New England Utility Seeks $1,000/MWh Power Price Caps
NSTAR, the parent company of Boston Edison, Commonwealth
Electric, Cambridge Electric and Commonwealth Gas, has requested
that the Federal Energy Regulatory Commission impose a price cap of
$1,000/MWh on the New England wholesale power market to protect
electricity consumers from potential surges in prices during peak
periods this summer (see Docket No. EL00-83).
The NSTAR filing requests that price caps be in place from July
1, 2000 through April 2001. The filing also asks that during that
period, FERC direct the New England Power Pool (NEPOOL) and the New
England Independent System Operator (ISO-NE) to develop operating
procedures that will allow the ISO to determine whether the energy
market is workably competitive.
"While we continue to encourage competition, we recognize the
importance of temporary controls to protect consumers," said NSTAR
CEO Thomas J. May. "Even the U.S. stock market, generally regarded
as the most efficient market in the world, has 'circuit breakers'
to halt trading if irrational behavior is detected."
NSTAR Vice President of Energy Supply Paul Vaitkus noted that
New England is at the end of the pipeline for all fuels and has
historically had some of the highest energy prices in the nation.
It also is the only region in the country with a competitive energy
market, operated by an ISO, that does not have price limits.
California, Pennsylvania, New Jersey and Maryland already have
price caps in place and on June 6th, the New York State ISO
approved a price cap of a $1,000/MWh.
"On May 8, 2000, the price of wholesale electricity in New
England soared to $6,000/MWh, about 200 times the normal price,"
Vaitkus noted. "These irrational prices are a clear sign of market
instability. Left unabated, this behavior will stunt the growth of
retail competition and will expose consumers to higher energy
prices. If the competitive market is to develop properly and live
up to the promise of reduced energy costs for customers, temporary
controls such as the price caps we are seeking, must be
In its complaint, NSTAR told the Commission the May 8 price
spike, "coupled with official predictions of price spikes of even
greater magnitude during the summer, has caused a 100% price
increase in the forward bilateral markets. That increase is, in
turn, choking off the nascent retail competition in New England.
"Measures to address known market flaws have not been
implemented and anomalous market conduct does not appear to be
understood. These factors, together with structural market flaws,
point to the fact that the energy market in New England is not
workably competitive during periods of capacity constraints."
NSTAR has requested that NEPOOL be directed to implement
temporary price caps by July 1, 2000 and redesign the energy market
by April 1, 2001 so the price caps can be lifted.