation Market Power Must Be Addressed Through a New Market-Based Rate Policy 1~1any small AP PA members are facing very serious threats to their viability- because of lack of availability of long-term Grm transmission and increasing generation consolidation. These systems get few if any bids from suppliers, are often unable to obtain transmission to reach alternative Many Small APPA IrIe111herS ~ sources of power, and are Laced with dramatic increases from are facing very serious local suppliers ~~~ith significant market power. threats to their viability ~'PA member experience demonstrates that merely imposing beCause~Of IaCk Of "global" generic conditions (st.ich as RTO participation) avallablllty Of long-term on market-based rate authorizations may have substantial firm tranSmlSSlonand unintended consequences. require years to put in place, IncreaSing generatlon and may or may not address the underlying problems (e.g., COnS011dat10n, generation market dominance compounded by a dearth of long-term firm transmission capacity to obtain access to competitive suppliers). Lack of competitive conditions must be addressed through a nc~~- market-based rate policy that ensuresjust and reasonable wholesale rates at all times.`"i FF.RC's KTO policy, as well as its market-based rate policy, assumes that competitive markets (supplemented in KTO regions by RTO market monitoring and mitigation regimes) will produccjust and reasonable rates. In man}~ real-world instances, this has proven not Co be the case. On a purely practical level, if the prices for power in "competitive" rnarkcts (either RTO-run or bilateral) exceed for sustained periods the costs E~or po~~~er that tivould have resulted under a traditional cost-of- service regime, this disparity will eventually bring calls for a return to traditional cost-of~-service regulation Ior electric generation. For these reasons, FERC must undertake a "bottom up" review and update of its market-based rate policy, as it applies both in RIO and non-KTO regions. I-fowever, this "bottom up" re~~iew must not bccorne a pretext t.o delay FLRC actions needed to address generation and transmission market power problems on a local or company-specific basis. Public power utilities participate in many different local and regional energy markets, most of which are flawed at best. ~~~'here these wholesale markets arc not competitive, 2~ Stale of Cc~lijornirc, ex reG Bill Lnckyerv. FLPC, 383 F.3d 100G (9'° Cir. 200-0 (rehearing and rehearing en bane sought October 2~, 2004) (FERC has continuing obligation under its market-based rate regime to ensure that. rates remain just and reasonable). Restructuring at the Crossroads: FERC Electric Policy Reconsidered 25