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Tuesday, April 13, 2010
10:30 AM - 12:00 PM
CNLS Conference Room (TA-3, Bldg 1690)

Seminar

U.S. Wholesale Electricity Market Fundamentals

Bernie Neenan
Technical Executive, Electric Power Research Institute

Seven Independent System Operators and Regional Transmission Organizations (ISO/RTOs) operate regional electricity markets and manage bulk power system reliability operations. However, they differ in important ways in terms of the functions they perform. Some establish and operate capacity markets to support meeting regional adequacy standards. Others limit their involvement to provide planning services to assist other entities, such as state public service commissions, determine and oversee the provision of capacity requirements. Most operate some form of real-time energy market to balance supply with demand, but the structure of those markets (using auctions versus accommodating bi-lateral arrangements) vary considerably. All are actively involved in operating the system dynamically to ensure that North American Electric Reliability Council (NERC) standards are met, but the mechanics of how that responsibility is achieved are not uniform.

One market structure does not fit all. Understanding the differences is important for comparing market performance. It is also important to characterize how retail markets interface with ISO/RTO market operations. Those interfaces between wholesale and retail markets are important for achieving a high degree of overall market performance. In some regions, ISO/RTO interfaces have influenced the way retail consumers buy electricity. In other regions there is little or no relationship between retail tariffs and wholesale market transactions. Drs. Neenan and Flaim will address the extent to which ISO/RTO market structure has influenced the development of efficient retail electricity prices and services needed to achieve the efficiency gains upon which electricity market restructuring was premised. A prognosis will be offered as to the extent to which Smart Meter and Smart Grid initiatives will improve the integration of wholesale and retail markets.