Probe of New England ICAP Market Supported

New England regulators and market participants said they support an investigation by FERC into the operation of the installed capacity (ICAP) market in the New England Power Pool (NEPOOL) during this past April-July period.

In a complaint filed earlier this month, Alternative Power Source Inc. (APS), a small Massachusetts power marketer, called on the Commission to order the suspension of all ICAP capacity charges billed to participants in NEPOOL during the April-July period until FERC and the Department of Justice (DOJ) have completed separate investigations into alleged gaming charges in the market.

The Maine Public Utilities Commission (PUC) "shares the concerns" of APS, and has asked the New England Independent System Operator (ISO) to investigate the ICAP bids for the April-July period and to "consider mitigating the bids for May through July," the regulators told FERC [EL00-109]. The Maine commission also plans to submit a complaint to FERC "addressing the unjust and unreasonable market-clearing price resulting from the operation of the ICAP auction." It asked for fast-track processing of APS's request.

The New England Conference of Public Utilities Commissioners also supported APS's complaint, saying it "reinforced" its earlier request for termination of the ICAP market in New England.

All load-serving entities (LSEs) in NEPOOL are required to purchase sufficient ICAP to meet their electric loads "plus a share of the reserves " in order to maintain reliability in the New England market. Critics contend the ICAP requirement is outdated in a competitive market.

APS filed its complaint at FERC after it received a bill charging it over $700,000 for an ICAP deficiency last April. The ICAP charge was based on a market price that "purportedly" cleared at $3,240/MW/month, even though NEPOOL reported there was 2,522 MW of excess ICAP last April, according to the marketer.

APS said it is now faced with a "Hobson's choice" of either 1) paying the $700,000 into escrow, pending resolution of the billing dispute through the ADR process; or 2) being declared in default of its contract obligations, it told FERC. It has asked the Commission to suspend its payment of $700,000 into escrow until an investigation is completed.

Northeast Utilities Service Co. and Select Energy Inc. have urged FERC to dismiss APS's complaint, saying it is "all smoke and mirrors." APS is "simply seeking to devalue ICAP as a way to avoid its responsibilities under the Restated NEPOOL Agreement.

The APS complaint is the "latest in a series of attacks on a time-tested mechanism for maintaining reliability of electric service in New England," Northeast Utilities and Select Energy said. Moreover, they said APS's request for mitigation of the ICAP bids in the April-July period is "tantamount to a unilateral termination of the ICAP requirement" --- a requirement that FERC has upheld.

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