Over the last year, various states have introduced subsidies and preferences for different electricity resources that have circumvented the independent system operator (ISO) markets that the Federal Energy Regulatory Commission (FERC) approved in the 1990s. FERC’s intent was that hourly markets would provide all of the price signals needed to induce appropriate investment. As we’ve found out in California, that hasn’t worked out that way. These markets have difficulty conveying the full price information for all services (in part because many utility-owned generators are subsidized through state rate of return regulation) and the environmental and technological benefits that may be difficult to monetize in an hourly price.
FERC has challenged some of these new rules, and both won and lost in the courts. Now the market monitor in the biggest market in the U.S. that covers the Northeast and Midwest is joining the fight. If the market monitor wins, this will raise the salient question of whether FERC needs to rethink its policy, or will states begin to withdraw from the ISOs to pursue their own policy goals?
PJM market monitor opposes Illinois nuclear subsidies | Utility Dive
The market monitor argues the state’s subsidies “unlawfully intruded” on FERC’s authority over wholesale interstate electricity sales.