Energy Choice
                            

Matters

PUC's Cawley: Capacity Market Non-Performance Penalties During Polar Vortex Were Only $70,000 (Uplift Was $600 Million, Capacity Revenues Were Billions)

May 1, 2015

Email This Story
Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

To put a capper on why capacity markets are bad for customers, consider this:

Capacity market penalties imposed on non-performing generators during January 2014 were estimated to be only $70,000, Pennsylvania PUC Commissioner James Cawley told the National Energy Marketers Association National Restructuring conference.

In comparison, because the capacity market did not assure reliability and PJM operators were forced to take out-of-market actions to maintain reliability, load paid $600 million in uplift charges.

In other words, the capacity market "penalties" offset only 0.01% of the increased uplift charges.

Cawley said that another estimate pegged capacity penalties at $150,000, still meaningless compared to uplift costs.

The penalties are even more infinitesimal compared to total capacity revenues received by generators (and paid by load), which total billions annually.

As he has done before (click here for prior story), Cawley offered a scathing critique of the capacity market, saying that non-performing generators should have been required to pay back all of their capacity revenues, though Cawley noted this was not required under the tariff.

Departing from Cawley's comments and speaking for ourselves, PJM of course has a "fix" for these issues: simply introduce another layer of complexity into the capacity market, via capacity performance, which will only result in an increase in capacity prices.

While the idea of true performance penalties may sound alluring, consider that only a few years ago, PJM was touting a much-vaunted Brattle study as saying the capacity market was "working" and that no major changes were needed, despite consistently ignoring protests from load who pointed out the capacity market's numerous flaws, including no true performance requirements. Do we really think PJM is going to get it right this time?

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Retail Energy Analyst -- Retail Supplier -- Houston
• NEW! -- Pricing Analyst -- Retail Supplier
• NEW! -- Senior Energy Supply Analyst -- Retail Supplier -- Houston
• NEW! -- Vice President, Commercial Sales -- Retail Provider -- Houston
• NEW! -- Regional Sales Manager-Mass Markets -- Retail Supplier -- Houston
• NEW! -- Special Billing Analyst -- Retail Provider -- Houston
• NEW! -- Market Relations Analyst -- Retail Supplier -- Houston
• NEW! -- Billing Analyst -- Retail Supplier -- Houston
• NEW! -- Account Manager -- Houston
• NEW! -- Director of Operations -- Retail Supplier -- Houston
• Operations Analyst -- Retail Supplier
• Analyst, Residential Pricing and Analysis -- Retail Supplier -- Houston
• Regional Sales Manager --Retail Provider -- Dallas, TX