APPA's Competitive Market Plan - American Public Power Association

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20 APPA’s Competitive Market Plan: 2011 Update www.PublicPower.org
V. Bilateral Contracts O ne of the core features of APPA’s RTO market redesign proposal is that LSEs would serve their loads with a combination of owned generation/demand-side resources and generation/demand-side resources obtained under longer- term bilateral contracts. Market participants (wholesale buyers and sellers) could enter into any contractual arrangement acceptable to both parties, subject to state and RTO requirements governing the resource portfolio of each LSE and the eligibility of the seller for market-based rate authority (as discussed below). APPA is not in this Plan recommending any requirements for LSEs to enter into bilateral contracts, nor does this plan place any restrictions on the amount or percentage of power purchased through the optimization market. Rather, the reforms proposed here are likely to both incent and remove barriers to bilateral contracting, and reduce potential for excess earnings in the current market structure. An important component of the Competitive Market Plan is the phase-out of existing locational capacity markets. Payments established under auctions for future delivery years would still be honored for their terms, but going forward past that time, generation owners and demand response providers would need to make contractual arrangements to sell their resources, or sell their resources into the RTO’s optimization market without the financial backstop of separate capacity market payments. To support the financing of new power plants, ownership arrangements or bilateral contracts of at least 10 to 15 years in length would likely be needed. Such arrangements and contracts would also provide needed price stability for LSEs and their retail customers. APPA, however, is not in this proposal specifying minimum or specific contract lengths and terms. Instead we recommend, and expect, that each LSE would likely develop a portfolio of diverse resources of varying lengths and terms. The Competitive Market Plan is intended to improve the overall market environment by making a significant number of long-term resource arrangements of 10 years or longer readily available to buyers and sellers. The RTO’s optimization market would allow for residual optimization of LSE energy supply arrangements and balancing in real-time. APPA originally proposed these market structure changes in response to reports from APPA members and large end-use customers that in RTO markets, long-term, reasonably-priced bilateral contracts were difficult to arrange (especially full-requirements contracts). 56 Many buyers reported 56 Communications with APPA members, and testimony summarized in “Executives describe real-world problems with RTOs,” Public Power Daily, Feb. 29, 2008, http://publicpower.org/newsletters/ppdailydetail.cfmItemNumber=21269&sn.ItemNumber=0 (Login required) www.PublicPower.org APPA’s Competitive Market Plan: 2011 Update 21
Page 1: 2011 Update APPA’s Competitive Ma
Page 4 and 5: Acknowledgements APPA would like to
Page 6 and 7: Preface to the Competitive Market P
Page 8 and 9: in PJM, the recent battles over mea
Page 10 and 11: the New England generators filed a
Page 12: light of these new EPA regulations.
Page 15 and 16: supply products in determining sell
Page 17 and 18: I. Introduction T his paper present
Page 19 and 20: of the markets from citing these lo
Page 21 and 22: capacity market, resembling PJM’s
Page 23 and 24: II. Background T his plan originate
Page 25 and 26: light on whether such prices are ju
Page 27 and 28: difficult measurement and verificat
Page 29 and 30: power sold through the optimization
Page 31 and 32: IV. Role of State Regulatory Agenci
Page 33 and 34: depreciated units and other resourc
Page 35: APPA is most concerned by the Commi
Page 39 and 40: In addition to the financial incent
Page 41 and 42: No data on bilateral contracts was
Page 43 and 44: VI. Market Power W ithout new gener
Page 45 and 46: Moreover, MM State of the Market re
Page 47 and 48: Limited-run resources (e.g., genera
Page 49 and 50: evamped optimization market with th
Page 51 and 52: LTTR along with approval of new net
Page 53 and 54: ased security-constrained economic
Page 55 and 56: determined by the states in the pow
Page 57 and 58: possible that many projects that so
Page 59 and 60: the RTO-wide resource adequacy requ
Page 61 and 62: independent third party designated
Page 63 and 64: XI. Transmission Planning A paralle
Page 65 and 66: XII. Transition Issues I t has now
Page 68 and 69: APPENDIX A Division of Responsibili
Page 70: esource mix with an overreliance on

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