StaffSummary - Electricity Market Design and Structure...

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Electricity Market Design and Structure Docket No. RM01-12-000 October 15-19, 2001 Staff Summary of Discussions These notes reflect what staff heard from the panelists, including any points of consensus among those at the table. We do not intend to suggest, nor do we believe, that the notes reflect industry-wide consensus. Further, we recognize that many of the session topics are tied to one another and difficult to separate, so there are areas of overlap from one session to another. The primary purpose of releasing these notes is to focus the comments of those with alternative opinions. In that regard, it would be helpful to staff if commenters addressed their comments to points made in these notes. Monday, October 15 (AM): RTO Markets and Design: Required RTO Markets Peter Cramton, Professor, University of Maryland The Honorable David F. Hadley, Commissioner, Indiana Utility Regulatory Commission Mark D. Kleinginna, Corporate Energy Director, Ormet Corporation John Meyer, Vice President of Asset Commercialization, Reliant John L. O'Neal, President, Mirant Mid-Atlantic Roy J. Shanker, Ph.D. RTOs should operate a real-time energy market and ancillary service markets to procure regulation, spinning reserves, and perhaps non-spinning reserves markets. However, there was some disagreement about whether an RTO should be required to operate a day-ahead energy market. No one argued that an RTO needs to operate energy markets farther forward than day-ahead. Some panelists noted that bilateral contracts are an essential feature of such a market and in fact only a small amount of power is traded in Northeastern spot markets. The RTO need only schedule such bilateral contracts, and let market participants choose whether to rely on bilateral contracts or spot transactions. Most participants are likely to manage risks better using bilateral markets, but they will also frequently use the spot market as a result of load variation and generator outages. One panelist suggested that a bid-based balancing market, by itself, may not allow recovery of all legitimate fixed costs, especially in the absence of price-sensitive demand-
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RTO Week Summary 2 side bids. Others noted that installed capacity markets or operating reserve markets could set prices that recover fixed costs. The real-time energy market, the regulation market, and the operating reserves markets should have a standard market design. Standardization of these markets will reduce seams problems and increase market transparency. The markets should be based on supply and demand bids, and should establish transparent prices. The market should be designed to allow different energy prices to be established in different locations where transmission constraints exist. (There was some disagreement about whether the locations should be individual nodes or broader collections of nodes. However, one panelist suggested that, with LMP, nodes could be aggregated to facilitate
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This note was uploaded on 11/02/2011 for the course ECON 301 taught by Professor Gandhi during the Spring '01 term at Andhra University.

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StaffSummary - Electricity Market Design and Structure...

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