FERC Filings

MOTION TO INTERVENE AND PROTEST OF ELECTRIC POWER SUPPLY ASSOCIATION-Desert STAR, Inc.-Docket No. RT01-44-000

G. Market Monitoring

The DSTAR filing contemplates a market monitoring unit that will be part of the ISO and will report to the ISO Board of Directors. While the market monitoring proposal is not very advanced, its contemplated structure contains two significant defects that must be remedied in any future RTO filing.

The DSTAR filing clearly envisions an activist, interventionist market monitor. Appendix H to the draft tariff provides authority for the market monitor not only to investigate the behavior of individual market participants, but to accept and investigate complaints by market participants against each other. In addition, the DSTAR filing states that “detailed penalties and sanctions” will be developed.⁷

The Commission is well aware of the problems that have been created by interventionist market monitoring in existing ISOs. In fact, the Commission has recently cut back on the authority of existing market monitors in the Northeast. In its November 1, 2000, order concerning the California market, the Commission directed the ISO and the PX to consider less intrusive, narrowly tailored market protection mechanisms. Market monitors should be information gathering and reporting entities. They are not market police and have no business exercising sanctioning authority.

Ultimately, it is the Commission’s responsibility to change the market rules affecting the wholesale market or to enforce the rules already in place.
A second defect in the proposed DSTAR market monitoring proposal is the lack of independence of the monitor. The DSTAR market monitor will be an integral part of the ISO and will report to the RTO Board. It is an unfortunate reality that the RTO itself will not be completely divorced from the markets since the RTO will administer balancing energy and ancillary services markets. It is not realistic to believe that a market monitor that is an integral part of the RTO can independently report on the activities of the RTO. The DSTAR RTO filing needs to provide protections for the independence of the market monitor from the transmission operator. EPSA believes that the Commission should exercise its market monitoring oversight by looking at markets on an interregional, rather than RTO by RTO, basis using the market information gathered from the individual market monitors.

⁷ DSTAR Filing at 54

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