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News Digest

Fortnightly Magazine - August 2000
  • to what it called "a significant market problem, namely the near total absence of price-responsive demand, which the ISO cannot address, in the short term, by less intrusive means."
  • New England. As of the end of June, the proposal by NSTAR (parent company of Boston Edison) to ask the FERC to impose a $1,000 per megawatt-hour price cap for energy in ISO New England had drawn stiff protests from across the nation. Companies such as Aquila Energy Marketing, AES Energy Marketing, Tractebel Energy Marketing, Hydro Quebec Energy Services, and Duke Energy North America attacked the move. Other opponents included the Electric Power Supply Association and the Maine PUC. In particular, ISO New England decried allegations that it is forced to accept bids in peak periods. "This is not the case," it said. The ISO acknowledged that it must accept all reserve bids, but said that rule did not apply to energy. "Indeed," the ISO added, "there has never been an instance, since the markets began on May 1, 1999, where all energy bids were accepted-some energy bids are always rejected."

Ten-Minute Power Reserves. The FERC approved a request by the New York ISO to impose bidding restrictions on 10-minute, non-spinning operating reserves on an interim basis, after agreeing with the ISO that markets showed a lack of "workable competition," but many expressed dismay about aspects of the order and sought rehearing, including the ISO itself.

  • Overbilling. Several parties, including the ISO itself, the state consumer protection board, and the state's association of municipal electric utilities, attacked the FERC's decision to bar the ISO from correcting the charges and rebilling customers who may have overpaid for reserve requirements.
  • Self-Insurance. Other parties, including Niagara Mohawk Power Corp. and Rochester Gas & Electric, wondered why the ISO allegedly had forced them to acquire power reserves from east of the state's primary transmission constraint, rather than from the west, even when the largest single outage contingency in the east was small relative to the size of the purchase of reserve power. Said RG&E, "despite numerous attempts in bidding into the ISO to provide operating reserves, [we] have been essentially unable to sell supply reserves from west of the constraint."
  • Market Power Analysis. The Long Island Power Authority challenged the price cap of $2.52 imposed for 10-minute, nonsynchronous (non-spinning) reserves, saying the cap had no basis, either as a competitive price or a cost-based rate. (The ISO had chosen the $2.52 cap, citing it as the highest price prevailing before the moment when the market became uncompetitive.) But LIPA argued against using antitrust market analysis to gauge competition, claiming that spinning and nonspinning reserves were essentially the same product, as spinning reserves could always substitute for nonspinning reserves. It urged using a performance-based measure of market power, which would test the percentage of hours that a given market participant wields influence.

In its final order, the FERC had noted that if the ISO could not fix its problems, the commission might find it necessary to intervene further.


Electric Reliability

Utility T&D Systems. The Michigan PSC