A market charge can discourage useful behavior if it mistakes every departure from schedule for a source of cost. That is the incentive problem FERC identified in its February 7 uplift proposal. It sought to align certain real-time charges with transactions reasonably expected to cause uplift, not to establish that a new pricing regime had already improved efficiency. [2017-02332][2016-30971]

The proposal would operate where regional market operators already allocate real-time uplift to deviations. It would not require others to change allocation methods. Its megawatt-hour deviation measure excludes economic or reliability dispatch instructions, and helpful deviations would offset harmful ones hourly. The economic logic depends on the contribution to system needs, rather than merely the presence of a schedule difference. [2017-02332][2016-30971]

Fast-start pricing, addressed in a separate December proposal, concerns how resource offers enter market prices. Proposed eligibility requires startup within ten minutes, minimum run time of one hour or less and an economic energy offer, rather than self-scheduling. Those conditions define a resource class; they do not guarantee that each eligible resource sets a price whenever it operates. [2017-02332][2016-30971]

These mechanisms affect different parts of the market account: allocation determines who bears certain costs, while pricing determines how eligible offers are reflected in prices. Proposed reporting would keep uplift dollars separate from megawatts of operator-initiated commitments. The two agency records explain an intended improvement in incentives, not measured profits, lower production costs or a verified saving for electricity customers. [2017-02332][2016-30971]

Source documents

  1. Uplift Cost Allocation and Transparency in Markets Operated by Regional Transmission Organizations and Independent System Operatorshttps://www.govinfo.gov/content/pkg/FR-2017-02-07/html/2017-02332.htm
  2. Fast-Start Pricing in Markets Operated by Regional Transmission Organizations and Independent System Operatorshttps://www.govinfo.gov/content/pkg/FR-2016-12-30/html/2016-30971.htm