Download ISO New England Price Plan Opposed

ISO New England Price Plan Opposed; MISO Files An
Energy Market Tariff
Aug. 4 (Utility Spotlight) The Federal Energy Regulatory Com-mission's approval of ISO-New England's plan that allows it to set a
$1,000/Mwh price for power when demand comes close to exceeding demand has effectively reintroduced
three "scarcity pricing" rules that existed before the ISO broke up its single pricing system into 8 regional
pricing zones.
FERC contended that setting the $1,000
price cap "will encourage generators
outside of New England to offer
additional supplies" and "encourage New
England buyers to reduce their purchases,
both of which will help to alleviate the
shortage." But power buyers, including
NStar opposed the ISO proposal even
though its spokesperson Erin O'Brien
reported that prices hit the $1,000 cap for
no more than three hours during last
summer's peak season.
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Headlines for Week of Aug 4, 03
She added: "Scarcity pricing benefits New England by provid-ing proper incentives to all generators during
shortage conditions."
But NStar insisted that the proposal would encourage gener-ators to withhold supplies in order to increase
scarcity conditions. To which FERC responded that suppliers would have no financial incentive and prices
could not be forced over $1,000 through withholding supplies.
Nevertheless, Ellen Angley, NStar vice president for energy supply & transmission, argued that the cap
should be paid "where resources are most needed, not across the entire market, but she said there as been no
decision on a possible appeal.
Elsewhere, aiming for a March 31, 2004 market launch, the Midwest Independent Transmission Operator
(MISO) has filed its proposed open access transmission & energy markets tariff with FERC. It said that the
tariff preserves the basic structure of MISO's existing open access transmission tariff while incorporating
necessary provisions for implementing day-ahead and real-time energy markets based on "securityconstrained, bid-based dispatch of generation, locational marginal pricing and financial transmission rights
(financial instruments that allow market participants to hedge their exposure to transmission congestion)."
As required by FERC Order No. 2000, MISO is implementing market-based solutions to manage
transmission congestion. It maintains that, with the tools it is offering, participants will be better able to
manage costs associated with grid congestion and customers will benefit from more efficient use of the
transmission system, more economic dispatch of generation and more transparent pricing signals.
"As our filing makes clear, we look forward to the coming weeks and months where we will continue to
address the comments, concerns and modifications of our stakeholders and regulators," commented MSIO
CEO James P. Torgerson. "These improvements to (this) filing will be critical to a successful market
launch on March 31, 2004."
FERC's approval of the ISO New England proposal also allows suppliers from outside the region to be
included in calculations that set the price for energy. In addition, it also provides energy payments to
generators that are required by the grid operator to remain on standby for reliability protection during times
of energy scarcity.
All measures, which had been suspended with the introduction of the restructured market due to software
limitations, became effective on July 30.
Meanwhile, in a promising move, a Norwalk, CT-based re-sidential electric supplier offered last week
power generation costs to new customers 5% below those of the state's two standard-offer suppliers. This is
the same discount its existing 22,000 customers receive.
Levco Tech stopped accepting new customers in January but said it will immediately start signing up new
customers for service starting in October. If the discounts falls below 5% in the future, the company said,
customers would have the option of switching suppliers.
Some observers said they were surprised that the company was resuming marketing efforts now before the
state's electric utilities obtain wholesale power contracts for 2004 but they hope more competitors will
eventually enter the restructured market."If (Levco) feels the confidence, that's good," said energy
consultant Joel Gordes. "You get one in, and it may draw othersàThat will be interesting to watch."
Levco vice president Ed Levene said it stopped signing up customers in January because rising natural gas
and oil prices made providing electricity too expensive. It gets its electricity from the Dominion Retail
subsidiary of Dominion Resources, which owns the in-state Millstone nuclear plant. He noted that, with
prices now lower, his company believes it can sign up new customers and continue to provide a discount
even after new electric rates go into effect next year, but Levco cannot guarantee that it will be able to do
so.
In Ohio, Cinergy reported last week that it received a subpoena from the Commodity Futures Trading
Commission requesting information about its energy trading, including price reporting to energy industry
publications. It said that CFTC also requested information about the activities of one of its gas trading
employees from May 2000 to January 2001. It added that the employee, who is not an executive, has been
placed on administrative leave.
Separately, following CFTC's announcement that Williams Cos. had agreed to pay a $20 million civil
penalty in order to end accusations that it had tried to manipulate natural gas price indexes, Standard &
Poor's Ratings Services said this was in line with its expectations and so does not have a material impact on
Williams' ratings (B+/Negative-).
On Oct. 25, 2002, Williams reported that an internal audit of its trading activities had revealed that a few of
its non-managerial employees had engaged in inaccurate reporting of natural gas trades, which the
company voluntarily reported to the CFTC and other federal agencies.
Meanwhile, DQE said that it is negotiating with the Internal Revenue Service to resolve the company's
long-standing dispute over tax liabilities related to leases that its unregulated businesses entered into in the
1990s with foreign power plants.
(Contributions from J.F. McGlinchy and Charles Carroll)