The future looks "very bright" for organized U.S. power markets waiting in the wings, FERC Chairman Patrick Wood told an audience of energy marketers gathered in Washington, DC, last Wednesday.
"In all these kind of markets to come, which are the markets beyond ones which those of you are operating in, the future looks very bright, and I'm very hopeful," Wood told the National Energy Marketers Association's (NEMA) annual meeting and national energy restructuring conference.
"This one was a lot harder to get to than gas, but I think the payoffs are going to be that much bigger," he told the group of energy marketers. "This is about a $300 billion a year industry that we're talking about with power."
Wood noted a recently completed cost-benefits study looked at the regional benefits of having a real-time balancing market in the Southwest Power Pool (SPP), "which is effectively economic dispatch -- one of my favorite concepts of organized markets because that brings money coming to customers."
Wood said the cost-benefits study, "which I thought was very conservative," shows $1.2 billion in benefits. "There are some costs -- I think about over 10 years, the costs are estimated to be about $100 million on the side of the RTO and $100 million on the side of the transmission-owning companies."
Meanwhile, Wood also referenced a study related to a possible GridFlorida RTO. That report found that going to a full economically dispatched market "there would bring $980 million in benefits over 10 years in just one state." Wood said that the offsetting costs "were unusually inflated, which our staff are down there today [Wednesday] talking honestly about with the folks down there to make sure they don't throw the baby out with the bath water."
Wood also underscored the point that organized power markets enhance reliability of the U.S. power grid. Case in point is the recent experience of the Midwest Independent Transmission Operator (MISO), which launched new energy markets in April.
"We saw on the second day of the MISO market, in western Wisconsin, a line go down," Wood noted. "It tripped and fell, requiring MISO to go forward and do the transmission loading relief." But then "it kind of occurred to everybody [at MISO] that you don't have to wait two hours to do a redispatch."
Rather, MISO officials were able to look at locational marginal prices (LMPs) in Minnesota and Wisconsin and get the line in question back up and running in a matter of minutes. "The people's power was not curtailed," Wood noted. He said that officials at Wisconsin-based American Transmission Co. (ATC), an independent transmission company, have been "thrilled about this. They have little maps that look like weather maps of LMP prices before, during and after. You can kind of tell the story -- how price signals send the signals for reliability purposes."
Noting organized power markets can bring a wide variety of benefits to customers, Wood said, "I think the newest [addition] to the litany of positive things that happen for markets -- wholesale and retail -- is improved reliability." Jim Torgerson, CEO of MISO, also emphasized the reliability benefits of MISO's new markets in a conference call with reporters last month.
Meanwhile, Wood noted that recently there have been calls for a reevaluation of the progress of wholesale electricity markets. Concerns voiced to FERC in this regard fall into three main categories, the FERC chairman noted: (i) transmission expansion and rights of the transmission grid; (ii) resource adequacy; and (iii) accountability of the market institutions (i.e., the accountability of RTOs and ISOs to stakeholders).
Addressing the first category, Wood said that with the possible exception of New York with regard to economic planning, "I do see that a lot of transmission will continue to be in the regulated rate base over the years to come."
There will be some exceptions, he said, pointing to projects like the Neptune transmission project (New York-New Jersey) and Cross Sound Cable (Connecticut-Long Island).
"But I think AC merchant transmission is going to be very difficult to build," he said, adding that "I don't think we're going to see market-driven construction of transmission. I think the LMP signals and the price information that we get from the markets, both in New York and elsewhere, are going to be sufficient to tell us where we have persistent congestion."
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