In today’s AUSenergy News Update: Demand response court ruling means Chicago electricity prices could increase by 20%, Dynegy may seek to move its Illinois generation to PJM, and this winter’s power prices are likely to be lower.
Summary: A court ruling that would halt demand response could cause electricity prices to increase by 20%. The ruling in May by a three-judge panel of U.S. Court of Appeals for the D.C. Circuit held that PJM and other regional grid operators around the country don’t have the legal authority to purchase demand response. Only states can do that, the court ruled in a challenge brought by an association of power generators that includes Exelon.
AUS Comment: Demand response is a valuable and environmentally-friendly resource. Paying big power users to reduce their energy consumption provides as much capacity to meet peak electricity demand as a big nuclear plant. But power companies such as Exelon want to eliminate it to increase their own profits, which may mean that customers’ electric bills in Illinois could increase by 20% above the 7.5 cents per kWh currently being charged by ComEd.
Summary: Unless MISO changes its capacity market rules, Dynegy said that it may seek to move its Illinois generation to PJM. MISO’s voluntary capacity market uses a vertical demand curve that procures resources one year in advance while the PJM market uses a sloped demand curve that obtains capacity three years in advance. Critics say MISO’s system makes it hard to attract capital investment and that its vertical demand curve causes excessive price volatility.
AUS Comment: Dynegy isn’t the first company to show interest in switching from one RTO to another. Back in 2002, Commonwealth Edison (ComEd) asked FERC for permission to leave MISO and join PJM because both parties were unable to reach an agreement on new rate structures. Changes must happen to the MISO capacity market in order to protect the reliability of the system and their consumers.
Summary: Natural Resources Defense Council Senior Attorney, John Moore, believes this winter’s power prices are likely to be lower for several reasons. Most notably, Utilities are working to avoid the challenges brought on by last year’s polar vortex. Electric transmission grid operators are taking actions to keep consumer power costs in check while strengthening reliability no matter what the weather. Regulators are working on solutions to improve coordination issues between gas and electricity markets. A mild summer has helped bring prices to near-normal levels. In the long term, increased investments in renewable energy and energy efficiency will reduce both wholesale and retail energy prices while bringing their own reliability benefits.
AUS Comment: Mr. Moore’s predictions are optimistic and we will continue to closely monitor energy prices.
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