A diverse group of stakeholders filed a request with the Federal Energy Regulatory Commission (FERC) to convene a public conference to discuss integrating carbon pricing into U.S. organized regional wholesale electricity energy markets.  The group says it is not asking FERC to direct carbon pricing but instead to gather a wide range of stakeholders to discuss the technical and implementation issues raised by incorporating carbon pricing policies into the organized wholesale markets operated by Regional Transmission Organizations (RTOs).

The request is notable for the very broad cross section of electricity market stakeholders behind it.  The group includes trade associations of competitive power producers and marketers for traditional, renewable, and advanced energy technologies and some of their members; energy policy advocates; environmental advocates; and the trade group for natural gas suppliers.  This request should be of significant interest to a wide range of market participants and their investors, plus consumers of electricity, state policymakers and other diverse interests.

Wholesale electricity markets operators are grappling with how to reconcile wholesale markets with state carbon reduction policies without interfering with competitive market price signals.  As discussed in the request and in a prior post to this blog, the New York Independent System Operator (“NYISO”) released a proposal explaining how to introduce a carbon price in its wholesale electricity market.  Other RTOs are exploring other steps to address carbon reduction policies being adopted at the state and regional levels.

Advocates of the conference expect that carbon pricing could alter the economic dispatch of resources to prioritize less carbon-intensive resources and displace more carbon-intensive resources.  This has a bearing on FERC’s jurisdictional scope, such as how wholesale markets function and their prices.

The request says that the unique features of organized wholesale electricity markets present an opportunity for integrating policies that directly price carbon emissions into energy market operation.  Carbon pricing in those markets could further state policies while preserving the benefits of market-based approaches to electric energy markets.

The aim of the conference would be to start a dialogue among a broad range of stakeholders and interested parties regarding the opportunities and challenges associated with integrating carbon pricing into the organized wholesale markets.

Among the broad issues suggested to be addressed at the technical conference are:

  • The mechanisms for pricing carbon on a state, regional, or national level.
  • How the costs of carbon emissions and other pollutants are already incorporated into wholesale markets, and how these experiences inform ways to integrate a carbon price into the markets and achieve efficient market operation.
  • The potential for carbon pricing to create regulatory certainty and incentives for financing resources that further state environmental goals as well as maintain reliability and cost effective customer service.
  • The relative merits, practical issues and obstacles to incorporating carbon prices into the wholesale markets.

The request for technical conference includes a suggested detailed conference agenda organized around stakeholder-specific panels for the following groups: (1) state and regional greenhouse gas initiative officials, (2) RTO representatives, (3) stakeholders and experts representing load, generation, renewable and advanced technologies, environmental and other interests, and (4) states.

There is no deadline for FERC to act on the request and no requirement that it act on the request at all.

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Photo of Bud Earley Bud Earley

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers…

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

Working with Covington teams, Mr. Earley has provided expert advice and analysis to investment firms, utilities, independent power producers, project developers, customers, marketers and U.S. and international energy companies,

Prior to joining Covington, Mr. Earley served for over 30 years in various staff positions at the Federal Energy Regulatory Commission (FERC). While at the FERC, Mr. Earley was instrumental in developing and applying policies regarding the transition of the electric utility industry to competition, including policies regarding independent power producers, transmission access, standard generator interconnection procedures, organized electricity markets, mergers and market-based rates.