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Public Citizen criticizes electricity "capacity" market

The Austin office of Public Citizen on Tuesday said that paying electricity generators to add capacity to meet growing demand is not the solution to meeting the state's growing demand for power. It hired two consultants to study the existing "capacity market" in the PJM regional transmission market, which serves 13 states and the District of Columbia and has a design most like that being considered for the Electricity Reliability Council of Texas. Those experts said  replicating the PJM-run capacity market would take until 2015 and would cost between $1.2 billion and $2.3 billion a year." The consultants are Anna Sommer, president of Sommer Energy and the report’s principal author, and co-author David Schissel, president of Schlissel Technical Consulting.

   "Our study has found that a capacity market takes too long, costs too much and won’t be enough to keep the lights on," said Tom "Smitty" Smith, director of Public Citizen’s Texas Office. "We’d be better off developing a new market structure that creates incentives for people to use less electricity." Public Citizen said "a capacity market would just reward the owners of existing power plants with substantial windfall profits."

A link to the study is here.

The Public Utility Commission of Texas has been discussing this issue for more than a year and will consider it again on Thursday. It has already raised the ceiling price in the Texas wholesale electricity market to help give generators more incentive to build new power plants. ERCOT managers have warned that the grid's safety margin between capacity and projected demand could run uncomfortably short as soon as this summer.

Public Citizen said it also plans to release this week a study looking at whether a capacity market would be enough to help Energy Futures Holdings, the state's biggest power generator that is struggling with a big debt load.

-- Jim Fuquay



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