FERC needs to review capacity market performance, GAO recommends
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FERC Capacity Markets face scrutiny as GAO flags inconsistent data on resource adequacy and costs, urging performance goals, risk assessment, and better metrics across PJM, ISO-NE, NYISO, and MISO amid cost-recovery proposals.
What This Means
FERC capacity markets aim for resource adequacy, but GAO finds weak data and urges goals and performance reviews.
GAO finds inconsistent adequacy and cost data across RTO regions.
Calls for FERC to improve data quality and consistency.
Set performance goals and measure capacity market outcomes.
Regularly identify, assess, and respond to capacity market risks.
Context: cost-recovery plan for coal and nuclear in PJM, ISO-NE, NYISO, MISO.
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.
