Wholesale power markets for beginners

In April, the NEPPA Regional Power Supply Committee will host an informational workshop on an important topic. That is, the way that wholesale electric power is bought and sold in our region through the markets administered by ISO-New England. These markets, as almost everyone in the power industry would agree, are the single most defining element of electric deregulation in New England. Prior to deregulation, wholesale power in New England was sold through contracts between buyers (distribution utilities) and sellers (investor-owned utilities that owned their own generating plants, or independent generators authorized to produce and sell wholesale power). With state deregulation laws passed in all but one New England state in the 1990s however, power generation became an unregulated component of the electric power industry, and power plants had to start selling their power in competitive markets for whatever prices they could obtain. (The theory behind this of course, was that competition would drive power prices down, but that’s another story for another day).

As the markets have evolved, they have become incredibly complex, and subject to frequent changes in their rules of operation. In some cases, changes in the rules have brought about unintended consequences, requiring yet further rules changes. Market participants, made up of hundreds of different companies and organizations representing different interests, make the whole process even more complex, since changes in market rules and operations are subject to review and voting by the participants.

The increasing complexity of the markets has required most participants to invest enormous amounts of time and resources in order to understand market operations and the financial implications of market rules. This requirement poses a heavy burden on smaller participants, who are simply unable to allocate the resources to do this. For public power systems, along with other market participants, this has meant that a small number of their representatives carry the large responsibility of keeping abreast of market changes, understanding them, and advising their colleagues on their implications for voting purposes.

The April workshop is being planned by this group of public power representatives for the purpose of helping their colleagues understand New England wholesale market operations more clearly, by describing the various markets in as non-technical a manner as possible. For this reason, we especially invite Light Board Commissioners or other public power officials who are not directly involved with power supply planning or purchasing, and who therefore may not be familiar with this area of utility management and operations.