Advanced Energy Perspectives

It’s no secret that Fortune 500 companies want more advanced energy. Over the past five years, these companies have signed contracts for more than 24 GW of large-scale renewable energy, pursued thousands of onsite solar installations, and embraced newer technologies like battery storage. The role of organized competitive wholesale markets as enablers of advanced energy procurement by large buyers is, however, a bit of a trade secret. Which is too bad, because policymakers could meet the needs of businesses and accelerate the transition to a cleaner economy all at once by expanding and reforming these markets. Here’s how.

Over the past several months, our Indiana team has been intervening in a proceeding before the Indiana Utility Regulatory Commission (IURC) to examine Duke Energy Indiana’s coal self-commitment practices. Self-commitment refers to a process by which a utility instructs the regional market within which it operates – in this case, the Midcontinent Independent System Operator (MISO) – to dispatch the utility’s own resource unit regardless of whether or not it is the cheapest available at the time. Many vertically integrated utilities have been using this mechanism to run their expensive coal plants more frequently than economics would otherwise dictate. They do this because it is not their shareholders who suffer financial losses, but rather their captive ratepayers: When the cost to operate these units exceeds the market clearing price, utilities pass along the difference to customers, in part through fuel adjustment clause proceedings. AEE is working to curb this self-serving utility practice.

In October, the Federal Energy Regulatory Commission (FERC) issued a long-awaited order on plans submitted by PJM Interconnection (PJM) to implement the broad Minimum Offer Price Rule (MOPR) the agency ordered in late 2019. As we’ve detailed in prior posts, the broad MOPR that FERC has imposed in PJM and other regions threatens to exclude advanced energy resources supported by state policies from the centralized capacity markets, a result that could derail state clean energy ambitions and unnecessarily raise costs to consumers. While not approving the compliance plan in its entirety, FERC’s order did accept PJM’s proposal to provide flexibility in the application of the MOPR that could mitigate some of the MOPR’s anticipated negative effects, without eliminating them entirely. Meanwhile, court challenges to FERC’s MOPR policy in PJM are poised to begin, and the broader impacts of FERC’s MOPR-like policies in New York and New England continue to play out, all setting the stage for a new chapter in this ongoing state-FERC saga in the new year, this time with new FERC leadership.

Creation of a wholesale energy market in the West got a stamp of approval from Nevada last week when a legislative committee sent a letter to state officials urging them to support western regionalization – and citing AEE’s principles for doing so. “The West may meet its near-term clean energy policy targets” with current arrangements, committee chair Daniele Monroe-Moreno wrote. “However, to achieve long-term clean energy targets, western states and utilities must move towards even more flexible options and coordinated operations.”

One of the simplest concepts governing the electric power system for more than half the country – competitive wholesale markets deliver reliable power at the best price for customers – is also among the most complex in practice. Our nation’s system of  Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) proves that. Navigating the world of RTOs and ISOs can be challenging, but participating in the markets they manage is critical to the success of advanced energy companies. AEE’s recent webinar, “Everything You Wanted to Know about RTOs But Never Could – Until Now,” moderated by AEE General Counsel and Managing Director Jeff Dennis, dug into how RTOs and ISOs operate and how to utilize AEE’s PowerSuite platform to track, navigate, and participate in RTO/ISO processes.