Probe of New England ICAP Market Sought
A small Massachusetts power marketer last week called on FERC to
order the suspension of all installed capacity (ICAP) charges
billed to participants in the New England Power Pool (NEPOOL)
during the April-July period until the Commission and Department of
Justice (DOJ) have completed separate investigations into gaming
charges in the market.
The DOJ's antitrust division already has initiated an "extensive
investigation" into the New England ICAP market, said Alternate
Power Source Inc. (APS) of Westwood, MA, adding that FERC should
"step in, investigate and mitigate prices" as well.
"It's our firm belief that there is gaming going on out in the
marketplace with these ICAP numbers." said APS President Stephen M.
Tuleja. In addition to cooperating with the DOJ, his company has
petitioned a federal court in Massachusetts for an injunction
against billing of the ICAP charges until the market is
"thoroughly" reviewed by federal investigators, he told GPI Daily.
ICAP charges essentially are the fixed charges associated with
buying of electricity in the New England wholesale market,
according to Tuleja. All load-serving entities are required to pay
ICAP charges on a certain percentage of their load, with the
charges going to generating companies in New England for making
their facilities available to the market, said a spokeswoman for
the New England ISO.
The charges are a "hold-over from the regulated world. They're a
tool that was put in place to ensure that utilities had adequate
capacity to serve their native loads. But in the unregulated world,
many would argue there's no reason to have this [ICAP charge] in
place any longer," Tuleja said.
FERC terminated the monthly ICAP auction market in New England
effective Aug. 1 at the request of the ISO, but that didn't ease
the high ICAP costs that some marketers - especially small ones
like APS - have been saddled with during the past year.
"Competitive companies shouldn't be entitled to bill you
anything they want for the electricity [the commodity], and then
hit you with an up-charge for what they consider to be their fixed
costs," said Tuleja.
APS filed a complaint at FERC last week after it received a bill
charging it over $700,000 for an ICAP deficiency last April. The
ICAP charge was based on a market price that "purportedly" cleared
at $3,240/MW/month, even though NEPOOL reported there was 2,522 MW
of excess ICAP last April, according to the marketer.
APS now is faced with a "Hobson's choice" of 1) either paying
the $700,000 into escrow, pending resolution of the billing dispute
through the ADR process; or 2) being declared in default of its
contractual obligations, it told FERC.
"Either choice would result in dire and irreparable financial
consequences to APS - either an extensive and crippling loss of
cash flow, or a potential fatal series of chain reaction defaults
in APS's contractual obligations with its customers and supplies,"
APS, which sells about 1.6 million MWhs of electricity a year,
contends it is the "victim of gaming of the ICAP 'markets' by large
suppliers of ICAP, who apparently manipulate the ICAP supply to
maximize their revenue of the expense of smaller companies."