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 electric
power generation facility.
A more formal definition of a merchant power plant would be "a
power plant built or purchased with private equity that does not have
firm customers (i.e. captive ratepayers similar to a utility) which will
attempt to sell most or all of its product in the open market." The pure
merchant plant would initially have no customers while a "hybrid mer-
chant" would have some but not all of its capacity initially contracted to
a 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 its
output dedicated to contract customerts)." For discussion we will clarify
a cogeneration facility (Federal Energy Regulatory Commission, FERC,
qualified facility or 'QF') as "a power plant primarily constructed to
meet a given site's thermal and electric needs which meets the required
FERC efficiency standards for a 'QF', and generally not exporting much
if any power for external sale."
In summary , we'll say a utility has captive ratepayers, an IPP has
contract customers, a cogenerator has its own site as the 'customer ', and
a merchant plant attempts to sell into the open market establishing cus-
tomers as it produces its product.