To prepare for the coming peak period of electricityconsumption, the New York State Public Service Commission (PSC) hasannounced it will monitor the state’s wholesale electric marketduring this first summer of its operation. The market now isadministered by the New York Independent System Operator (NY ISO),an independent non-profit organization that operates the state’sbulk power system and administers a competitive wholesale marketfor electricity.

“Profound changes are taking place in the nation’s electricmarket as we make the transition to competition,” said PSC ChairMaureen O. Helmer. “At the same time, there is a rising demand forelectricity and a limited supply of generation for the immediatefuture.”

The monitoring of NYISO follows a complaint filed with FERC justweeks ago by the New York State Electric & Gas (NYSEG), whichsuggested changes to the ISO because of “continuing problems” (seeDaily GPI, May 2). It called on FERC to”investigate and initiate emergency actions” to correct the problems,and suggested the Commission “create a safety net” by temporarilyshutting down market-based rates and adopting cost-based biddingsubject to the NY ISO’s review and oversight. To date, there has beenno action taken on NYSEG’s complaint.

Helmer said that as New York and other states move toward anopen market system, limited generation supply “clearly” will havean impact on prices throughout the Northeast. “Rising demand fueledby continued economic growth will require timely consideration ofnew, state-of-the-art generation facilities to stabilize prices andmaintain the reliability of our electric system.”

PSC staff will monitor both day-ahead and real-time marketprices in the various markets administered by NY ISO. Just thisweek, NY ISO issued its summer power forecast, stating that the”power supply should be adequate to meet the traditional highsummer demand.” NY ISO forecast a peak electric demand of 30,200MW, which is a 1.7% increase over the 1999 forecast of 29,700 MW.NY ISO also recently completed an Installed Capacity (ICAP) auctionto secure enough ICAP generation to satisfy the reserverequirements of 35,636 MW set by the New York State ReliabilityCouncil, which was 18% installed reserve above demand.

Along with evaluating conditions in the markets themselves, thePSC staff will monitor other key market indicators, includingtransmission congestion, status of nearby regions outside of theNew York State, natural gas prices and the level of transactions inthe day-ahead and the real-time market.

“While the NY ISO will closely monitor market activities, ourefforts are intended to ensure we have an accurate and detailedunderstanding of the market’s performance during its first summerof operation,” Helmer said. “Timely information on marketperformance will put us in a better position to rapidly identifyany pricing irregularities and to work with the NY ISO and FERC onany needed improvements.”

When NY ISO was formed last December, it assumed responsibilityfor managing the state’s electric grid from the former New YorkPower Pool. In the event that reserve supplies in New York andthroughout the Northeast become limited during peak periods thissummer, NY ISO has operating procedures in place to take thenecessary actions and maintain adequate reserves. Correctiveactions include purchasing reserve power from neighboring systems,if available, and initiating procedures to reduce demand.

High temperatures earlier this month already triggered an “earlydrill,” according to NY ISO. Although this usually is the time ofyear for routine maintenance and some generating capacity isunavailable, the increased demand for electricity during the hightemperatures proved that NY ISO was able to maintain its”reliability…with no loss of power.”

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