National Energy Regulatory
Council (NERC), in order to clearly regulate how the maximum bid prices for
persons operating existing (existing generators) and planned (new generators) facilities
ensuring capacity are set, approved The bids of the Capacity auction
participants and the auction maximum price setting methodology (available here).
Substantive provisions:
• When setting maximum prices, the assessment of new entrant’s electricity
generation, energy storage facilities in the electrical system, electricity
demand for the facilities of independent aggregator will be performed in the
following stages: the reference technology is selected; the characteristics of
the selected reference technology are described; total costs of the reference
technology are determined; net costs of the new entrant are determined; maximum
price caps of bids from persons operating existing and planned capacity
ensuring facilities are set.
• Reference technologies and their costs levels, other indicators/parameters
will be assessed based on the experience of other countries, the latest
information from experts, competent authorities and interested parties,
research and scientific literature, analyses performed by consultants, etc.
• Maximum price cap for new entrants will be calculated by adjusting
(increasing) costs of the reference technology by a 1.5 coefficient which is
related to the uncertainties of the projected expenditures and receivable
incomes. The coefficient was chosen based on the practice of other countries
(Ireland, Poland).
• Maximum price cap for entrants operating existing facilities will be set by
a 0.6 coefficient by adjusting (reducing) maximum price cap of new entrants.
This coefficient has been chosen also taking into account the fact that some of
the investments of the existing generators have already returned (based on the
practice of Poland) and aiming at maximum economic efficiency and minimum
financial burden for electricity consumers, as the Capacity mechanism should
not be the only source of the costs recovery for the persons who are going to
participate in the Capacity mechanism, they are encouraged to participate
actively in the market and thus to get additional income.
