EPSA: APPA Wholesale Electricity Market Proposal 'Would Turn the Country Backward'

March 5, 2008 // Published as a news service by IHS

Tools for Engineers IHS sells standards collections and regulatory information for the oil & gas, petrochemical and utilities industries. For more information and a price quote, please complete the form below. API Collections ASME BPVC ASTM Collections CyberRegs - Compliance library IHS Standards Expert - Standards DB IEEE Collections NEMA Collections AWS D1.1 Welding Code First Name: Last Name: Email address:

The Electric Power Supply Association (EPSA) expressed serious disappointment in a long-awaited American Public Power Association (APPA) announcement on how it proposes to address wholesale electricity market issues after several years of consideration.

According to EPSA, the APPA proposal, which recommended reducing or eliminating centralized markets, would turn the country backward and actually harm the two-thirds of the nation's consumers and economy served by organized regional wholesale electricity markets.

A statement released by John E. Shelk, president and CEO of EPSA, on Feb. 27 said:

"Growing demand for electricity and the pressing need for innovation to address climate change require robust organized wholesale markets that provide sustained market-based price signals, rather than the discredited cost-based regime that APPA seems to favor, despite its claims to the contrary today.

"In organized markets, it is essential that ISOs [Independent System Operators] and RTOs [Regional Transmission Organizations] continue to administer centralized wholesale markets. Any changes should make pricing mechanisms more reflective of economic realities imposed on all of us by today's global economy, not less. Consumers need to be empowered to address these realities, not led to believe they can be avoided.

"APPA's announcement today admits that it is still developing the details of its proposal and concedes that its approach 'will take time, with many thorny transition issues to be resolved.' This is time the nation does not have, if the unprecedented level of investment in large-scale, multi-decade projects, each costing in the billions of dollars, is to occur in a timely manner.

"Calls, like today's, to radically change wholesale markets, particularly when the latest changes in those markets are just now being implemented and the early signs are positive, can only hinder investment by increasing the uncertainty over how electricity will be priced in the future.

"As a nation, we cannot be short-sighted about electricity when climate change and the need for new generation tell us that we need long-term solutions. Consumers need reliability, they need demand response, they need improved power plant performance and efficiency, they need new generation capacity, they need new technologies and they expect reduced greenhouse gases. By all these measures, competitive wholesale electricity markets are responding and are part of the solution.

"Rather than proposing constructive improvements the past year while FERC [Federal Energy Regulatory Commission] was seeking them, APPA waited until the week after FERC voted to issue its proposed rulemaking, without expanding its scope as APPA had sought without justification, before coming forward. It is noteworthy that four of the five FERC commissioners are from regions without RTOs and ISOs. The entire commission and its staff spent the past year carefully and thoughtfully reviewing the facts, not emotions, and correctly concluded that the organized markets need to be refined, not rejected.

"EPSA is particularly puzzled by APPA's call today to 'open a dialogue' with RTO supporters, including FERC. First, FERC has already been doing that for well over a year. Second, EPSA sought such a dialogue with APPA in December 2006 and again several times last year and was flatly turned down.

"While EPSA was reassured by APPA's comments at last week's NARUC [National Association of Regulatory Utility Commissioners] Electricity Committee that it did not favor a return to rate-based generation in restructured states, today's proposal seems to be a back-door path to that very result.

"What APPA is proposing sounds an awful lot like creating an independent coordinator of transmission (ICT), a surprising proposal given the dissatisfaction of leading APPA members with the existing ICT in Entergy's region.

"At the end of the day, what will benefit consumers and truly protect them from peril are well thought-out, realistic solutions to what is actually challenging energy markets, including the factors that are increasing the cost of all forms of energy all around the world."

Source: Electric Power Supply Association (EPSA).