Think Enron’s bad behavior, market manipulation, gaming — those sorts of shenanigans. What precisely constitutes market abuse can be hard to describe, but most would agree that it’s bad when it happens. Now, under a number of proposals pending at the Public Utility Commission, generation companies can obtain an absolute defense against such allegations.
So far three big companies have filed such proposals, and the PUC on Friday green lighted one of them. When approved by the PUC — and if the companies stick to them — the proposals protect companies against any prosecution for market power abuse. Hence, they’re a little bit like Get Out of Jail Free cards from the old Monopoly board game.
Known as “Market Mitigation Plans,” these proposals are designed by the generation companies themselves and are meant to describe fair business practices. They typically include descriptions of bidding behaviors and other rules that, if followed, should signal to regulators that the generation company is playing by the rules.
But no one understands these complex plans like the companies understand them. This should raise concerns, especially given that each of these companies have a direct interest in maximizing their position in the market. And while these plans supposedly describe fair practices, theoretically they also could open the door to unforeseen gaming opportunities.
Another worry is that these plans may allow companies to further leverage the super high prices currently permitted in the state’s wholesale energy market. Texas maintains the nation’s highest wholesale price cap for energy, and the PUC last week voted to increase that cap to an even higher level. Through these plans, the companies may gain an ability to more easily price power at these extreme levels. This, in turn, could lead to higher bills at home.
The Public Utility Commission adopted a plan by Houston’s NRG on Friday. Separate plans from Calpine and GDF-Suez will be considered at a later date. So far, only the company that filed the plan, the PUC staff, and an independent monitor of the state’s electricity market have been allowed to meaningfully consider the details. No substantive input so far has been permitted from experts with consumer organizations.