Daily Archives: January 25, 2010

Energy storage on the grid: transmission equipment or market participant? (Again)

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Michael Giberson

In the wholesale power markets world, commercial energy storage concepts are commonly somewhat of an afterthought. None of the large regional wholesale power markets integrated into transmission operations put too much effort into thinking about energy storage as they developed their market rules.

A part of the problem is that the transmission system and the rules that surround it is set up to move power from generation sources to electrical loads. Grid-connected energy storage devices are something of a hybrid: sometimes act like generators – supplying power – and sometimes act like loads – consuming power. They don’t always fit neatly into traditional categories. Further mixing things up, energy storage can contribute greatly to system reliability, usually treated as a matter for transmission-system based coordination rather than market transaction.

But as commercial-scale energy storage begins to arrive on the scene it has become more important to sort through these issues.

I’m just quoting myself from a post of 14 months ago on the topic of integrating energy storage players into regional power markets.  At the time the case involved American Electric Power’s desire to add a battery storage system as part of a transmission system upgrade in Texas, and a request that the energy storage device be treated as transmission facilities (and therefore have costs recovered through regulated transmission rates) rather than as an energy market participant of some sort.  The PUC of Texas permitted AEP its battery-storage-system-as-transmission-facility.

Last week FERC took initial action on a similar request (link goes to decision; see also FERC news release).  Western Grid Development LLC has proposed installing energy storage devices on the CAISO-managed transmission system and seeks to have its system treated as transmission facilities. The comments and protests filed in response to the Western Grid raise the same concerns heard in the AEP/Texas case.  Some parties object that storage inherently involves participation in energy buying and selling and therefore the systems ought to be energy market participants; Western Grid states that any purchase or sale of energy would be incidental to operation of the system in support of the transmission grid, done only at the direction of CAISO, and net revenues – if any – would be refunded to transmission ratepayers.

In FERC’s decision, it agreed that the facilities could be treated as transmission equipment so long as they are built and operated as described by Western Grid, and so long as the CAISO approves the project as part of the ISO’s regional transmission planning process.  (CAISO, by the way, filed a strong protest in response to the Western Grid request, so I expect Western Grid will have much work to do to gets its project off the ground, even with this preliminary approval by FERC.)

FERC was clear that this decision is limited to Western Grid’s project as proposed and does not suggest any general position on the treatment of energy storage devices on the grid.  In fact no general position may be available, given, as FERC explains, “electricity storage devices …do not readily fit into only one of the traditional asset functions of generation, transmission or distribution. Under certain circumstances, storage devices can resemble any of these functions or even load. For this reason, the Commission has addressed the classification of energy storage devices on a case-by-case basis.”

By the way, a number of the key people involved in Western Grid are also working together on the Tres Amigas project though (I think) no official links exist between the two companies.

A private right of action on price gouging

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Michael Giberson

One bill,, submitted to the New York State Assembly last year (but, so far as I can tell, not passed into law; ADDED: See status note below.), proposes to grant consumers a private right of action when they become victims of price gouging in times of emergency. Currently only the state’s Attorney General has authority to bring legal action against someone accused of violating the state’s price gouging law.

The bill’s sponsor suggests that “the threat of enforcement by the Attorney General is not serving as an adequate deterrent,” and implies allowing private rights of actions would help.  To that end, “the purpose of this bill is to grant citizens who are victims of illegal price gouging in times of emergency the right to directly sue the responsible party.” The proposal would allow a victim to sue to recover up to “actual damages” or $1000, whichever is greater, and give the court discretion to award a prevailing plaintiff up to $5000 and reasonable attorneys’ fees.

The bill does not specify who is considered a “victim” under the law.  I can imagine a few problems that may result.

The existing New York law on price gouging is in Section 396-r of the New York Code.  The law provides that during “any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety and welfare of consumers, no party within the chain of distribution of such consumer goods or services or both shall sell or offer to sell any such goods or services or both for an amount which represents an unconscionably excessive price.”  The law narrows the description of “abnormal disruption” to events resulting in a state of emergency declared by the governor, and otherwise tries to specify just what the law covers, but on the question of what makes a price too high, the law simply states: “Whether a price is unconscionably excessive is a question of law for the court,” and it offers a bit of guidance.

So here is one problem: One part of that guidance suggests a price could be unconscionably excessive if “the amount charged grossly exceeded the price at which the same or similar goods or services were readily obtainable by other consumers in the trade area.”  Therefore, the definition seems to apply in cases in which the “victim” incurs the hazard, i.e. could have purchased at other prices but chose to buy from a merchant offering the good or service for a much higher price. Why would a consumer do this? Well, under this proposal the consumer could file a private action by which he might rewarded as much as $1,000 damages plus up to a $5,000 penalty and reasonable attorneys’ fees because the consumer chose to pay the higher price.

More generally, which victims would qualify to seek compensation? While the consumer charged an amount grossly exceeding some reference price is typically seen as a price gouging victim, what about consumers that would have purchased the good or service but for the unconscionably excessive price at which it is offered? Surely they, too, are victims under the logic of price gouging.  Will they also be able to seek private rights of action and obtain a reward?  If not then the law protects consumers willing and able to pay the higher price, but not consumers who find themselves priced out of the market.  If the law permits these victims-without-receipts to file private suits of action, the potential liability of a business charging higher prices after an emergency can become very large and ill-defined.

Supporters of anti-price gouging legislation may say this is all fine.  The first case suggests that consumers may intentionally seek out merchants offering too-high prices with the intent of subsequently filing a price gouging claim, but that just means that more citizens are motivated to help deter price gouging, and that’s the point, right?  The second case, with a large and ill-documented class of consumers who would-have-but-didn’t-buy at the too-high price, by dramatically increasing the potential liability, similarly serves to help deter price gouging.  Again, that’s the point and what could be wrong?

Well, nothing in New York’s anti-price gouging law requires merchants to remain open for business during market disruptions associated with declared emergencies.  And if remaining open might expose the store to large but hard-to-define liabilities, the store’s owner might reasonably just close up shop.  Consumers, then, would be made worse off by the action of this “consumer protection” policy.

UPDATE: As indicated on the bill’s information page, in early February 2010 the Consumer Protection Committee of the State Senate approved the bill on an 8-2 vote and sent it to the Finance Committee.  An identical bill, A278A, passed the State Assembly last year.

Hey cooks! Use Bing for recipe searches

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Lynne Kiesling

OK, so this is pretty cool and useful:

Today Bing, the relatively new search engine from Microsoft, launched a feature that lists recipes when users search for food items. Search “chicken,” for example, then click the “chicken recipes” tab, and Bing delivers chicken noodle soups and chicken schnitzels from major databases like Allrecipes, Delish, and bonappetit.com’s sister site, Epicurious.

The searches will also include calorie counts, photos, etc. Pretty nifty! And the competing search engine thing is very good too …

Tim Harford on Hahn-Passell and Regulation 2.0

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Lynne Kiesling

Courtesy of Tim Harford’s blog at the Financial Times (which you should be following, or following via Twitter) is a link to this “Devils and Details” post from Bob Hahn’s and Peter Passell’s new blog, Regulation 2.0. Their comment and the links embedded in the post are worth considering on the topic of carbon policy:

In the beginning, economists touted emissions taxes and cap-and-trade systems as efficient, market-friendly methods for reducing pollution. The idea: put a price on pollution equal to the damage it caused or decide what level of emissions was acceptable to society as a whole, and then let businesses decide how to minimize the cost. The two approaches – put a price on emissions or put a limit their total quantity — were thought to be equivalent means to the same end.

Then came Martin Weitzman, a very clever economist from Harvard, who showed decades ago that the choice between the price and quantity approaches mattered a lot when policymakers weren’t certain what the costs and/or benefits of pollution control would be. And now Round Three: In a recent, provocative piece [Download Here], David Weisbach of the University of Chicago questions Weitzman’s conclusions. He concludes that the optimal approach may change if you make the (realistic) assumption that policymakers can alter course in response to new information.

And then there’s another factor to consider: the systems can be designed to look a lot like each other. For example, a cap-and-trade system with a “safety valve,’’ which effectively limits the maximum market price of emissions permits, in many respects mimics the impact of an emissions tax.

So where does that leave us on climate change policy? The key is not to get lost in the trees – any market-based system that rewards people and businesses for emitting less carbon would be a big step forward.

Their posts will focus on energy, environment, telecom, alcohol, financial, and other forms of regulation. I like the spirit of “Regulation 2.0″, because Regulation 1.0 is certainly obsolete in the areas I study, but inertia in adapting and evolving is very strong, and change comes too slowly.