NSTAR, the parent company of Boston Edison, CommonwealthElectric, Cambridge Electric and Commonwealth Gas, has requestedthat the Federal Energy Regulatory Commission impose a price cap of$1,000/MWh on the New England wholesale power market to protectelectricity consumers from potential surges in prices during peakperiods this summer (see Docket No. EL00-83).

The NSTAR filing requests that price caps be in place from July1, 2000 through April 2001. The filing also asks that during thatperiod, FERC direct the New England Power Pool (NEPOOL) and the NewEngland Independent System Operator (ISO-NE) to develop operatingprocedures that will allow the ISO to determine whether the energymarket is workably competitive.

“While we continue to encourage competition, we recognize theimportance of temporary controls to protect consumers,” said NSTARCEO Thomas J. May. “Even the U.S. stock market, generally regardedas the most efficient market in the world, has ‘circuit breakers’to halt trading if irrational behavior is detected.”

NSTAR Vice President of Energy Supply Paul Vaitkus noted thatNew England is at the end of the pipeline for all fuels and hashistorically had some of the highest energy prices in the nation.It also is the only region in the country with a competitive energymarket, operated by an ISO, that does not have price limits.California, Pennsylvania, New Jersey and Maryland already haveprice caps in place and on June 6th, the New York State ISOapproved a price cap of a $1,000/MWh.

“On May 8, 2000, the price of wholesale electricity in NewEngland soared to $6,000/MWh, about 200 times the normal price,”Vaitkus noted. “These irrational prices are a clear sign of marketinstability. Left unabated, this behavior will stunt the growth ofretail competition and will expose consumers to higher energyprices. If the competitive market is to develop properly and liveup to the promise of reduced energy costs for customers, temporarycontrols such as the price caps we are seeking, must beimplemented.”

In its complaint, NSTAR told the Commission the May 8 pricespike, “coupled with official predictions of price spikes of evengreater magnitude during the summer, has caused a 100% priceincrease in the forward bilateral markets. That increase is, inturn, choking off the nascent retail competition in New England.

“Measures to address known market flaws have not beenimplemented and anomalous market conduct does not appear to beunderstood. These factors, together with structural market flaws,point to the fact that the energy market in New England is notworkably competitive during periods of capacity constraints.”

NSTAR has requested that NEPOOL be directed to implementtemporary price caps by July 1, 2000 and redesign the energy marketby April 1, 2001 so the price caps can be lifted.

Rocco Canonica

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