FERC Chair Raises Spectre of Re-regulation; NRG CEO Suggests Market Re-design

FERC Chair Raises Spectre of Re-regulation; NRG CEO Suggests Market Re-design

Apr 25, 2017

by Margarita Fournier; Copyright 2016 by Competitive Assets, LLC.  All rights reserved

The Houston Chronicle recently ran two stories that touched on the “sudden shifts” in the country’s power markets, which could lead some regulators to step in to avoid disruptions. On 4/22/17, HC wrote about Cheryl LaFleur’s speech at the Federalist Society, discussing market changes – from renewables’ growth to nuclear plant closures – and the real possibility that states could re-introduce regulation because they “’aren’t satisfied with the set of resources being selected by the markets,’ LaFleur warned. That is driving concern among free market proponents like LaFleur, who worry that regulators’ attempts to control what types of generation get built will cause uncertainty in the markets.” The article mentions last year’s report by the Texas Coalition of Affordable Power, which showed that Texans in deregulated parts of the state paid about 15% more than in regulated regions.

On 4/21/17, HC’s columnist concluded that “[s]omething has got to give when it comes to how Texas generates, transmits, and sells electricity. In particular, Texas lawmakers need to reconsider how generators get paid for wholesale electricity by ERCOT, the semi-governmental agency that manages the grid in most of Texas. Prices have dropped so low that electric companies say they cannot afford to invest in the new power plants the state will eventually need to keep the lights on.” The author recounts a conversation with NRG’s CEO Mauricio Gutierrez, who noted profound market disruptions, and would like to see more compensation for dispatchable generation, used when the wind is not blowing, and less emphasis at ERCOT on new transmission lines. “Unless regulators redesign the wholesale market to eliminate these distortions, generators will shut down more coal and natural gas plants, make Texans more dependent on renewable energy and endanger the grid’s reliability, Gutierrez said…. Gutierrez has proposed some short-term technical changes to the wholesale market that he says will mitigate these problems for two or three years until renewable energy becomes a bigger portion of ERCOT. But lawmakers should start preparing now for a major overhaul of the wholesale market in the years to come.”

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