PowerFacts

ISO New England Market Monitor Confirms Competitiveness of All Its Markets

ISO New England's Internal Market Monitoring Unit (INTMMU) has published its 2008 Annual Markets Report, assessing the state of competition in the wholesale electricity markets operated by the ISO. The report addresses the development, operation, and performance of the wholesale electricity markets administered by the ISO and presents an assessment of each market based on market data, performance criteria, and independent studies. According to the report, electricity markets, forward capacity markets, and forward reserve markets all produced competitive results.

"A competitive market requires a market structure in which many competitors participate in the market and none of the competitors is large enough to affect price. Because the New England energy markets have many competitors and no single competitor is large enough to affect the market price, the region-wide market structure provides the foundation for a competitive market. Additionally, mitigation measures provide protection when and where inadequate transmission or peak load levels create the possibility of noncompetitive behavior." p. 9

"When wholesale electricity markets are competitive and efficient, they provide the incentives needed to maintain an adequate supply of electric energy, over the long run, at prices that are consistent with, but not higher than the cost of providing it. [Analysis indicates] the outcomes of the wholesale electric power markets in New England were consistent with competitive markets." p. 1

"The INTMMU examined the region's market structure and market results in detail. The examination of market results shows that electric energy prices reflect the costs to suppliers of producing electric energy (i.e., largely fuel prices), which is consistent with the finding that the market is competitive." p. 9

"New England electricity prices rapidly adjust to changes in fuel markets. [Data] which shows the percentage change in monthly natural gas prices and the percentage change in monthly real-time locational marginal prices (LMPs), demonstrates that changes in electricity prices are nearly the same as changes in natural gas prices." p. 4

"The fuel-adjusted price in 2008, $41/MWh, was 8% lower than the price in 2007. The decline of the fuel-adjusted price from 2007 to 2008 is attributable to two factors: the decrease in energy consumption and an increase in hydroelectric generation, which rose by 19% in 2008. Both factors result in more efficient, lower-cost resources setting the price." p. 6

"Demand-resource participation in the New England wholesale electricity markets has increased significantly in recent years. Before the Forward Capacity Market (FCM) transition period, which began in December 2006, the prices in the capacity market were very low. With the initiation of FCM transition payments, enrollment increased by 138% in 2007. In 2008, demand-response enrollment increased an additional 28%." p. 8

The full report can be found at http://www.iso-ne.com/markets/mktmonmit/rpts/index.html

ISO New England Market Monitor Confirms Competitiveness of All Its Markets

CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.