Merchant Power: "The New Kid on the Block"

Abstract

The term "merchant power producer" is a relatively new concept,which has evolved from the Independent Power Producer, IPP, classifica-tion to specifically describe a particular type or 'class' of an electricpower generation facility.A more formal definition of a merchant power plant would be "apower plant built or purchased with private equity that does not havefirm customers (i.e. captive ratepayers similar to a utility) which willattempt to sell most or all of its product in the open market." The puremerchant plant would initially have no customers while a "hybrid mer-chant" would have some but not all of its capacity initially contracted toa customer(s). This can easily be contrasted to an Independent Power Pro-ducer , IPP, defined as " a power plant with all or the majority of itsoutput dedicated to contract customerts)." For discussion we will clarifya cogeneration facility (Federal Energy Regulatory Commission, FERC,qualified facility or 'QF') as "a power plant primarily constructed tomeet a given site's thermal and electric needs which meets the requiredFERC efficiency standards for a 'QF', and generally not exporting muchif any power for external sale."In summary , we'll say a utility has captive ratepayers, an IPP hascontract customers, a cogenerator has its own site as the 'customer ', anda merchant plant attempts to sell into the open market establishing cus-tomers as it produces its product.