Low Bid Cap Kept on NYISO's Non-Spinning Reserves
The New York Independent System Operator (ISO) walked away from
FERC empty-handed last week, as the Commission cited its
disappointment with the regional power group's failure to reduce
concentration in the 10-minute non-spinning reserves market.
In its decision, which was approved by a 3-1 vote, FERC chided
the New York ISO for not only failing to implement some of the
market fixes that it ordered last May, but also for coming up short
with the corrections that it did put into effect. As a result, the
Commission rejected the ISO's request to substantially raise the
$2.52/MWh bid cap in the 10-minute non-spinning reserves market.
Instead, it voted to extend indefinitely the $2.52/MWh bid cap,
which expired Oct. 31, until the New York ISO can show that the
market is "workably competitive."
The regional group had asked for the bid cap on non-spinning
reserves to be increased to $15/MWh effective Nov. 1, and to
$30/MWh on Jan. 1, 2001. It proposed that the higher cap remain in
effect until April 30, 2001. Non-spinning reserves are power plants
waiting on stand-by to meet peak demand. FERC estimated that 97% of
the non-spinning reserve capacity in the East is held by only four
In addition to restricting the bid-cap level, the Commission
directed staff to schedule a technical conference to explore
changes to market rules to resolve the concerns in the non-spinning
reserves market. It told staff to report back with its findings in
The technical conference will provide industry and FERC with the
opportunity to prevent a "second sizable market meltdown in a major
state," said Chairman James J. Hoecker. He hinted Wednesday that
New York's problems may be owing, at least in part, to the fact
that it shares the region with two other strong ISOs - the New
England ISO and PJM. In a just-released report on the U.S. bulk
power markets, staff concluded the Commission's competition
objectives "would be better served with one Northeast regional
operation" instead of three, Hoecker said.
Commissioner Curt Hebert Jr., who dissented from the FERC
majority, said he advocated removing bid restrictions from the
market. "Rather than let go and at least allow the ISO to take baby
steps into the competitive market, we continue price controls
indefinitely. I would let [them] go, especially when an ISO with an
institution inherently wedded to keeping prices low rather than
efficiency wants to test its legs."
With the addition of a hydroelectric energy facility and
increased exports from the PJM and New England ISO into New York's
non-spinning reserves market, Hebert said he believed the "supply
picture since May has brightened considerably" to justify removing
price constraints. "The ISO [still] has a long way to go. I will
admit that. Nevertheless, I would not make the perfect the enemy of
the good," he said.
Moreover, he accused the FERC majority of backing down from its
threatened investigation of the New York ISO market in the event it
wasn't satisfied with the ISO's actions. "If the record convinces
the majority, as it seems to, that the ISO must do more [to reduce
market concentration], we much march boldly to institute the
proceeding that we threatened. Instead, the majority meekly calls
for a technical conference." Hebert also called for FERC to remove
the $1,000/MWh that was levied on the New York ISO's energy markets
Unlike Hebert, Commission Linda Breathitt supported extending
the $2.52/MWH bid cap on 10-minute non-spinning reserves capacity,
but she said she did so "reluctantly."