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NY Battle Over Power Market Rates Continues

NY Battle Over Power Market Rates Continues

The Independent Power Producers of New York, Inc. (IPPNY) called a recent complaint to FERC by New York State Electric & Gas (NYSEG) an attempt at "market mugging" in the New York retail electric market. IPPNY condemned NYSEG's complaint against the New York Independent System Operator (NYISO) and said suggested changes to the ISO were "an attempt to strangle fledging competitive electricity markets in the state before they become fully viable."

NYSEG filed the complaint during the last week in April, calling for the Commission to remove market-based pricing June 1-Oct. 31 and to replace it with cost-based bidding (see docket EL00-70 on FERC RIMS). "The confluence of severe implementation problems to date, including extra-tariff pricing rules, software problems and communications failures (collectively 'market flaws') have strained the NYISO market to the point that a short-term safety net is the only prudent course to avert a potential disaster this summer," NYSEG said.

NYSEG's President Michael I. German said "quick action by FERC" is needed. "These problems became evident during testing last year and the ISO should not have gone as quickly as it did." The ISO, which is governed by 10 non-utility executives, took operational control of the state's high-voltage electric transmission system from the New York Power Pool in November 1999. "The ISO encountered significant problems last winter and continues to experience major problems as we enter the summer peak period," German warned.

NYSEG said energy imports from outside New York have been "unworkable" because of ISO software malfunctions and other factors. Energy prices have fluctuated substantially over short periods in "inexplicable fashion," and there has been a "significant lack of convergence in day-ahead and real-time energy prices." The administration of fixed block generation has resulted in inefficient resource allocations, and customer payment obligations not covered by the ISO's tariff, the New York utility added.

NYSEG suggested the Commission "create a safety net" by temporarily shutting down market-based rates and adopting cost-based bidding subject to the ISO's review and oversight.

However, Carol E. Murphy, IPPNY executive director, warned the Commission that NYSEG has ulterior motives. "NYSEG has placed its boot across the neck of New York's infant market and with this filing is begging the FERC's permission to step down and crush it." IPPNY is a trade association representing New York's electric generators. "If we are to grow strong, healthy and efficient electricity markets in New York that reward customers with low prices over the long term, then we must let the markets take root. NYSEG's outrageous behavior must be repudiated by all sectors of the market --- including the FERC."

Nevertheless, IPPNY acknowledged that these problems do exist. It said NYSEG already had opportunities to help the ISO correct these problems but did not act. IPPNY said it prefers to work through the market problems rather than "trashing the market altogether as NYSEG proposes."

IPPNY suggested that NYSEG's complaint was based on the utility's fear that it will be impacted severely by summer price volatility because of defects in its generation divestiture plan, which was completed last year. However, a NYSEG spokesman said the utility's concerns are purely altruistic. He said NYSEG is well prepared for any price volatility this summer and has more than adequate load to meet summer peak demand.

Rocco Canonica

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