Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

The Nation's Grid Chiefs: On The Future of Markets

Exclusive interviews with the CEOs of five regional transmission systems.

Fortnightly Magazine - October 2006

market and reliability impact.

Fortnightly: How do you conduct market monitoring in New York? Is your present scheme working out?

Lynch: Actually I think we have one of the most robust market-monitoring units of any of the ISOs or RTOs.

Fortnightly: But it’s internal?

Lynch: Yes, it is internal. We do have an independent market advisor who reports to the board, but who also collaborates with our internal market-monitoring unit. Our market-monitoring unit is a very large department. You have to remember: New York has a lot of programs in place to make sure that there are no abuses of market power. We initially had our AMP, our automatic mitigation procedure. We have now brought that back to the extent that we now have an AMP plan within New York City. For the rest-of-the-state zone, however, we conduct an actual physical analysis, looking at conduct and price impacts, because we did not think it was necessarily appropriate in that zone to allow for automatic price mitigation.

As I mentioned, we have an entire internal department that analyzes bids and behavior on a daily basis. They have conference calls with FERC, where they look at market behavior and monitoring. Again, you’re being the police here or the watchdog to identify issues and allow FERC to take specific action.

Fortnightly: Do you see any consolidation between regional RTOs in the future, or perhaps some additional RTOs around the country?

Lynch: I would have to say that I think in the near term that you probably will not see the new formation of markets. And from a geographical standpoint I don’t really think it is necessary to combine markets. I think as long as there are compatible market roles across the various organizations, there really is no need for a merger. But looking out 10 years, I think more people are going to see the value of competition.

Look at New York. We have seen a dramatic improvement in availability and efficiency of our operating fleet. And think of the value of shifting the risk of investment from your consumers over to the investors.

When the market sends locational price signals, it drives investors to build the infrastructure and to have the facilities located where the need is, as opposed to building them in remote areas. In 10 years, I think it is very conceivable that you could see new areas of markets pop up. It is going to take some time, though.

Fortnightly: Any other ideas come to mind on the current state of markets, plant efficiency and availability, or congestion?

Lynch: I want to make several generic comments on congestion, because it’s getting a lot of press right now.

First, in a market, congestion is not necessarily bad. It allows us to send the right price signals and send the right locational signals.

Second, when you look back on the history—power pools and integrated utilities—you find that there has always been congestion in our system.

Third, if you were to do studies of congestion today as compared to maybe three or four years