Commission Watch

Deck: 
Price controls turn upside-down in New England.
Fortnightly Magazine - July 15 2003
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Price controls turn upside-down in New England.

Several months have now passed since grid operators in New England introduced the region to a PJM-style standard market design (SMD), complete with a day-ahead market (DAM) and nodal-based locational marginal pricing (LMP) to manage congestion on transmission lines (a major problem in southwest Connecticut). Yet the SMD has not taken all the excitement out of electricity price discovery. Instead, the New England independent system operator (ISO-NE) has found it necessary to augment the new SMD regime with three new ad hoc price control schemes-three schemes so convoluted that they appear to run at cross-purposes, each undoing the other in turn.

DC PSC RFP Technical Consultant for Formal Case (FC) No. 1156

Of course, the bid cap of $1,000 per megawatt-hour (MWh) still remains in place as a last-ditch safety net. Yet many observers, including the Federal Energy Regulatory Commission (FERC), still wonder why the $1,000 price ceiling should not be sufficient to guard against gaming or a price blowout. But the physics and politics of bulk power operation and regulation still confound the experts. Even with the new SMD, things don't turn out as simply as they first appear.

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