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The American Public Power Association (APPA) has released its proposal to reform wholesale electricity markets run by regional transmission organizations (RTOs) under federal jurisdiction. The Competitive Market Plan was developed as part of APPA's electric market reform initiative (EMRI). Studies conducted under APPA's EMRI effort have documented extensive problems in RTO-run wholesale power markets, and led APPA to the conclusion that these markets are not producing "just and reasonable" prices, as required under federal law.

The overarching goal of the plan is to create actual competition through a market structure that is more consumer-oriented, balanced and transparent. Among other outcomes, the plan would do the following:

- increase the availability of long-term power supply contracts (i.e., 10 years or more) needed to finance new electricity generation facilities - particularly renewable generation facilities - thereby enhancing the amount of future supply;

- reduce opportunities for generators to exercise market power; and

- reduce price volatility and establish wholesale electricity prices that better comport with the Federal Power Act's just and reasonable standard.

A primary feature of the APPA plan is an optimization market that would replace the current RTO-run spot markets with a market in which buyers and sellers can purchase or sell incremental amounts of electricity so that precise demand in each hour can be supplied. At least at the outset, prices in the optimization market would be determined using a single price clearing mechanism, but supplier bids would be limited to their actual costs of supplying energy, according to the APPA.

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SOURCE: American Public Power Association

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