Electricity Markets

Mandatory Capacity Markets and the Need for Reform

This white paper shows how recent developments in regional transmission organizations with mandatory capacity markets demonstrate an urgent need for reform of the capacity constructs used in these regions.

The American Public Power Association commissioned the report from Wilkinson Barker Knauer, a law firm with a specialty practice in energy, to document the extent to which policy actions in these regions have exacerbated what it sees as fundamental flaws in the design of mandatory capacity markets. The paper shows how an increase in state resource procurement and the resulting series of complex rule changes by PJM Interconnection, ISO-New England, and the New York ISO and the Federal Energy Regulatory Commission have increasingly impeded both state energy policies and the ability of public power and cooperative utilities to self-supply.

The paper reviews recent state actions and interventions and lays out a set of proposed reforms to the capacity constructs that would correct for fundamental flaws in their current design - chiefly, transitioning to a voluntary capacity market and removing buyer-side mitigation (such as a minimum offer price rule) from the procurement process.

Read the paper.

Learn more about the American Public Power Association's suggested reforms to capacity markets and other related regulatory filings.