FERC needs to review capacity market performance, GAO recommends

Dive Brief:

The U.S. Government Accountability Office has completed a review of federal oversight across four regional capacity markets, concluding better data and study are necessary to insure the markets are functioning properly.
According to the review, the Federal Energy Regulatory Commission should improve data quality with consistent metrics reported through standardized definitions, establish goals for capacity markets and more fully assess their performance and risks.
In conducting its review, GAO said it analyzed data on electricity costs and resource trends from the four regions with capacity markets, reviewed relevant data and interviewed government officials and grid operators.

Dive Insight:

Capacity markets may or may not be functioning properly, but FERC can't adequately make that determination, according to the GAO report.

"Available information on the level of resource adequacy ... and related costs in regions with and without capacity markets is not comprehensive or consistent," the report found. "Moreover, consistent data on historical trends in resource adequacy and related costs are not available for regions without capacity markets."

The review concluded that FERC collects some useful information in regions with and without capacity markets, but GAO said it "identified problems with data quality, such as inconsistent data."

GAO included three recommendations, including calling for FERC to take steps to improve the quality of data collected, and regularly assess the overall performance of capacity markets by developing goals for those assessments.

"FERC should develop and document an approach to regularly identify, assess, and respond to risks that capacity markets face," the report also recommended. The commission "has not established performance goals for capacity markets, measured progress against those goals, or used performance information to make changes to capacity markets as needed."

The recommendation comes as the agency is grappling with a controversial proposal to assure cost-recovery for struggling coal and nuclear plants in the power markets. So far, the proposal would only apply to power markets with capacity markets, including PJM Interconnection, the New England ISO, the New York ISO and possibly MISO. However MISO only has a voluntary capacity market, making it unclear how the proposed rule would be applied there.