FERC has rejected a complaint that called for the New YorkIndependent System Operator (NYISO) to change its market rules andsoftware by Aug. 1 to permit bidding by non-physical entities(power marketers) in the electric market there.

Instead, the Commission majority ordered the NYISO to submit byJan. 1 a report on its development of a plan to implement biddingby power marketers. This would provide ample time for the NYISO tohave such bidding in place for the peak demand period next summer,the majority contends.

FERC acted notationally on the complaint earlier this month, yetit debated the merits of the decision at yesterday’s bi-monthlymeeting. Again, Commissioner Curt Hebert Jr. departed from themajority, which held that Morgan Stanley Capital Group Inc. in itscomplaint had failed to show an “overriding immediate need” to makethe bidding changes effective Aug. 1.

Sharply criticizing the majority’s decision, Hebert charged thatit had “passed up an opportunity to hold the New York IndependentSystem Operator’s feet to the fire to overcome price increases inthat state in time for next summer.”

Rather than calling for “a change in the rules restricting[bidding in] the market…the majority coddles the New York ISO” byrequiring a progress report by Jan. 1, which he believes will cause”unnecessary delay” in providing price relief to New York electriccustomers by next summer.

“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.”

Currently, the NYISO 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 a non-physical entity (power marketer)is prohibited from participating directly in the bidding process.Morgan Stanley, a power marketer itself, wants the restrictionlifted — yesterday.

Hebert thinks that bidding by marketers will be good for the NewYork market. “Anyone can figure out that allowing marketers to sellincreases supplies. Anyone can figure out also that includingarbitragers in the buying end increases hedging, and smooths outprice volatility.”

Chairman James J. Hoecker agreed. “I think that we are all [in]fundamental agreement here that non-physical entities need to bepart of this market…We need more market-makers.” But he doesn’tthink the NYISO should be rushed into 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, which was issued Oct. 5.

In response to Hebert, Hoecker said, “I would call the positiontaken by this order ‘practicality,’ not ‘timidity.'”

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