Comments on FERC's Standard Market Design Proposals

Paul Joskow

Working Papers from Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research

Abstract: TABLE OF CONTENTS I. EXECUTIVE SUMMARY II. LONG TERM RESOURCE ADEQUACY 1. Attributes of “Ideal” Competitive Spot Wholesale Markets 2. Market Imperfections 3. Institutional Imperfections 4. Empirical Evidence on Net Revenues During Scarcity Conditions 5. Scarcity Rents in New England 6. Policy Responses 7. Assessment of Proposed Resource Adequacy Rules III. TRANSMISSION INVESTMENT, PARTICIPANT FUNDING AND CRRs 1. Summary of Conclusions on Transmission Investment Framework 2. Definitions: Merchant Investment, Participant Funding and Rolled-In Pricing 3. Alternative Approaches to Participant Funding 4. Attributes of Real Transmission Investment Opportunities 5. Merchant Investment Will Not Play a Major Role in Meeting Transmission Investment Needs 6. Flaws in the Merchant Transmission Theory 7. There is no Basis for Placing the Full Burden of CRR Shortfalls on TOs 8. An Alternative Transmission Investment Framework IV. MANAGING CONGESTION VS. ALLOCATING AVAILABLE TRANSMISSION CAPACITY EFFICIENTLY V. PERFORMANCE-BASED REGULATION SHOULD BE ADDRESSED IN THE FINAL RULE Figure 1: COMPETITIVE WHOLESALE SPOT MARKET: “NORMAL” CONDITIONS Figure 2: RATIONING SCARCE CAPACITY Table 1: SCARCITY RENTS IN NEW ENGLAND Table 2: PJM TRANSMISSION CONGESTION CHARGES Table 3: PJM TRANSMISSION CONSTRAINT EVENT HOURS Table 4: PJM TOTAL OPERATING EXPENSES

Date: 2003-01
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