The FERC majority’s ruling rejecting Morgan Stanley CapitalGroup Inc.’s efforts to participate in bidding in the New York bulkpower market “coddles” the New York Independent System Operator(NYISO), Commissioner Curt Hebert Jr. said last week.

He charged that the Commission majority had “passed up anopportunity to hold the New York Independent System Operator’s feetto the fire to overcome price increases in that state in time fornext summer.”

Rather than ordering “a change in the rules restricting [biddingin] the market” by non-physical entities, mostly power marketers,the Commission merely required the New York ISO to submit aprogress report by Jan. 1 outlining a plan to implement biddingchanges, Hebert said, adding this will cause “unnecessary delay” inproviding price relief to New York electric customers by nextsummer. The majority’s decision is “paralysis by analysis.”

Currently, New York ISO rules limit bidding in the day-ahead andreal-time markets to only entities capable of supplying power, suchas generators, and entities that consume electricity, such asload-serving entities. But non-physical entities (power marketers)are prohibited from participating directly in the bidding process.Morgan Stanley, a power marketer itself, wants the restrictionlifted.

“I refuse to take this path of timidity,” Hebert said in hisdissent. Instead, “I think we should require the New York ISO tofile an amendment on Jan. 1. for the new market rules to becomeeffective next summer.”

Chairman James J. Hoecker countered that the position taken bythe Commission majority was one of “practicality, not timidity.”Moreover, he noted, “I think that we are all [in] fundamentalagreement here that non-physical entities need to be part of thismarket.” But he doesn’t think the New York ISO should be rushedinto making the changes.

“We are concerned that the changes necessary to accommodatebidding by non-physical entities, especially with regard to theNYISO’s software, be carefully conceived. It is imprudent tointroduce sudden overrides and quick fixes that could serve todisrupt efforts to correct the market flaws already identified orcreate new problems,” said the FERC order.

In its complaint, Morgan Stanley asked FERC to order the NewYork ISO to change its market rules and software by Aug. 1 topermit bidding by non-physical entities (power marketers) in theelectric market there [EL00-90]. However, the Commission saidMorgan Stanley had failed to show an “overriding immediate need”for the bidding changes to become effective Aug. 1.

In requiring a progress report by Jan. 1, FERC believes the NewYork ISO will have ample time to remove the bidding restrictionsfor power marketers to participate during the peak demand periodnext summer.

Susan Parker

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