NRG Supports Pro-Competition and Fuel-Neutral Policies
October 02, 2017
On September 29, the Department of Energy (DOE) announced the following directive, “Secretary Perry Urges FERC to Take Swift Action to Address Threats to Grid Resiliency.” While it’s far too early in the process to get into any details (FERC won’t even see comments until October 23rd), we thought this may be a good opportunity to reiterate NRG’s position on competitive energy markets.
In June of this year, NRG Regulatory team member Abe Silverman, published a piece in The Energy Daily explaining that market competition can ‘solve’ for any number of preferred market outcomes. Our perspective in that piece remains just as true today.
What does this mean given the recent DOE directive?
We agree with the DOE that FERC needs to take immediate action on improving price formation in the energy markets. Our electric grid is evolving at a break-neck pace and FERC’s energy market pricing rules have not kept pace with the changes that we are seeing. The DOE has correctly identified the need for immediate reform.
The PJM market has taken the lead in thinking about the types of changes that would accommodate this new reality. For instance, the PJM price formation initiative is consistent with competitive and economic fundamentals. It applies fuel-neutral grid pricing that ensures that energy market pricing reflects the actual cost of running generators, including less flexible generators such as coal and nuclear. Indeed, the proposed rulemaking gives FERC an opportunity to consider a similar approach to rewarding competition and investment more broadly.
However—and this is a big however—to the extent that DOE is directing FERC to engage in fuel-specific bailouts or ordering compensation for resources that can no longer compete in the market, we would strongly oppose such action. Such a proposal threatens established power markets by propping up uneconomic coal and nuclear generation under the guise of fuel diversity, all on the backs of consumers and the environment. While NRG is pleased that the DOE recognizes that there is a problem with price formation in wholesale markets, the solution is not quasi-regulation.
Instead, FERC should look for smart, pro-competitive and fuel-neutral policies.
At NRG, we remain convinced that competitive energy markets drive choice, sustainable innovation and value to consumers and businesses.
Want to learn more about what’s possible with well-constructed energy markets? Read: “Market Competition can Solve for Low Cost Carbon Reduction,” by Abe Silverman.
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