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News Digest

Dynegy's David Francis, vice president for western power trading, testified on Dec. 21 on why he thought the ISO was bending the rules:
Fortnightly Magazine - February 1 2001
  • the ICAP charge an "artifact" inconsistent with markets. "Today's energy market routinely clears at prices many times the real-time marginal cost of energy," said energy division legal counsel Mathew Morais. "There is no compelling need to assure all generation owners that their fixed costs will be fully recovered through an administrative charge." .-B.W.R.

FTR Auctions. The PJM Interconnection filed attachment K to its open access transmission tariff, to limit the amount of congestion credits available through a fixed transmission right (FTR) acquired through an FTR auction, to discourage FTR holders from inducing artificial congestion. As PJM explained, its market monitoring unit feared that traders could purchase FTRs in the monthly auction, but then later submit bids in the day-ahead market designed to create congestion to artificially inflate the value of FTRs. The new amendment denies any return over the FTR auction cost if such bids create more congestion in the day-ahead market than occurs in real time. .

Must-Run Contracts. The FERC rejected attempts by power producer Southern Energy to force the California ISO to pay certain foregone revenues (lost opportunities to sell energy into other, more lucrative markets) in addition to the fixed option payment the generator would receive for selling the output of its generating plants under RMR contracts (for "regulatory must-run" plants) with the ISO. RMR plants are those that must be dispatched to serve customers because of transmission constraints that preclude reliance on other plants. .-L.A.B.

Congestion Management. Lamenting that "no 'off-the-shelf' system is available," ISO New England announced it would take another 15 to 17 months to put in place Phase I of its proposed, single-settlement congestion management system, to include locational pricing, a security-constrained economic dispatch and financial congestion rights. Phase 2-a multi-settlement system with bidding on congestion, demand-side resources and a four-hour reserve market, would follow 12 months later.

The ISO said the Phase 1 improvements were needed to address "major problems" with monthly uplift in transmission (congestion rent) and energy averaging $16 million and $9 million, respectively, during 2000. As it explained, "energy uplift" occurs when units are dispatched through a pay-as-bid auction at a price above the energy clearing price. It said the region's pay-as-bid auction had escalated in size and cost, leading generators to submit bids less flexible than actual unit characteristics, and depressing prices received in the parallel central clearing price auctions for energy and reserves.

The ISO added that it had signed a contract with ALSTOM ESCA, its primary software vendor (and the vendor for PJM's multi-settlement system), and expected to sign a contract with CAP Gemini Ernst & Young for certain program management services, such as integration testing. . -B.W.R.

New York Reforms. The New York Department of Public Service recommended on Dec. 14 that the New York ISO should adopt a wide range of operational reforms and consumer safeguards, including a price cap of $150 per megawatt-hour on wholesale power, with "circuit breakers" set at even lower price thresholds to help detect and prevent market manipulation.

The 125-page study, offers details on how the ISO operates (load zones,