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2004-05 Seminars

Perspectives on ISO-New England's proposed Locational Installed Capacity Market

John S. Rohrbach
Lukens Energy Group

Abstract
FERC Docket ER03-563-030 is a proceeding to institute a locational installed capacity (LICAP) pricing system for New England. LICAP is the offshoot of the work of Dr. Steven Stoft (www.stoft.com <http://www.stoft.com/> ) and Dr. Paul Joskow of MIT. The general theory of LICAP is that because it is postulated that generators would not cover costs if there were just enough generators around, a system of locational installed capacity prices is needed to procure reliability. Dr. Joskow's April 4, 2003 paper "The Difficult Transition to Competitive Electricity Markets in the U.S.", provides the support for the idea that current 'energy-and-ICAP markets' are allegedly inadequate to support generation adequacy.
Given this background, and the recently concluded ISO-New England hearing at FERC, John's talk will address the following:

• Introduction & Disclaimer

• What is the Locational Installed Capacity (LICAP) debate about?

• FERC Docket ER03-563-030

• General Positions of the Parties

• Assessment of the problem LICAP is trying to solve

• Generation overbuild lowers overall energy revenues

• Inadequate revenue for seldom-run units

• Transmission constraints & RMR contracts

• Solutions (Ranging from LICAP to 'Trust-the-Market')

• Concluding Remarks