Consumers of electricity may be excused if they did not catch the full reasoning behind a federal commission’s recent decision to raise costs come April 1. The decision touches so lightly on the current reality of deregulated power markets that many people in the industry don’t see the sense behind it, either.

In brief, the Federal Energy Regulatory Commission announced a week before it was scheduled to hold a hearing on the subject that New England utilities and, therefore, probably their customers, should be liable for a charge that had little meaning under the old regulated system of energy production and has no demonstrated meaning now. The charge is for failing to purchase enough installed capacity, which sounds like something rather important – who would want to be caught short of installed capacity? Known as ICAP, it is one of six quasi-independent wholesale energy products in New England and represents the difference between the region’s monthly usage and its annual peak usage. (There is, in addition, an energy market, three reserve markets and a market used to balance the whole system.)

The ICAP payment doesn’t guarantee utilities anything, and while the money is thought to go toward the building of new power plants to ensure the region avoids power shortages, there is no guarantee that it does.

New England’s power grid operator told the federal commission last year it thought a new ICAP deficiency charge should be the average price for ICAP in 1999, which was 17 cents per kilowatt month. The commission instead chose a previous deficiency charge of $8.75, which was rarely paid during the old regulated system when utilities essentially traded among themselves, but easily could be incurred under a deregulated energy market. The added cost to Maine for this inability to see that when a market fundamentally changes the rules governing a market must also change is expected to be $150 million a year.

The commission recognizes that it is simply guessing when it sticks to the previous charge and has invited New England’s Independent System Operator to offer a better number with an explanation for it. The operator, of course, should do that – ICAP was trading at between $2 and $3 shortly before the commission’s latest order, which seems to be a likely price range – but it should also strongly request a hearing for doing away entirely with this charge, which previously was unnecessary and under the new system is both unnecessary and archaic.

The system operator should start its presentation by pointing out that the commission is laboring under a misconception. New England, despite what the commission’s order says, does not have an energy capacity shortage and, more to the point, is not expected to have one. For evidence, it might look to a study by the energy behemoth Dynegy that shows only New England and Texas with sizable energy capacity surpluses. The idea that a deficiency charge is needed to provoke someone into building a power plant here is inaccurate; the question has been which of the many proposed plants would be built first to outcompete the others.

The point of deregulating the power industry was to allow the market to provide incentives for identifying and building energy facilities. The ICAP deficiency charge is what substituted (badly) for market incentives under the old model. But is is worse than merely outdated because ICAP’s presence will be most felt when it is least needed, during off-peak months, when its charges are highest, sending exactly the wrong price signals. The persistent suggestions, being investigated by the Department of Justice, that ICAP was withheld by its few sellers to drive up the price only makes it less appealing.

When New England’s system operator presents the commission with a model for replacing the ICAP, it can be brief: The substitute is the deregulated system commissioners approved over the last five years. It’s already in place, and would work better without the being forced to wear the regulations of the past.