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At QER Roundtable, EPSA Recommends Competitive Pricing Improvements

February 11, 2016 By Cheryl Kaften

On February 4, a panel of energy industry experts gathered at the Congressional Auditorium in Washington, D.C., for a roundtable discussion about the second installment of the U.S. Department of Energy’s Quadrennial Energy Review Second Installment–An Integrated Study of the Electricity System. John Shelk, CEO of the Electric Power Supply Association (EPSA), the national trade organization for wholesale suppliers, delivered a speech early in the program – advocating on behalf of a free market offering competitive opportunities and challenges.

“From our perspective,” Shelk said – speaking as a member of Panel 1 Bulk Power Generation and Transmission: How Can We Plan, Build, and Operate the Appropriate Amount for Future Needs? – “competitive markets remain the best model to manage challenges and consumer costs, because markets are inherently more flexible, adaptable, and place more risks on investors than consumers. “

On behalf of EPSA, Shelk made two near-term suggestions for improving the energy industry:

  1. Implement electric energy pricing improvements soon. EPSA, Shelk said, joined the Edison Electric Institute, Natural Gas Supply Association, and America’s Natural Gas Alliance in supporting the Federal Energy Regulatory Commission’s (FERC’s) electric energy price formation reforms to better determine Day Ahead and Real Time prices. Those prices, he explained, are “tightly bounded by FERC-approved tariffs and grid operator actions.” He noted that, under the leaderships of FERC Chairman Norman Bay, as well as that of his colleagues, “much work has been done in recent years.” However, Shelk warned, “Absent more accurate prices, market participants will receive distorted and insufficient information about when, where, and how to invest to meet future needs.”

With that said, the EPSA CEO recommended, “This year, FERC should take final action on proposals made too late and pursue additional ones in reform areas not already covered by pending proposals.”

  1. Resist selective, discriminatory re-regulation in restructured states. States have an important role in regulating power generation, with each making a fundamental choice about whether to rely on markets or cost-based regulation, Shelk pointed out, noting that, “When a state chooses cost-based generation, it can obtain consumer savings through competitive procurement.” He cautioned, “Once a state chooses markets, inviting competitive suppliers to put their capital at work and at risk, they have to let markets work. States cannot toggle between markets and cost-based regulation – nor shield some generation from market forces buffeting everyone else.”

Doing so, he said, “means that future needs cannot be made on a market basis.” Going forward, Shelk warned, “Given the interstate nature of the wholesale markets in which states choose to participate, it is critical to resolutely act to prevent wholesale market distortions emanating from discriminatory state actions.”

Shelk also discussed a number of factors that the industry must consider in the medium- and longer-term – among them, reliability, the Clean Power Plan, and alternatives to existing dispatch models.

He ended by saying, “The country is entering exciting, yet uncharted waters, full of vast potential to harness the ingenuity of our economic system, including competition in power markets ….”

Other members of the first roundtable panel included Gerry Cauley, CEO, North American Electric Reliability Corporation; Tom Kuhn, President, Edison Electric Institute; Sue Kelly, CEO, American Public Power Association; and Jay Morrison, Vice President– Regulatory Issues, National Rural Electric Cooperative Association.

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