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Frontlines

Fortnightly Magazine - June 15 2000

Gas & Electric, Consolidated Edison, Niagara Mohawk, Orange & Rockland, the Long Island Power Authority, and Rochester Gas & Electric.

Under the new consensus proposals, the ISO by June 5 would begin to conduct "price screens" to verify that prices were rational. Market prices above screen levels would not be permitted unless the ISO first determined that the prices "were the result of properly functioning, competitive markets." The ISO would convene its management committee to address market anomalies and produce a progress report by June 15, and again every two weeks thereafter "until all existing problems have been addressed."

Nevertheless, NYSEG chose not to retract any of its allegations of "market flaws" identified in the earlier complaint:

  • Imports. Energy imports from outside New York are "unworkable."
  • Volatility. Energy prices fluctuate substantially over short periods in an "inexplicable fashion."
  • Irrational Relationships . A "significant lack" of convergence in day-ahead and real-time energy prices.
  • Tariff Violations . Inefficient allocation of fixed-block generation resources, resulting in customer payment obligations not permitted by tariff.
  • Overlooked Resources . Failure by the ISO to recognize resources in the market.
  • Poor Communications . Lack of timely communication on curtailments and restoration of transactions.
  • Market Power . Uncompetitive prices for ancillary services.
  • Unreliable Settlements . Revisions of settlement information after long delays, "distorting" market signals.

Explaining why imports were unworkable, NYSEG said "severe cuts" to transactions between control areas had led PJM to consider discontinuing day-ahead transactions with New York. Further, it said that NY ISO software incorrectly predicts prices, curtailing purchases of less-expensive supplies and then forcing the buyers to purchase energy at much higher prices.

SOME OUTSIDE THE ISO DIDN'T SEE THINGS AS SO BAD . Writing on May 15, after NYSEG had toned down its initial complaint, General Counsel David M. Perlman of Constellation Power Source insisted the ISO could work it out.

"In no instance are the issues...so fundamental as to require a complete, albeit temporary retreat from competitive energy markets," wrote Perlman.

PSE&G vice president (law) Richard P. Bonnifield agreed: "[T]he proper forum for resolving these market issues is within the structures and procedures of the NY ISO."

At PECO Energy, lawyer Marjorie Philips acknowledged that NYSEG had "correctly identified a number of flaws." but she argued that many of them related to "seams" between control areas and emphasized that all of the ISOs in the Northeast were aware of the issues and committed to work to resolve them through their Memorandum of Understanding.

Philips added that NYSEG had not provided "any numbers that quantify the extent by which external supplier participation has dwindled."

Yet supplier participation was very much on the minds of those representing consumers in New York City, where the NYSEG complaint found allies.

New York City corporation counsel, Michael D. Hess, noted that for full-service electric customers in the downstate load pocket, Con Edison on May 1 had shifted from an embedded-cost generation charge to a market supply charge based on ISO prices. As Hess explained, that meant that "New York City electricity customers will be exposed to these