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

By a vote of 3-1, with Commission Curt Hebert Jr. dissenting,the Commission agreed the utilities serving the market should bereimbursed for the penalties they were charged for failing to meettheir installed capacity (ICAP) obligation this summer. The ICAPdeficiency penalties were unfair, it ruled, given that the supplyof 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 be returningmoney to the electric market. “…There are a lot of people outthere who have been imploring us to give money back. And franklyI’m not going to pass up the opportunity to do it, especially whenthere are no legal impediments,” he said. “…New York City is theonly part of the state that was paying higher rates this summer. SoI’m happy to give 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 in the order,essentially saying the rebates amounted to nothing more than aBand-Aid for New York City. “Instead of offering rebates toload-serving entities that are unable to [secure] sufficientinstalled capacity in the New York City area, I would act now toensure additional supply of installed capacity. I would do this bylifting the price cap [on ICAP] and promoting the entry of newgeneration.”

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