The Federal Energy Regulatory Commission last week handedload-serving entities (mostly electric utilities) that supply theNew York City power market a present — a targeted rebate of $3.75per kilowatt month.

By a vote of 3-1, with Commissioner Curt Hebert Jr. dissenting,the Commission agreed certain utilities serving the market shouldbe reimbursed for the penalties they were charged for falling shortof their installed capacity (ICAP) obligation this summer. TheICAP deficiency penalties were unfair, it ruled, given that thesupply of available ICAP in the New York City market was very tightduring the summer [ER00-3462].

The current mechanism in the New York Independent SystemOperator (NYISO) tariff “penalizes the New York City load-servingentities essentially for failing to achieve the impossible – andthat is, for failing to obtain ICAP when none was available,” saidCommissioner William Massey.

Chairman James J. Hoecker was more than happy to return money tothe electric market. “.There are a lot of people out there who havebeen imploring us to give money back. And frankly I’m not going topass up the opportunity to do it, especially when there are nolegal impediments,” he said. “.New York City is the only part ofthe state that was paying higher rates this summer. So I’m happy togive them a break.”

The New York ISO sought the rebates from FERC, fearing thatwithout them retail electric competition could be seriouslyimpaired in the New York market – either load-serving entitieswould flee the market or new entrants would be discouraged fromentering it.

Hebert dissented from the majority’s decision, essentiallysaying the rebates amounted to nothing more than a Band-Aid for NewYork City. “Instead of offering rebates to load-serving entitiesthat are unable to [secure] sufficient installed capacity in theNew York City area, I would act now to ensure additional supply ofinstalled capacity. I would do this by lifting the price cap [onICAP] and promoting the entry of new generation.”

Susan Parker

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.