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News Digest

Electric Reliability
Fortnightly Magazine - June 15 2000

same megawatts, "to a degree not easily possible to quantify."

Market Chaos. Alleging that software problems and communications failures were so pervasive that action was needed "to avert a potential disaster this summer," New York State Electric & Gas Co. petitioned the FERC to suspend all market pricing programs operated by the New York ISO for energy, reserve capacity, and ancillary services, for the period June 1 through Oct. 31, and to revert to cost-based pricing.

But cooler heads soon prevailed, and NYSEG agreed to withdraw its request, on consultation with other members of the ISO, including Central Hudson Gas & Electric, Consolidated Edison, Niagara Mohawk, Orange & Rockland, the Long Island Power Authority, and Rochester Gas & Electric. The scaled-back proposal asks the ISO to work out problems internally, and report back to the FERC.

Must-Run Plants. The California PUC weighed in on the side of the ISO and a "buyers' coalition" of investor-owned electric utilities in a dispute of whether so-called RMR (reliability must-run) plants should earn a profit when dispatched by the ISO. The dispute involves the private power producers, Southern Energy Delta and Southern Energy Potrero, which own three power plants in the San Francisco "load pocket."

Southern argues that when the ISO dispatches "must-run" plants, it should pay owners a "fixed option payment" (FOP) that compensates them for both incremental operating costs and fixed capital costs. Anything less, says Southern, would amount to a "zero-profit" rate.

The ISO, the utilities, and the FERC trial staff all oppose Southern's argument, pointing out that in most cases Southern does not need to interrupt sales of output from the plants under profitable bilateral contracts in order to comply with the ISO's dispatch orders, so that revenues from bilateral sales are available as a credit against fixed capital costs. Otherwise, say the buyers, Southern would profit from "market power."

Yet Southern countered, "The parties seem to suggest that 'locational rents' are the same as the exercise of market power, which they are not." Southern argued that even the buyers' witness Larry Ruff "conceded at hearing that there was a difference between the ability to capitalize on good locations and the exercise of market power."


State PUCs

Stranded Costs. In an interim order, the Illinois commission allowed Commonwealth Edison Co. to revise its plan for calculating market prices to set transition charges to recover stranded costs. Com Ed would replace the "neutral fact finder" (NFF) process that had required utilities and marketers to submit summaries of contracts to a committee appointed by the commission.

In his separate concurring opinion, commission chairman Richard L. Mathias said that utilities, consumers and retail suppliers all had questioned the NFF approach- that it could create a "real likelihood" of a "re-monopolization" of the Illinois electric industry.

Com Ed's new plan would calculate peak market prices and forward transaction prices along with bid/ask prices from transactions posted on Altrade and Bloomberg "PowerMatch," two real-time, online electronic power trading exchanges. For off-peak pricing, the utility will use historical day-ahead data published in . To develop hourly prices