The New York Independent System Operator’s (NYISO) board of directors last Tuesday voted unanimously to ask FERC to sign off on a penalty plan designed to deter market participants from manipulating New York’s wholesale electricity markets during times of tight power supply.

“Given the very tight supply situation we are facing in New York this summer, we believe as a board, we have a responsibility to protect consumers against the possibility that someone might manipulate the market during extreme demand periods,” said Richard J. Grossi, NYISO board chairman. “We had hoped to have another proposal, the AMP or Automated Mitigation Procedure, in place by now and continue to believe it is a necessary tool for protecting consumers against improper market behavior” (see NGI, May 21).

The NYISO penalties proposal will request a waiver of the filing notice period at the Federal Energy Regulatory Commission (FERC) to allow for the immediate provisional implementation of penalties, pending Commission approval. The proposal also stipulates that no penalties will be collected unless and until FERC approves the filing and will sunset on Oct. 1, 2002. As an “exigent circumstances” filing, it will automatically sunset after 120 days unless the NYISO Management Committee concurs in the filing.

Under the terms of the NYISO penalty proposal, both load serving entities and generators can be penalized for non-competitive conduct as specified by the ISO’s market monitoring plan and market mitigation measures. Upon the second instance of mitigation for substantially similar conduct, the offending party would be fined an amount equal to the locational based marginal price times the number of megawatts involved in the offense. Upon the third instance of mitigation for substantially similar conduct, the first penalty would be doubled and then tripled for subsequent offenses. The “substantially similar” test will be based on the conduct of a market participant and its affiliates over the current and preceding two capability periods.

Meanwhile, NYISO and ISO New England last week disclosed that they have agreed to an expanded reserve sharing procedure during short-term periods of generation or transmission line interruptions. The expanded reserve sharing procedure allows each region to count on operating reserves to be made available by the other region following a system interruption. This procedure is intended to provide flexibility in committing resources to recover lost generation and help maintain continuous system operations through a facility interruption.

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