NRECA Report Finds Short-term Energy Markets are Having Difficulties Fulfilling Long-term Objectives
Chapman, B.; Kirsch, L.; McHugh, E.; Morey, M.; Wagner, B.; "The Regional Transmission Organization Report Card: Wholesale Electricity Markets and RTO Performance Evaluation," prepared for National Rural Electric Cooperative Association, October 24, 2006.
"The Regional Transmission Organization Report Card: Wholesale Electricity Markets and RTO Performance Evaluation" (Report), commissioned by the National Rural Electric Cooperative Association, evaluates the performance of wholesale power markets for two Regional Transmission Organizations (RTOs) - the PJM Interconnection and the Midwest Independent Transmission System Operator. It finds that the RTOs' short-term energy markets are having difficulties fulfilling the long-term investment objectives that are pivotal for achieving and sustaining the benefits of competitive wholesale electricity markets. This Report is the first in an annual series, with the next edition, including additional RTOs, due to be released in 2007.
The Report notes that RTOs have found only partial solutions to the challenges of (1) encouraging investments in generation and transmission to ensure grid reliability at reasonable cost and (2) identifying and mitigating market power. This failing is due in large measure to the short-term nature of the RTOs' energy markets. The Report notes that the shortage of high-voltage transmission investment limits coordinated regional market competitiveness and efficiency, and the dearth of generation investment, especially in transmission-constrained load pockets, threatens system reliability. The Report adjudges it difficult to reach conclusive findings on the net benefits for ultimate consumers because of the differences in the measures of market performance and market efficiency used and reported by the RTOs, as well as the fact that key data are not publicly available. These proprietary data are essential inputs for a thorough analysis of RTO and market performance.
Comments or questions? Please contact Mat Morey or Laurence Kirsch.
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