Volume 02 Number 152 Monday, August 9, 1999 ISSN 1522-7561
News

Electric Power
National Energy Marketers Association
Approves Principles for Merchant Plants

Anticipating increased competition, the National Energy Marketers Association (NEM) has approved a set of principles designed to help merchant power plants enter the electricity market, NEM president Craig Goodman told BNA Aug. 6.

Merchant power plants are owned by independent power producers and generate electricity expressly for sale on the wholesale electricity market.

"We want as level of a playing field as possible to allow the open market to work," Goodman said. "Competitive generation and power marketers must have open and non-discriminatory access to electric transmission services on a basis comparable to that of the utilities in order for consumers to derive the maximum benefit."

In the principles, approved by the group's executive committee in July, NEM asserted that independent power producers would benefit the market in a variety of ways.

For example, they would build merchant power plants to meet electricity demands whenever and wherever needed, resulting in lower prices for energy and capacity as the new power plants compete for market share.

Developers, rather than captive ratepayers, would have to bear the risk for these new investments, and they would not incur stranded costs that ratepayers would have to pay off.

Furthermore, the increased presence of merchant plants would increase wholesale competition while fostering retail competition.

To help independent power producers realize these benefits, NEM's principles call for:

the elimination of regulatory barriers to the development of merchant generation capacity;

public service commission help in identifying and removing statutory and legal impediments;

generation ownership and control to be kept separate from ownership and control of transmission and retail distribution;

public service commissions to recognize that independent developers would accelerate the transition to competition and would ensure reliability, although existing utilities should not be barred from constructing new generation capacity;

all generation to compete on price-to-earn dispatch and market share;

open and nondiscriminatory access to electric transmission services comparable to utilities;

transmission interconnections for merchant plants provided on a non-discriminatory basis;

all interstate transmission services to be transparently scheduled and posted on an electronic service;

incumbent generation not to constrain the market via an artificial priority on the transmission service;

a recognition that developers will not risk low prices stemming from over-supply without a potential for higher prices stemming from short supplies;

an understanding of price spikes, since high power prices of short duration may cost less in the long run than developing additional peaking generation facilities;

the market to ensure availability of supply, and public service regulation to ensure fair play and reliability of regulated distribution services;

the encouragement of additional interstate natural gas pipeline competition, to help supply the advent of new gas-burning generation plants.

Copyright © 1999 by The Bureau of National Affairs, Inc., Washington D.C.