Design Changes OK'd for New England Power Market
FERC last week conditionally approved a significant re-design of
the New England bulk power market in an attempt to reduce the price
volatility stemming from congestion of the region's transmission
system. But it could be as long as two years before the regional
market feels the benefits of the changes.
In a complex decision, the Commission gave the New England
Independent System Operator (ISO) the green light to move away from
its existing single-settlement system, which offers day-ahead
bidding for energy and ancillary services, toward a
multi-settlement approach that would provide for both real-time and
day-ahead bidding. In addition, it approved certain elements of a
permanent congestion management system for the New England ISO,
which manages the wholesale market and power exchange for six
states in the region.
"My hope is that today's order is a signal of a more aggressive
Commission posture on insisting on well designed and efficient
electricity markets," said Commissioner William Massey. "The
headlines about electricity price spikes and impending shortages
drive home the importance of getting market design right."
The "good news" is that there was "broad consensus" among the
New England stakeholders for adopting locational marginal pricing
(LMP) to manage system congestion, which Massey said "sends [the
market] correct price signals for using existing generation and
transmission resources efficiently." At the same time, LMP will
help with future siting of new generation and transmission
facilities, he noted, adding that it is "becoming the Commission's
preferred congestion management system."
The "bad news" is that the New England ISO has said it will be
16 to 24 months before it can fully implement the market design
changes, Massey said. The Commission made it very clear that it was
"very disappointed" with the ISO's projected timetable for
implementation. It ordered New England to submit within 30 days an
explanation of why it can't complete implementation by Feb. 1, 2001
--- prior to the start of next spring [EL00-62]."We're going to be
taking a hard look" at this issue, said Ellen Foley, a spokeswoman
for the New England ISO.
If the extended implementation timetable is due to the
development of LMP software, FERC encouraged the New England ISO to
purchase the "rather successful" software of the Pennsylvania-New
Jersey-Maryland (PJM) pool.
Commissioner Linda Breathitt noted that many of the procedures
being adopted for the New England power market were already in use
by adjoining ISOs --- the New York ISO and the PJM power pool.
"Approving similar bidding, settlement and congestion mechanisms
for New England will simplify coordination among the regional
ISOs," and hopefully improve system reliability.
Many parties, including the North American Electric Reliability
Council (NERC), believe the patchwork of different congestion
management systems being approved in regions is at least partly to
blame for some of the reliability stresses on the grid now.
Commissioner Curt Hebert Jr., a strong advocate of transcos,
didn't think the ISO design changes would make much difference. "As
long as we continue to allow ISOs to live from summer to summer,
while putting a Band-Aid [on them], we're never going to get it
right." The power market needs more investment in transmission
facilities, he said, and transcos will encourage that.
In a related matter, New England ISO's Foley dismissed reports
last week that the New England region could face severe power
outages this summer due to insufficient generation supplies. The
published reports accompanied the New England ISO's decision to
declare an eight-hour power watch last Tuesday when the Seabrook
Nuclear Power Station in New Hampshire tripped off line amid "hot,
humid weather" in the region.
"We don't suffer from generation shortages in New England,"
Foley said. In fact, almost 1,500 MW of new capacity has been added
to the region during the past year, and another 5,000 MW is
currently under construction, she noted. New England currently has
330 generating units that serve more than 6.3 million customers.