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Probe of New England ICAP Market Sought

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 noted.

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."

Susan Parker

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