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News Digest

PUC Oversight: Panacea or New Problem?
Fortnightly Magazine - October 1 2000

point-to-point reservations, and unauthorized use charges, which will reflect actual equity and debt capital costs of utilities providing SRPS. .

State-Mandated Divestitures. Virginia regulators gave the state's electric utilities until Oct. 16-one day after the FERC's first deadline under Order 2000-to file plans for divesting ownership or control of transmission assets under the Virginia state law that requires formation of regional transmission groups. .

 

Power Markets

New England Price Peaks. Northeast Utilities, United Illuminating Co., and the Maine PUC all filed similar complaints asking the FERC to compel ISO New England to recalculate the unprecedented price peaks of $2,870 and $6,000 per megawatt-hour that occurred on May 8 during hours 13-17, claiming that ISO-NE violated its own tariff rules in calculating the price.

The PUC charged that ISO-NE violated its tariff by relying on a high-priced energy import transaction from the New York control area (at $3,387 per megawatt-hour) to set the price in New England. UI added that the New York supplier had no incentive to offer a competitive bid, since it was selling energy into New England to satisfy the region's requirement for installed capacity (ICAP), and by definition energy could not qualify under the ICAP rule unless it was also priced at a level "not likely to be dispatched."

Moreover, the PUC added that ISO-NE should have mitigated the New York price after the fact, since a few days later the New York ISO itself recalculated its own price to $331 per megawatt-hour, concluding that the sale was exposed to "flaws" within the New York market.

The PUC observed that because ISO-NE refused to mitigate the $6,000 price, Bangor Hydro in Maine paid "approximately $2.7 million for energy for five hours." That cost was more than five times the amount that Bangor would have paid if ISO-NE had mitigated the price to $1,100 per megawatt-hour, the figure calculated as appropriate by the PUC. .

Reserve Requirements. The New York ISO filed a plan with the FERC to pay a rebate to those load-serving entities (LSEs) operating during the summer peak season in the New York City load pocket that failed to procure enough supply to meet the ISO's requirement for installed capacity and thus were forced to pay deficiency charges to cover the ISO's deficiency procurement auction. The rebate will cover the difference between the nominal price limit in the ICAP market of $8.75 per kilowatt-month and the higher deficiency charge of $12.50 per kilowatt-month.

The ISO concluded that the LSEs were not at fault, since capacity shortages occurred in the NYC load pocket. "As a result," it said, "the deficiency charges have become purely punitive... several LSEs have indicated that these penalties... may drive them out of the New York market." .

New York Prices. Citing "dramatic and sometimes inexplicable price fluctuations"—and its own duty to ensure just and reasonable rates—the New York PSC directed the state independent system operator to provide access to certain information that the PSC might need to assess the ISO's operation and to address implementation problems that it says have occurred "in