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FERC OKs ICAP Rebates for Utilities Serving NYC

FERC OKs ICAP Rebates for Utilities Serving NYC

The Federal Energy Regulatory Commission last week handed load-serving entities (mostly electric utilities) that supply the New York City power market a present --- a targeted rebate of $3.75 per kilowatt month.

By a vote of 3-1, with Commissioner Curt Hebert Jr. dissenting, the Commission agreed certain utilities serving the market should be reimbursed for the penalties they were charged for falling short of their installed capacity (ICAP) obligation this summer. The ICAP deficiency penalties were unfair, it ruled, given that the supply of available ICAP in the New York City market was very tight during the summer [ER00-3462].

The current mechanism in the New York Independent System Operator (NYISO) tariff "penalizes the New York City load-serving entities essentially for failing to achieve the impossible - and that is, for failing to obtain ICAP when none was available," said Commissioner William Massey.

Chairman James J. Hoecker was more than happy to return money to the electric market. ".There are a lot of people out there who have been imploring us to give money back. And frankly I'm not going to pass up the opportunity to do it, especially when there are no legal impediments," he said. ".New York City is the only part of the state that was paying higher rates this summer. So I'm happy to give them a break."

The New York ISO sought the rebates from FERC, fearing that without them retail electric competition could be seriously impaired in the New York market - either load-serving entities would flee the market or new entrants would be discouraged from entering it.

Hebert dissented from the majority's decision, essentially saying the rebates amounted to nothing more than a Band-Aid for New York City. "Instead of offering rebates to load-serving entities that are unable to [secure] sufficient installed capacity in the New York City area, I would act now to ensure additional supply of installed capacity. I would do this by lifting the price cap [on ICAP] and promoting the entry of new generation."

Susan Parker

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