Energy / Research & Reports

The surprising ground zero for electricity market fights

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Federal Energy Regulatory Commission — Photo: John Shinkle/POLITICO

THE WOODLANDS, TX — “Look to the East and you’ll see a major initiative to transform New York’s electric grid into a cleaner, more efficient system. Look to the West and you’ll find ambitious clean energy legislation in California.

Yet utility executives and federal regulators recently gathered in the Midwest to highlight how this region is ground zero for key electricity-market debates. Anyone concerned with fair, affordable electricity should be paying close attention.

To start, there was the Mid-America Regulatory Conference in June, during which Tony Clark, then of the Federal Energy Regulatory Commission (FERC), said disputes playing out in Illinois and Ohio represent the major challenge facing the electricity industry at a critical juncture in its evolution. These states are part of FERC-regulated wholesale markets that rely upon market signals to determine when power generator companies invest in new units or close an old one. Yet the low costs of natural gas, efficiency, and renewables are pushing some utilities to seek subsidies for their aging, unprofitable coal and nuclear plants.

Clark worries such ‘out-of-market constructs’ would distort price signals and lead to ‘a really, really unsustainable future.’ Environmental and consumer advocates tend to agree, viewing such requests as unnecessary subsidies that would increase electricity bills. Moreover, by propping up uneconomic generators, these subsidies would distort markets in ways that discourage investment and innovation.”

— Dick Munson, POWER

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