FERC last week conditionally approved a significant re-design ofthe New England bulk power market in an attempt to reduce the pricevolatility stemming from congestion of the region’s transmissionsystem. But it could be as long as two years before the regionalmarket feels the benefits of the changes.

In a complex decision, the Commission gave the New EnglandIndependent System Operator (ISO) the green light to move away fromits existing single-settlement system, which offers day-aheadbidding for energy and ancillary services, toward amulti-settlement approach that would provide for both real-time andday-ahead bidding. In addition, it approved certain elements of apermanent congestion management system for the New England ISO,which manages the wholesale market and power exchange for sixstates in the region.

“My hope is that today’s order is a signal of a more aggressiveCommission posture on insisting on well designed and efficientelectricity markets,” said Commissioner William Massey. “Theheadlines about electricity price spikes and impending shortagesdrive home the importance of getting market design right.”

The “good news” is that there was “broad consensus” among theNew England stakeholders for adopting locational marginal pricing(LMP) to manage system congestion, which Massey said “sends [themarket] correct price signals for using existing generation andtransmission resources efficiently.” At the same time, LMP willhelp with future siting of new generation and transmissionfacilities, he noted, adding that it is “becoming the Commission’spreferred congestion management system.”

The “bad news” is that the New England ISO has said it will be16 to 24 months before it can fully implement the market designchanges, Massey said. The Commission made it very clear that it was”very disappointed” with the ISO’s projected timetable forimplementation. It ordered New England to submit within 30 days anexplanation of why it can’t complete implementation by Feb. 1, 2001— prior to the start of next spring [EL00-62].”We’re going to betaking a hard look” at this issue, said Ellen Foley, a spokeswomanfor the New England ISO.

If the extended implementation timetable is due to thedevelopment of LMP software, FERC encouraged the New England ISO topurchase the “rather successful” software of the Pennsylvania-NewJersey-Maryland (PJM) pool.

Commissioner Linda Breathitt noted that many of the proceduresbeing adopted for the New England power market were already in useby adjoining ISOs — the New York ISO and the PJM power pool.”Approving similar bidding, settlement and congestion mechanismsfor New England will simplify coordination among the regionalISOs,” and hopefully improve system reliability.

Many parties, including the North American Electric ReliabilityCouncil (NERC), believe the patchwork of different congestionmanagement systems being approved in regions is at least partly toblame for some of the reliability stresses on the grid now.

Commissioner Curt Hebert Jr., a strong advocate of transcos,didn’t think the ISO design changes would make much difference. “Aslong as we continue to allow ISOs to live from summer to summer,while putting a Band-Aid [on them], we’re never going to get itright.” The power market needs more investment in transmissionfacilities, he said, and transcos will encourage that.

In a related matter, New England ISO’s Foley dismissed reportslast week that the New England region could face severe poweroutages this summer due to insufficient generation supplies. Thepublished reports accompanied the New England ISO’s decision todeclare an eight-hour power watch last Tuesday when the SeabrookNuclear Power Station in New Hampshire tripped off line amid “hot,humid weather” in the region.

“We don’t suffer from generation shortages in New England,”Foley said. In fact, almost 1,500 MW of new capacity has been addedto the region during the past year, and another 5,000 MW iscurrently under construction, she noted. New England currently has330 generating units that serve more than 6.3 million customers.

Susan Parker

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.