WHEREAS, the original architecture of the American electricity system was designed for vertically integrated, locally regulated monopoly utilities, a structure fundamentally misaligned with the competitive wholesale markets created in subsequent decades;   

WHEREAS, utilities are now, in many cases, multi-state, publicly traded corporations whose fiduciary obligations to shareholders routinely diverge from their obligations to ratepayers, creating structural conflicts of interest that current market rules inadequately address;   

WHEREAS, the uniform clearing price mechanism — under which all generators dispatched in a given interval are paid the price bid by the highest-cost marginal unit — systematically transfers wealth from ratepayers to lower-cost generators whose actual costs of production are far below the price they receive;   

WHEREAS, this clearing price windfall, which has been estimated to cost ratepayers more than $300 per household annually in affected markets, has no economic justification in a functioning competitive market and would not exist if electricity were subject to the same pricing discipline applied to other deregulated American industries;   

WHEREAS, transmission costs, the costs of moving electricity from generation to user,  are routinely socialized across all ratepayers within a region regardless of who benefits, effectively subsidizing remote generators, distorting investment signals, discouraging generation development close to load centers, and obscuring the true delivered cost of electricity; 

WHEREAS, current market rules permit generators, including those receiving substantial federal tax credits, state subsidies, capacity payments, and other public support, to bid into wholesale energy markets at prices at or near zero, displacing higher-cost but economically rational competitors and distorting price signals that would otherwise drive investment in lowest-cost generation and delivery;   

WHEREAS, this zero-bid distortion, driven substantially by taxpayer-funded subsidies, undermines the market mechanisms intended to discipline electricity costs, stifles innovation by removing financial reward for superior solutions, and poses long-term risks to generation adequacy and grid reliability;   

WHEREAS, the July 2024 PJM Interconnection capacity auction produced prices approximately 833 percent higher than the prior year, a direct consequence of market structure failures that penalized reliability investments, resulting in residential electricity rate increases of ten to twenty percent for millions of ratepayers across the PJM footprint beginning in 2025;   

WHEREAS, the Federal Energy Regulatory Commission’s Order 1920 (May 2024) and Order 1920-A (November 2024) have acknowledged the need for greater state involvement in transmission planning and cost allocation, creating a federal framework within which state action is both appropriate and expected;   

WHEREAS, in contrast to current practices, pay-as-bid pricing — under which each generator dispatched receives the price it bid rather than a uniform clearing price, the highest price, aligns revenue with actual costs and eliminates windfall profits at ratepayer expense, provided that anti-gaming mechanisms prevent strategic bidding above true costs;   

WHEREAS, pay-as-bid pricing was successfully adopted in the England and Wales balancing mechanism in 2001 and has been examined by multiple RTOs as a potential reform, demonstrating that implementation is practically feasible with appropriate market design;  

WHEREAS, requiring transmission costs to be reflected in the delivered price of electricity, allocated to the beneficiaries of transmission services in proportion to their use, rather than socialized across all ratepayers, is consistent with the beneficiary-pays principle endorsed by FERC Order 1920-A, would incentivize generation siting closer to load, and would remove a hidden cross-subsidy that distorts competition;   

WHEREAS, requiring generators to bid no lower than their net true cost of electricity production, defined as their full true costs, including fuel, capital recovery, operations and maintenance, decommissioning, interconnection, and required return on investment, minus all external revenue inputs received from any source, including federal tax credits, production incentive payments, state subsidies, capacity market payments, ancillary services revenues, and power purchase agreement revenues, would restore market discipline by ensuring bids reflect only what the generator actually requires from the energy market to be made whole, rather than allowing publicly subsidized generators to suppress market prices below the level needed by unsubsidized competitors; this net true cost bidding standard does not deprive any generator of its subsidies, rather it  requires the benefit of those subsidies flow to ratepayers through lower energy prices rather than to generator shareholders through inflated market revenues;   

WHEREAS, the combination of pay-as-bid pricing, true transmission cost allocation, and net true cost bidding requirements, under which each generator’s bid floor is its full production cost minus all external revenue it receives from any public or private source, such as power purchase agreements, together will constitute a coherent, mutually reinforcing framework for electricity market rationalization: pay-as-bid ensures generators are paid what they need rather than a windfall; true transmission cost allocation ensures the full delivered cost is visible and allocated to those who cause it; and net true cost bidding ensures that public subsidies reduce the price ratepayers pay for electricity rather than inflating generator profits, consistent with how every other deregulated sector of the American economy disciplines costs and allocates benefits;   

WHEREAS, coordinated action by multiple states within a Regional Transmission Organization creates direct pressure on both the RTO and the Federal Energy Regulatory Commission to advance market reforms, as RTOs are responsive to their member states and FERC is responsive to congressional and multi-state stakeholder pressure;   

WHEREAS, the [STATE] Legislature finds that the current structure of wholesale electricity markets unjustifiably increases costs for [STATE] ratepayers, blocks competition, discourages lowest-cost delivery of electricity, stifles innovation, and that comprehensive market rationalization is in the public interest;   

BE IT RESOLVED by the [STATE] Senate and the [STATE] House of Representatives, jointly:  

That the [STATE] Legislature hereby urges comprehensive reform of the wholesale electricity markets affecting [STATE] ratepayers consistent with the framework set forth in this Resolution.   

Section 1 — Pay-As-Bid Pricing   

The [STATE] Legislature urges the [STATE] Public Utility Commission and petitions [RTO NAME] and the Federal Energy Regulatory Commission to:  

• (a) Replace the uniform clearing price mechanism in wholesale energy markets with a pay-as-bid pricing mechanism under which each generation resource dispatched in any given dispatch interval is compensated at the price reflected in its accepted bid, rather than at the clearing price of the marginal unit;  
• (b) Design any pay-as-bid transition to include robust artificial intelligence-based market surveillance systems capable of detecting and deterring strategic bidding above true costs, gaming, generation withholding, and market manipulation;  
• (c) Establish penalties for confirmed market manipulation or strategic gaming under a pay-as-bid regime that are proportionate to ratepayer harm caused, not merely to profits gained, and that are sufficient to create meaningful deterrence;  
• (d) Retain and make available to all market participants the Fixed Resource Requirement alternative capacity mechanism or equivalent so that generators unwilling to participate under reformed market rules may do so without disrupting system reliability;  
• (e) Study and publicly report on the expected ratepayer savings, reliability impacts, and implementation timeline associated with a transition to pay-as-bid pricing within [RTO NAME] markets. 

Section 2 — True Transmission Cost Pricing  

The [STATE] Legislature urges the [STATE] Public Utility Commission and petitions [RTO NAME] and the Federal Energy Regulatory Commission to:   

• (a) Require that the full cost of transmitting electricity from each generation source to each load zone, including capital cost, line losses, congestion, and system maintenance attributable to serving that load be reflected in the delivered price of electricity at each load zone;  
• (b) Discontinue the practice of socializing transmission costs across all ratepayers in a region without regard to the geographic source of generation serving each load zone, and instead allocate transmission costs to the beneficiaries of transmission services in proportion to their use of those services, consistent with the beneficiary-pays principle endorsed by FERC Order 1920-A;  
• (c) Establish locational pricing signals that incentivize development of generation resources closer to major load centers, reducing overall system transmission costs and improving resilience;  
• (d) Apply true transmission cost allocation principles in evaluating the cost-effectiveness of proposed transmission expansion projects, so that ratepayer-funded transmission investment reflects actual system needs rather than development preferences of remote generation interests;  
• (e) Provide [STATE] ratepayers, through the [STATE] Public Utility Commission, with regular public reporting on transmission costs allocated to [STATE] load, the geographic sources of generation serving [STATE] load, and the delivered cost differential between proximate and remote generation sources. 

Section 3 — Full True Cost Bidding  

The [STATE] Legislature urges the [STATE] Public Utility Commission and petitions [RTO NAME] and the Federal Energy Regulatory Commission to:   

• (a) Require that all generators participating in wholesale energy markets submit bids that reflect, at minimum, the full true cost of generating electricity from that resource, including fuel, capital cost recovery, scheduled and unscheduled operations and maintenance, decommissioning and retirement obligations, interconnection costs, and required return on investment;  
• (b) Prohibit any generator from submitting energy market bids below its net true cost of generation, calculated as its fully-loaded cost of generation, including fuel, capital recovery, operations and maintenance, decommissioning, interconnection, and required return on investment, minus all external revenue inputs received from any source, including federal tax credits, production incentive payments, state subsidies, capacity market payments, ancillary services revenues, and power purchase agreement revenues, so that the financial benefit of any public subsidy flows to ratepayers through lower energy market prices rather than to generator shareholders through energy market revenues that exceed the generator’s actual unsubsidized need;  
• (c) Require generators to annually self-certify all revenue sources — including capacity payments, ancillary services revenues, federal tax credits, state subsidies, and power purchase agreement revenues — and to calculate and disclose the net true cost bid floor applicable to that generator, reflecting full true costs minus all such external revenue inputs, subject to audit by the [STATE] Public Utility Commission and [RTO NAME];       
• (d) Treat submission of a false self-certification as market manipulation subject to the same detection and penalty framework applicable to bid gaming under Section 1;  
• (e) Require the [STATE] Public Utility Commission to apply full true cost accounting principles, consistent with this Section, in evaluating power purchase agreements, utility resource plans, and integrated resource plans submitted for Commission review, giving priority to resources that demonstrate lowest delivered cost inclusive of full true costs without reliance on public subsidy. 

Section 4 — Artificial Intelligence Market Surveillance  

The [STATE] Legislature urges [RTO NAME] and the Federal Energy Regulatory Commission to:   

• (a) Deploy and continuously improve artificial intelligence-based market surveillance systems capable of detecting strategic bidding, market manipulation, coordinated gaming, false self-certification, generation withholding, and other forms of market distortion across energy, capacity, and ancillary services markets;  
• (b) Make real-time and retrospective surveillance findings available to state public utility commissions within each RTO footprint, including [STATE], to enable state-level monitoring and intervention;  
• (c) Establish transparent public reporting on market surveillance findings, enforcement actions taken, and penalties assessed on an annual basis;  
• (d) Coordinate surveillance data with FERC’s Office of Enforcement to ensure that market manipulation findings result in regulatory action at the federal level when warranted. 

Section 5 — Congressional Delegation Directive  

The [STATE] Legislature hereby urges the members of [STATE]’s Congressional Delegation, including its United States Senators and Representatives in Congress to:   

• (a) Actively engage with the Federal Energy Regulatory Commission to press for rationalization of wholesale electricity markets consistent with the three-part framework set forth in this Resolution: pay-as-bid pricing, true transmission cost allocation, and full true cost bidding;  
• (b) Support federal legislation that codifies pay-as-bid pricing requirements, beneficiary-pays transmission cost allocation, and full true cost bidding standards in wholesale electricity markets operated by Regional Transmission Organizations and Independent System Operators;  
• (c) Urge FERC to exercise its Section 206 authority under the Federal Power Act to investigate whether existing uniform clearing price mechanisms, socialized transmission cost allocation, and below-cost bidding practices are unjust and unreasonable rates and to initiate rulemaking proceedings accordingly;  
• (d) Coordinate with the congressional delegations of other states within the [RTO NAME] footprint to build a multi-state legislative coalition in support of electricity market rationalization, recognizing that coordinated multi-state pressure is more likely to produce federal and RTO-level action than any single state acting alone;  
• (e) Report annually to the [STATE] Legislature on actions taken in furtherance of this directive and on the status of relevant federal proceedings before FERC and in Congress. 

Section 6 — North American Electric Reliability Corporation Study  

The [STATE] Legislature urges the North American Electric Reliability Corporation (NERC) to study and publicly report on:   

• (a) The reliability implications of continued below-cost bidding by subsidized generators in RTO wholesale markets, including effects on the long-term viability of dispatchable generation resources that provide essential grid stability services;  
• (b) The reliability implications of socialized transmission cost allocation, including effects on optimal generation siting, transmission congestion, and the resilience of the bulk power system;  
• (c) The feasibility and reliability implications of transitioning to pay-as-bid pricing and true transmission cost allocation in existing RTO market structures, including recommended market design features necessary to maintain reliability during and after any transition;  
• (d) Best practices for artificial intelligence-based market surveillance as a tool for maintaining market integrity in reformed wholesale electricity markets.  
• (e) Study what is required and ramifications for any state to withdraw from membership in a Regional Transmission Organization without financial penalty or stranded cost obligation, provided that the withdrawing state has enacted rules through its public utility commission ensuring: reliable electric power generation sufficient to meet the state’s load requirements; adequate reserve and excess capacity to serve peak power needs without disruption or failure; and a competitive intrastate electricity market structure designed to subject generators and suppliers to market discipline sufficient to maintain rates as low as practicable for residential, commercial, and industrial ratepayers.  
• (f) Study the implications and impacts of states withdrawing from Regional Transmission Organizations on the Regional Transmission Organizations that they withdraw from.   

Section 7 — Multi-State Coordination  

The [STATE] Legislature finds that the systemic distortions addressed by this Resolution affect all states within the [RTO NAME] footprint, and that coordinated action by multiple states creates significantly greater leverage to achieve reform at the RTO and federal levels than any state acting in isolation. Accordingly, the [STATE] Legislature:   

• (a) Encourages the legislatures of all states within the [RTO NAME] footprint to consider adopting resolutions consistent with the framework set forth herein;  
• (b) Directs the [STATE] Public Utility Commission to share this Resolution with its counterpart commissions in all states within the [RTO NAME] footprint and to coordinate advocacy before [RTO NAME] and FERC consistent with this Resolution’s directives;  
• (c) Authorizes and encourages [STATE]’s representative(s) on the [RTO NAME] Members Committee and any related governance bodies to advocate for the market reforms described in this Resolution. 

Section 8 — Definitions   

As used in this Resolution:   

1. “Full true cost” means the total cost of generating and delivering one unit of electricity from a given resource, inclusive of fuel costs, capital recovery, scheduled and unscheduled operations and maintenance, decommissioning and retirement obligations, interconnection costs, and required return on investment, before any offset for external revenue. Full true cost is the gross figure from which net true cost is calculated.  
2. “Net true cost” means the minimum amount a generator requires from the wholesale energy market to recover its full true cost, calculated as full true cost minus all external revenue inputs the generator receives from any public or private source, including federal tax credits, production incentive payments, state subsidies, capacity market payments, ancillary services revenues, and power purchase agreement revenues. Net true cost is the bid floor applicable to each generator under this Resolution. A generator whose external revenue inputs equal or exceed its full true cost has a net true cost of zero and may not claim that market conditions require energy market revenues above that floor.  
3. “Pay-as-bid pricing” means a market pricing mechanism under which each generation resource dispatched in a given interval receives the price reflected in its accepted bid, in contrast to uniform clearing price mechanisms under which all dispatched resources receive the price bid by the highest-cost marginal unit.  
4. “True transmission cost allocation” means the allocation of the costs of transmitting electricity from generation to load based on the actual cost of serving each load zone from each generation source, allocated to the beneficiaries of transmission services in proportion to their use, rather than averaged or socialized across all ratepayers regardless of the geographic source of generation serving them.  
5. “[RTO NAME]” means [full legal name of the applicable Regional Transmission Organization or Independent System Operator].  
6. “[STATE] Public Utility Commission” means [full legal name of the applicable state utility regulatory body]. 

Section 9 — Effective Date and Transmittal   

This Joint Resolution takes effect upon adoption by both chambers of the [STATE] Legislature and shall be transmitted by the [STATE] Secretary of State to: the Chair of the [STATE] Public Utility Commission; the Chief Executive Officer of [RTO NAME]; the Chair of the Federal Energy Regulatory Commission; each member of [STATE]’s congressional delegation; the Chief Executive Officer of NERC; and the presiding officer of the legislature of each state within the [RTO NAME] footprint.