Energy Legal Blog

FERC Proposes Sundry Changes to Organized Power Market Rules

In a new rulemaking, the Federal Energy Regulatory Commission (FERC) has resisted pressure from various groups to examine the foundations of organized wholesale power markets administered by RTOs and ISOs, and instead proposes various tweaks to the rules in these markets. 

FERC rejected the calls by the American Public Power Association and others who have argued that organized power markets are failing to produce just and reasonable rates and that FERC should engage in fundamental reform of RTOs and ISO.  Instead, FERC focused its proposals on areas where it stated that improvements were supported by the law, facts and economic theory, but which have also been high-profile of late, whether due to advocacy by individual Commissioners (such as demand response) or because of bitter disputes within or about RTOs (such as market monitoring).  The specific proposals fall into four categories.

          Demand Response

o        Require RTOs and ISOs to accept bids from demand response resources in their markets for certain ancillary services comparable to other resources.

o        During a system emergency, require RTOs and ISOs to eliminate a charge to a buyer for taking less energy in the real-time market than it purchased in the day-ahead market.

o        Require RTOs and ISOs to permit an aggregator of retail customers to bid demand response on behalf of retail customers.

o        Modify market rules to allow market-clearing prices, during a period of operating reserve shortage, to reach a level that rebalances supply and demand so as to maintain reliability while providing sufficient provisions for mitigating market power.

Long-term Power Contracting

o        Require RTOs and ISOs to dedicate a portion of their websites for market participants to post offers to buy or sell power on a long-term basis.

Improved Market Monitoring

o        Require each RTO and ISO to provide its Market Monitoring Unit (MMU) with access to market data, resources and personnel necessary to carry out its duties.

o        Require the MMU to report directly to the RTO or ISO board.

o        Expand the list of recipients who would receive MMU recommendations regarding rule and tariff changes, and broaden the scope of behavior reported to FERC.

o        Remove the MMU from tariff administration, including mitigation, and require each RTO and ISO to include in its tariff ethics standards for MMU employees.

o        Expand dissemination of MMU market information to a broader constituency, with more frequent reports.

Responsiveness to Customers and Stakeholders

o        Adopt principles for RTOs and ISOs to ensure inclusiveness, fairness in balancing diverse interests, representation of minority positions, and ongoing responsiveness.

Comments on the proposed rules are due April 21.  In addition to the proposed reforms, FERC also ordered a technical conference to be held to consider proposals for modifying the design of organized markets, as well as a separate technical conference to discuss barriers to demand response in organized markets.