NYISO Seeks FERC OK of Market Abuse Penalties

Pointing out the potential for market power abuses during this summer's peak demand periods, the New York Independent System Operator (NYISO) has asked FERC to give it a quick go-ahead to penalize for repeated abuses of market power in the Empire State.

The filing, made at the Federal Energy Regulatory Commission last Monday, follows a recent Commission order that approved an NYISO market mitigation plan, but limited the duration of the automated mitigation procedures (AMP) to the 2001 summer capability period (see NGI, July 2). In its "exigent circumstances" filing, NYISO proposes revisions to incorporate provisions for the implementation of certain proposed penalties for repeated abuses of market power.

The ISO made its filing under Section 205 of the Federal Power Act at the direction of its independent board of directors. The board can direct NYISO to make such filings without the concurrence of the system's management committee when the board concludes that exigent circumstances relating to the reliability of New York's power system or an ISO-administered market exist. The board concluded that exigent circumstances exist because there is a material risk that prices in NYISO-administered markets could be tainted by abuses of market power during at least some intervals in the high load periods of this summer.

NYISO acknowledged that it has significant ability under its market mitigation measures to mitigate prospectively the market impacts of the exercising of market power. This ability will be significantly enhanced by FERC's order approving its AMP proposal, the ISO went on to note. But, with the exception of cases involving physical withholding, NYISO argued that its mitigation measures are not intended to, and do not provide, an affirmative deterrent to market power abuses. Rather, they are intended to restore competitive market outcomes, while avoiding unnecessary intervention in New York's electric markets and providing appropriate incentives to participate in those markets.

NYISO said that its proposed penalties help to deter market power abuses from occurring in the first place. Further, the proposed penalties do not change the market mitigation thresholds or other substantive provisions of the market mitigation measures. If, however, NYISO has repeatedly mitigated similar conduct, it likely will have become apparent that additional measures are needed to deter yet further violations of the thresholds. The proposed penalties provide such a targeted deterrent.

The ISO, asking FERC to act on an expedited basis, said that such protections are particularly warranted during the potentially tight supply and demand conditions that New York may face this summer. The ISO requested an effective date of one day after its filing was made, if the penalties are approved.

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