On September 17, 2015 the Federal Energy Regulatory Commission (FERC) published the Notice of Proposed Ruling that is aimed at fixing the price formation mechanisms for the power markets.
FERC proposes to address two practices that fail to provide appropriate signals for resources to respond to the actual operating needs and properly reflect system conditions and costs to serve consumers when compensating resources within organized markets:
- Requiring that each organized market align settlement and dispatch intervals by settling real-time energy and operating reserves transactions financially at the same time interval that it dispatches energy and prices operating reserves. Currently, while all markets dispatch resources sub hourly, some settle those transactions based on an hourly integrated price – a price that equals the average price for all individual dispatch intervals across an hour. The proposed settlement interval reform provides incentives for market participants to follow commitment and dispatch instructions, make efficient investments in facilities and equipment and maintain reliability.
- Requiring that each organized market trigger shortage pricing for any dispatch interval during which a shortage of energy or operating reserves occurs. In some markets a shortage is required to last a minimum time period before shortage pricing is triggered. As a result, there is a delay between the time when a system experiences a shortage of energy and operating reserves and the time when prices reflect those shortages. The proposed shortage pricing trigger reform will require a shortage of any duration to be reflected in prices, and will thus compensate resources for the value of the services they provide when the system needs energy or operating reserves.
Effective Date: September 17, 2015