A number of energy trade groups have filed comments with the Federal Energy Regulatory Commission (FERC) on the organizations’ jointly-developed principles for Energy Market Price Formation Reforms.
The comments filed by the Edison Electric Institute (EEI) Electric Power Supply Association (EPSA), Natural Gas Supply Association (NGSA), Nuclear Energy Institute (NEI) and America’s Natural Gas Alliance (ANGA).
“In order to provide the market signals necessary to support the investment and customer response needed to maintain reliability, energy prices, to the extent possible, should reflect the true value and marginal cost of providing power to the grid,” the trade groups said at the outset of their March 6 comments.
The trade groups asked FERC to direct each independent system operator (ISO) or regional transmission operator (RTO) to consult with their stakeholders and submit a plan to FERC by a fixed date.
“The plan should detail how current market rules and practices support the principles; identify concrete steps to change market rules and practices as necessary to support the principles; and, establish a timeframe for implementation,” the trade groups said.
The trade groups also called for periodic reporting to allow FERC to monitor timely implementation of the regional plans.
For starters, the trade groups want dispatch-based pricing. Wholesale markets should provide accurate day ahead and real time price signals, the groups said.
The groups said this includes observing the principles of dispatch-based pricing so that the cleared locational marginal price (LMP) is as consistent as possible with the marginal cost of operating the system, which includes the following:
**Reflect in market clearing prices all units that are run, taking account of costs such as start-up or no load costs.
**Include in operator modeling or algorithms the value of or services from all units in the market clearing price, including block-loaded or ramping units, operating reserves, units providing voltage support or reactive power, or units run in response to reliability events or needs.
**Reflect all operator actions, including for reliability events, in the Day Ahead or Real Time market clearing price.
**Reflect shortage or emergency situations in market clearing prices to provide needed investment signals.
**Recover all reasonable and supportable costs incurred in unexpected circumstances, particularly when such costs are incurred in response to operator directives.
The trade groups also go on to say that the system must have both commitment and transparency.
On the transparency issue, “Out of market actions and payments in the Real Time and Day Ahead markets should be minimized as they mask market action or needs and are not hedgeable by market participants,” the trade groups said.