FERC needs better data on capacity market, GAO says

Source: Sam Mintz, E&E News reporter • Posted: Monday, December 11, 2017

The Federal Energy Regulatory Commission should do a better job assessing the performance of capacity markets, the Government Accountability Office said in a report released yesterday.

Four out of the seven grid operators that FERC oversees use capacity markets, which are designed to provide financial incentives to operate enough power plants to match consumer demand. The capacity markets are meant to address the fact that revenue from energy and ancillary service markets might not be sufficient to cover the costs of some plant owners.

According to GAO, FERC has “not fully assessed the overall performance of capacity markets.” The report also noted the agency has not established performance goals for the markets, measured progress against goals or used data about performance to make changes to the markets.

GAO gives an example, from 2013, when FERC examined the capacity market in one region and identified five desirable characteristics.

“But FERC has not conducted this analysis for other regions with capacity markets nor updated this analysis,” the watchdog wrote.

“By more fully assessing performance, FERC may increase opportunities to identify and address potential performance problems and to share effective approaches across capacity markets. This may help ensure customers do not pay more than necessary for resource adequacy,” GAO continued.

GAO recommended FERC take steps to improve the quality of data collected for its Common Metrics Report. It also suggested FERC regularly assess the overall performance of capacity markets by developing performance goals and measuring progress toward those. That could be done using data that is already being collected by FERC, grid operators and independent market monitors.

FERC said in response that it generally agrees with the findings and that commission staff are being directed to “develop appropriate next steps to implement” GAO’s recommendations.