A Better NYT Article on Restructuring

Michael Giberson

New York Times reporter David Cay Johnston is back with another article on electric power restructuring, and — surprise — it is not awful. Unlike the confused mess of an explanation he offered in the first article of the series in October, this one is coherent.

We are warned about the “dangers” of the uniform price auction, a fundamental part of the wholesale power market design for many parts of the country. Johnston cites, for instance, a pair of hours from March 6, 2003 in which the shifting of a few bids drove prices up from $258 MWh to over $990 MWh even as the amount of power consumed was falling. Perhaps he only went back three and a half years for the example because the episode was particularly dramatic, but if the problem suggested was endemic to the design presumably he’d have many more current examples.

Besides, there is something a little misplaced about all the focus on short run price peaks in an industry where generating assets can last 30 or 40 years. The peaks may have all the drama, but the real action is in the long term. An efficient price mechanism should help bring about an efficient mix of generating (and transmission and demand response) assets over time. I would agree with a theme in the article that these regional power markets integrated into power systems operation are complex, and it is far from certain that any of the existing markets have figured it all out.

A few other things about the article bugged me. Isn’t it a little odd to, in one paragraph, complain about how some state regulators “encouraged or forced [utilities] to sell their own generating plants,” and just four paragraph later worry that “in many markets some buyers and sellers are related”? So is the problem that buyers and sellers are affiliated, or that they are not?

Actually, I think that in some cases the problem is that the buyer and sellers are often affiliated with the company running the transmission lines, but Johnston doesn’t really get into that angle in the article. Overall, however, Johnston does a much better job this time around.


One thought on “A Better NYT Article on Restructuring

  1. As a former reliability planner in a regulated utility, I fully expected to see price peaks in the k$/MWh in modern markets. Let’s not forget that the last megawatt of capacity in a system *costs* in the k$/MWh range, all-in. As customers of regulated utilities we’ve long been paying such prices, though they were averaged in so as to not be noticeable.

    I didn’t think this article was any better than the first one of the series. This one stitched an ugly quilt out of weakly related anecdotes, with its main substantive problem being transparency.

    See EPSA’s response, LATEST FROM THE TIMES: BALANCED STORIES ON COMPETITION NOT FIT TO PRINT?John E. Shelk, President and CEO, Electric Power Supply Association.

    http://www.epsa.org/forms/documents/DocumentFormPublic/view?id=74C900000019

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