FERC Filings
MOTION FOR LEAVE TO INTERVENE AND PROTEST:NYISO AMP AND CON ED LMM
PROTEST
I.
THE COMMISSION SHOULD NOT APPROVE EXTENTION OF MARKET MITIAGTION IN NEW YORK
The NYISO and Con Ed are, once again, seeking to extend the AMP and the Revised LMM until October 31, 2002 – an entire calendar year. EPSA once again strongly urges the Commission to reject these additional extensions.
A.
THE AMP AND REVISED LMM EXTENSIONS ARE NOT JUSTIFIED
Neither the NYISO nor Con Ed have shown that market abuse exists, or that the current market mitigation measures are unjust or unreasonable. In fact, both NYISO and Con Ed’s requests to extend the AMP and Revised LMM are based on assumptions that the markets may experience “the undisputed threat of market power” and make no credible case to show that the market has experienced undue market abuse. Moreover, Con Ed bases its request on the Commission’s flawed decision making in its July 20, 2001 Order approving the Revised LMM through October 31, 2001.
In its June 28th Order approving the AMP, the Commission justly criticized NYISO for implementing automatic mitigation “without determining whether there is an underlying structural market power problem.” Yet, the NYISO’s September 28th request to extend the AMP nevertheless fails to determine if the New York market has a fundamentally flawed market power problem. This is a requirement the Commission should consider necessary before approving what has simply proven to be an unnecessary fix to market flaws that do not exist. Indeed, it is clear that both NYISO and Con Ed propose to remedy alleged symptoms of market abuse, rather than address real, conclusive flaws in the market.
EPSA reminds the Commission of its comments of August 20, 2001, where we once again highlight how the New York Market Advisor’s Report, entitled The New York Market Advisor’s Annual Report on the New York Electric Markets for Calendar Year 2000, illustrates that the existing mitigation measures are adequate and effective. The NYISO’s Market Advisor stands apart from the filing parties in both the AMP case and the Revised LMM case, in that it is dealing with facts - and not rhetorical allegations. In the past, the Commission has simply ignored the Market Advisor’s Report and its factual underpinnings. EPSA once again strongly recommends that the Commission not base its findings on speculation that capacity might be tight or that the market may experience threats of market power (the definition of which is still symptomatically undefined), but rather base its decision on the facts in the Market Advisor’s Report.
Against this backdrop, it is unreasonable to have the NYISO and Con Ed, like clockwork, seek yet another extension of the AMP and the Revised LMM. Such market intervention measures may be viewed by certain constituencies within the NYISO as “politically correct,” but they have profound and serious consequences for energy prices and the long-term competitive viability of the markets that cannot be ignored and, in the long-run, harm consumers.
B.
MITIGATION MEASURES SHOULD NOT SERVE AS A PART IN THE DISCUSSIONS TO FORM A NORTHEASTERN RTO
While EPSA highlights the New York Market Advisor’s report illustrating that the current market mitigation measure are indeed adequate, it should not be construed to mean that the New York market should in any way serve as a model for the entire Northeast region. As EPSA has said in previous filings, the use of unjustifiable mitigation measures in New York will adversely affect the entire regional market by limiting market entry, slowing the development of risk mitigation tools, undermining demand-side response, and further exaggerating seams issues among the region. These are not trivial considerations; each is critical to the successful development of workably competitive regional markets.
At a time when capital is needed to attract new generation and to expand and improve the electric system infrastructure, the proposed actions would create uncertainty that will discourage and delay this much-needed investment. Indeed, the NYISO’s proposals are counterproductive to its own recommendation that substantial new investment – 8,600 MW of new installed capacity by 2005 – is needed in New York if the market is to operate as intended. Further, such market mitigation proposals are inconsistent with similar procedures in neighboring markets, and only promise to exaggerate the seemingly endless problems and differences that exist between and among the Northeast ISOs.
II.
THE AMP HAS NOT WORKED PROPERLY AND SHOULD NOT BE EXTENDED TO FURTHER COMPROMISE THE INTEGRITY OF THE NEW YORK MARKETS
The AMP did not perform as designed and improperly mitigated economically justifiable bids. Sadly, the NYISO proposed to extend the AMP without the completion of a detailed analysis of the AMP’s operation over the past summer. In its filing, the NYSIO contends that “the AMP operated in accordance with its design, and served as an important backstop for the competitive performance of the New York Day-Ahead Market.” The NYISO goes on to state that the AMP did not interfere with the competitive performance of such markets and that it performed as designed. Yet, in a report presented on October 9, 2001 (October 9th Report) to the Joint Scheduling and Pricing and Market Structures Working Groups of the NYISO, the opposite is indeed the case – the AMP mitigated bids did not result from the exercise of market power. The report shows that two units were improperly mitigated on August 2nd and August 10th, respectively.
The AMP also has proven to have improperly mitigated bids for quantities of energy that are so small as to be extremely unlikely to represent an exercise of market power. As designed, the AMP is supposed to only encompass units larger than 50 MW or units in portfolios larger than 50 MW. As outlined in the October 9th Report, very small amounts of MW were mitigated on July 23rd and 24th, 2001. It goes on to report that more units were mitigated due to flawed calculations of reference level curves. The Commission should therefore not further approve the existence of a proposal that improperly mitigates economically justifiable bids.
III.
CON ED HAS ALSO FAILED TO JUSTIFY ITS REQUEST TO EXTEND THE REVISED LMM AND HAS NOT ADHEARED TO DIRECTIVES OF THE COMMISSION’S ORDERS
In its July 20th Order, the Commission directed the NYISO, working with market participants through a stakeholder process, to evaluate and propose the appropriate extension or modification of the Revised LMM for period after October 31, 2001, and address the concerns regarding coordination of NYISO’s other mitigation measures such as the AMP. Con Ed concedes that this process has not occurred. It notes that the NYISO could not develop the software needed to implement the Revised LMM and does not have the necessary data to conduct a legitimate evaluation of the process.
The essence of Con Ed’s filing is simple. They want to extend mitigation that never should have been implemented in the first place in order to study whether such mitigation should be continued in the future. Furthermore, NYISO market participants have not been presented with considerations concerning the Revised LMM and its relationship to the ISO’s other mitigation measures such as the AMP and $1,000 bid caps. Reinforcing its directives in the July 20th Order, the Commission, in its October 15, 2001 Order denying rehearing in the Con Ed dockets, directed Con Ed, upon request to extend additional mitigation, to address the generators’ concerns…..In particular… how the proposed mitigation will work in conjunction with other mitigation measures already in effect or proposed for NYISO.
The Con Ed filing plainly does not address this important issue and should not be approved to extend after October 31, 2001.