FERC Filings
REPLY COMMENTS OF EPSA ON RTO NOPR
THE RTO ROLE IN COMMODITY MARKET MONITORING SHOULD BE VERY LIMITED
It its initial comments, EPSA urged the Commission to limit the role of RTOs in monitoring commodity markets to data collection and investigation of transmission-related complaints. Information should then be forwarded to FERC for appropriate action. EPSA expressed its concern with RTO’s exercising authority to sanction bidding practices or otherwise alter market behavior.
Again the experiences of the summer have borne out this concern. In what was hopefully a short-term problem related to start-up operations, the New England ISO took action under the guise of market monitoring to unilaterally reform and suppress prices in the NEPOOL Operable Capability (OPCAP) Market. While the Commission has granted authority to impose price caps and price adjustments for a limited period, which NEPOOL is now seeking to extend, EPSA concurs with Commissioners Bailey and Hebert, this is exactly the type of action which should be avoided. Market monitoring should not be used as a substitute for structuring the RTO rules properly to begin with. Market monitoring is a tool for detecting abuse of those rules. The RTO rules must be structured to ensure fair and open access to transmission and support a competitive market in the first place.
Both the Department of Justice (DoJ) and the Bureau of Economics of the Federal Trade Commission (FTC) share EPSA’s concerns. The FTC Comments are blunt: "First, the market monitoring organization should not be given enforcement powers. . . . the conflict of interest issues inherent in self-monitoring by RTOs would be aggregated further if the market monitoring office had enforcement powers as well." (FTC Comments, page 24.) The DoJ is equally clear:
<spacer align="center">. . . RTOs, as well as separate trading institutions like California’s Power Exchange, should have carefully circumscribed market monitoring functions. Trading institutions should ensure market integrity and efficient functioning. . . . Trading institutions should determine whether established procedures are working properly, and when problems with their own procedures are identified (i.e., when opportunities to game the system are identified), trading institutions should change those procedures. And trading institutions also should play a role in information collection and dissemination.
The Department doubts, however, that RTOs and separate trading institutions should be responsible for detecting exercises of market power and making recommendations for correcting market power problems. . . . The Department opposes any form of punishment being meted out by trading institutions for exercises of market power.</spacer>
DoJ Comments, page 5-6. EPSA concurs and urges the Commission in the Final Rule to clearly limit the role of RTOs in market monitoring to data collection and analysis and reporting to appropriate regulatory agencies.
While "market monitoring" should not authorize RTO interventions in commodity markets, RTOs should be monitoring for and policing abuse of market power on the transmission system. The RTO should be carefully monitoring to assure that transmission providers are not able to use that ownership to unfairly disadvantage other market participants. The RTO should intervene where the transmission provider creates barriers to the entry of new competitive generation through onerous and extended interconnection procedures, unreasonably withholds CBM, or disrupts markets with inaccurate ATC calculations. The Final Rule should give RTOs clear instructions to manage the transmission system fairly and efficiently. RTOs’ market monitoring responsibility should be focused in its primary area of expertise: transmission operations, not commodity markets<sup>11</sup>.
10. In fact, the California Power Exchange has provided extensive price transparency in the California power market.
11. In addition, RTO dispute resolution efforts should be focused and limited to its areas of expertise: transmission operations. RTOs are not self-regulating market organizations, like NASD and NYMEX, as suggested by the California ISO in its Comments (at page 45). FERC should not be overly deferential to RTOs, particularly in areas, such as monitoring the electric commodity market, which are outside the experience and expertise of the ISO current staff, which is largely trained in transmission operations.