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News Digest (July 15, 2001)

Fortnightly Magazine - July 15 2001

Power Markets

Automated Price Mitigation. Aquila Energy Marketing and Edison Mission Energy (among others) opposed the New York ISO's plan for automated price mitigation (AMP), filed May 17, which would employ a "Security Constrained Unit Commitment" (SCUC) computer program to quickly identify outlier bids from power suppliers that exceed thresholds for reasonableness (OK'd previously through the ISO's market mitigation and monitoring plan), and then weigh the effect of those bids on price-setting algorithms, and mitigate prices (by excluding the bids) if the bids also would have caused prices to exceed certain thresholds for reasonableness and volatility.

Aquila and Edison say the regime will mitigate too many bids and drive prices down to artificially low levels because the AMP model is apparently designed to take all bids that exceed the bidding thresholds and then to analyze their effects on the price-setting algorithm on a collective basis, rather than by analyzing each bid separately. In fact, they say they didn't fully understand the ISO's AMP method until reading the ISO's June 1 answer to a first round of protests filed in May. FERC Docket No. ER01-2076-000, protest filed June 15, 2001. -B.W.R.

Power Supply Emergencies. Indeck Maine Energy asked the FERC to rule that ISO New England must first dispatch all available generation in the region before declaring a capacity emergency or imposing bid caps. FERC Docket No. EL01-86-000, filed June 5, 2001. -B.W.R.

ICAP Markets. ISO New England proposed a deficiency charge of $4.87 per kilowatt-month for its installed capacity (ICAP) market (said to be equivalent to the PJM charge of $5.38, after adjusting for the way the two different charges will operate), as an alternative to the $8.75 ICAP deficiency charge recently imposed by the FERC amidst widespread industry objections.

At the same time, ISO-NE proposed changes in the basic nature of the ICAP obligation, so that load-serving entities would meet the requirement over periods longer than one month (the prior ICAP market structure), and so that the ICAP product will act much like an option to purchase energy in a forward market and will be binding on a discreet physical resource (whereas the prior ICAP product imposed no restraint on unit availability). ISO-NE also would scrap its non-spinning reserve market as part of the plan. FERC Docket No. EL00-62-015, filed June 4, 2001.

Four days later, a federal appeals court told the FERC to reconsider the mandatory $8.75 ICAP deficiency charge, noting that FERC had not properly addressed industry claims that significant merchant plant expansion planned for the region would make the current ICAP charge superfluous. Central Maine Pwr. Co. v. FERC, Nos. 01-1376 et al., June 8, 2001 (1st Cir.).

Meanwhile, in a separate case, the FERC accepted modifications to tariffs governing the New York ISO's ICAP market, explaining that when the ISO recalls exported