While U.S. power markets remain in “fair to good condition,” FERC’s Office of Market Oversight and Investigations (OMI) remains concerned about “continued deterioration in the financial health of market players,” and what that is doing to market liquidity, OMI Chief Bill Hederman said last Wednesday.

Meanwhile, OMI has placed the ever-volatile western part of the country at the top of its list of regions that the office is keeping a close watch on.

At the Commission’s regular meeting, Hederman reported to commissioners the results of an internal analysis OMI has completed looking at U.S. electricity markets. The OMI chief noted improvements in reserve margins and slight improvements in demand responsiveness, saying that the overall assessment shows the country’s power markets are in good shape.

But the report also lists a number of concerns that OMI has. One trouble spot is that the “financial health of participants continues to weaken.” Hederman underscored the point that this is something “that we need to pay attention to.” He said that the “weakness effects both liquidity in the market and also effects the extent to which there are players and we need more players to have competition.”

The OMI chief also said there are concerns related to generator availability. Specifically, he made reference to “recent developments [related to] new gas-fired, combined cycle availability issues in the Northeast,” where additional generating capacity “has been much lower than one would expect.”

The report lays out OMI’s assessment of U.S. power markets on a region by region basis. Turning first to the West, Hederman told commissioners that “there is the need to keep an eye on this region.” From his point of view, the West continues to face the risk of instability “and we will be actively monitoring what’s going on there, both the market and physical reliability issues.”

Hederman said OMI believes the presence of FERC staff at the California independent system operator (Cal-ISO) continues to be a good thing. Commission staff, working closely with the market monitor, will help the Commission “get on top of this and stay on top of what’s going on there.”

Looking at other parts of the country, Hederman said that the Southeast has seen some improvement, noting the addition of merchant generation and investments in transmission infrastructure. “But despite those physical improvements, the region requires further maturity to reach a level of development that allows workable competition,” Hederman added.

As for the Northeast, Hederman noted that new supplies have come online in the region and that ISOs have addressed transmission constraint issues. At the same time, the OMI plans to keep an eye on load pockets in the Northeast and any market power issues that may crop up.

The Midwest “in general, looks healthy with strong fundamentals,” Hederman went on to say. Among its actions in this part of the country, OMI intends monitor the impact of utility decisions to join particular regional transmission organizations and seams in the region.

Overall, Hederman said OMI will be closely coordinating its market monitoring efforts with ongoing investigations by FERC staff and regional market monitoring efforts.

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