NYISO Eyes Moderate Sanctions for Power Abuse
Taking a middle of the road approach, the board of directors at the New York Independent System Operator (NYISO) last Tuesday issued a request to market participants to work to develop what the board called a "balanced sanctions" proposal related to market power abuse by the middle of next month.
At issue is a sanction proposal made by the New York State Consumer Protection Board (CPB) in response to NYISO's lack of authority to retroactively mitigate market power abuses. Currently, a market power abuser in the state cannot be forced to relinquish the gains achieved as a result of that abuse. But under the terms of the CPB proposal, a market participant found to have exercised market power would be penalized with increasingly severe sanctions, including escalating financial penalties and public disclosure, with repeat offenses. Upon the third offense, the CPB plan provides for the imposition of what amounts to the withdrawal of market-based rate authority for six months, regardless of whether the offenses are the same or different.
"While we agree with the CPB that the NYISO's lack of authority to retroactively mitigate abuses of market power leaves a tangible incentive for abuse, we do believe that a more balanced sanctions program is necessary for both reliability and market-related reasons," said NYISO Board Chairman Richard Grossi. "Therefore, we are requesting that a more balanced program be submitted to the appropriate participant committee or committees and, if approved, filed expeditiously with the FERC," he said. Grossi noted that the ISO's board would cooperate fully to expedite such a process.
Some of the issues the NYISO board identified in the CPB proposal as needing more balance included public disclosure, repeat offense period and withdrawal of market-based rate authority provisions. "We cannot lose sight of the fact that the legitimate need for the penalties is to act as a disincentive to abuse and, except to the extent the two are inseparable, not as punishment to the abusers," Grossi said. The board wants market participants to work through the ISO's committee governance structure to develop a balanced sanctions proposal by June 13.
Meanwhile, the NYISO board last Tuesday also voted to file a request with FERC asking for expedited approval of its automated mitigation procedure (AMP) under the ISO's existing market monitoring plan on or before FERC's June 13 meeting. The NYISO noted that it was prompted to make the expedited filing after FERC last week found that the ISO must file proposed tariff sheets under Section 205 of the Federal Power Act if it wishes to implement the modified market mitigation.
Because the NYISO board decided to file the expedited request at FERC, the ISO believes that its sanctions proposal should be pursued assuming that FERC approves the AMP. However, the NYISO said that if FERC does not approve the AMP, the board has instructed staff to recommend an alternative sanction proposal.
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