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Study Scope
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7
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Carnegie Mellon
Electricity Industry
Center
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8
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Study Method
|
8
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Executive
Summary
|
9
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1. The
Electricity Market in Pennsylvania
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18
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1.1
Electric generation and sales in the Commonwealth
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18
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1.2
Restructuring and Pennsylvania
market characteristics
|
20
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1.3
Market expectations and performance
|
29
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2. Review of
Previously Identified Policy Options
|
34
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2.1
Prior reports
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34
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2.1.1 Allegheny Conference on Community
Development
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34
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2.1.2 Industrial Energy Consumers of Pennsylvania (IECPA)
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36
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2.1.3 Energy Security Analysis,
Incorporated (ESAI)
|
36
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2.2
Pennsylvania P.U.C. hearing on electricity price increases
|
38
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2.3 Insights
from other restructured markets
|
51
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2.3.1 New Jersey auction
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53
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2.3.2 Maryland auction
|
53
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2.3.3 Illinois auction
|
54
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2.3.4 Auction prices and wholesale
prices
|
54
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2.3.5 Connecticut generation request for
proposals
|
55
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3. Factors Influencing Pennsylvania Prices
|
56
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3.1.
Market effects
|
56
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3.1.1 Fuel prices
|
59
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3.1.2 Transmission congestion
|
62
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3.1.3 Capacity markets in PJM
|
64
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3.2
Costs of Pennsylvania’s
Advanced Energy Portfolio Standard (AEPS)
|
65
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3.3
Regulatory and tax effects
|
67
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3.3.1 Competitive transition charge
|
67
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3.3.2 Pollution control costs
|
68
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3.3.3 Gross receipts tax in Pennsylvania and other
states
|
69
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3.3.4 Costs of using the market
|
69
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4. Technical, Market, and
Regulatory Options Analysis
|
71
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4.1
Options to reduce locational marginal prices (LMPs)
|
71
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4.1.1 Keep existing low cost generation
|
71
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4.1.2 Use Pennsylvania’s coal resources to best
advantage
|
71
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4.1.3 Encourage new generation to
locate close to load
|
72
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4.1.4 Real time pricing
|
72
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4.1.5 Market-based demand response
programs
|
74
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4.1.6 Demand reduction programs
|
75
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4.1.7 Incentives for new generation
|
78
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4.1.8 Changes to the market auction
model
|
80
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4.2 Options
for commercial and industrial customers to bypass LMP-based rates
|
82
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4.2.1 Encourage co-generation and
self-generation
|
82
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4.2.2 Aggregate potential users of
co-generation and self-generation
|
83
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4.2.3 Take advantage of special
situations for commercial and industrial customers
|
83
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4.3
Provider of last resort (POLR) requirements
|
83
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4.3.1 Risk premium
|
83
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4.3.2 POLR auction timing
|
84
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4.4
Change the climate for long-term electric power contracts
|
84
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4.4.1 Allow POLR providers to sign long-term
sales contracts
|
84
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4.4.2 Encourage PJM to offer forward
markets for ancillary services
|
84
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4.4.3 Speed up the approval process for
long-term contracts
|
85
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4.5
Coal gasification strategies for energy
|
85
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4.6
Transmission
|
86
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4.6.1 Transmission planning
|
86
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4.6.2 Transmission rights
|
86
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4.7
Optimize the Advanced Energy Portfolio Standard after 2015
|
86
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4.8
Tax options
|
87
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4.8.1 Tax option metrics
|
87
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4.8.2 Pennsylvania gross receipts tax
|
88
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4.8.3 Cross subsidies
|
88
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References and Notes
|
90
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