New York ISO to consider electricity price caps


Kate Thomas
OGJ Online

With possible power shortfalls and price spikes looming, the New York Independent System Operator board on June 20 will consider a controversial proposal to cap electricity bids in the day-ahead and real-time energy markets at $1,000/Mw-hr.

If the board approves the measure, the New York ISO will file for authority to impose the bid caps with the US Federal Energy Regulatory Commission. At the New York ISO's request, on May 31, FERC approved bidding restrictions on 10-min nonspinning reserves on an interim basis. However, FERC rejected imposition of bid caps on 10-min spinning reserves.

During 1998 and 1999 heat waves, power prices spiked to more than as $7,000/Mw-hr in some parts of the US. New York is one of the areas vulnerable to power outages this summer, says the North American Electric Reliability Council (NERC) in its annual assessment of summer generating and transmission capacity.

New York and New England have projected they might not be able to meet peak generation needs. Although about 1,000 Mw of generating capacity has been added in New England since last summer, the extra power has been partially offset by the loss of transmission capacity in Vermont, an outage at the Indian Point No. 2 nuclear plant, and the failure of the Hudson transformer serving New York City, according to NERC.

New Yorker consumers paid about 11.7�/kw-hr in 1998, according to the New York Energy Research and Development Authority, while industrial users paid about 5.3�/kw-hr, a 5% decline from the prior year. The organization claims New York consumers on a per unit basis pay more than the national average for most forms of energy. While the state is the nation's fourth-largest energy consumer, only an estimated 12% of energy requirements are met by in-state resources.

In addition to proposed caps in the day-ahead and real-time market, the New York ISO board will also consider a proposal to limit combined payments for availability and lost opportunity costs for 10-min and 30-min reserves at $1,000/Mw-hr. Presently, generators can bid into the reserve market and are paid whether or not the power is used, said a New York ISO spokesman.

Combined payments for regulation�the process of adjusting supply to load�would also be capped at $1,100/Mw-hr under the proposal. Further, bid production cost guarantees would be suspended for a supplier who bids minimum generation levels, start-up costs, or minimum run times when locational-based marginal pricing at the supplier's bus averages $200Mw-hr/day or more. Total payments, including bid production cost guarantees, could not exceed $24,000/Mw/day.

Price caps have not popular with the industry. In testimony filed with FERC, Dynegy Inc. urged the agency to "resist the temptation to endorse price caps" and their functional equivalents. The Houston energy firm said price caps discourage future investment in generation and transmission, balkanize markets, and nullify meaningful market signals that would otherwise stimulate new construction.

Higher prices should ultimately elicit investment in new generation, New York ISO Chief Executive William J. Museler said in a statement, but "licensing new generation is not a smooth process. The peak demand is growing with New York's robust economy, while the building of new generation has remained stagnant."

Formed as part of the restructuring of New York's electric industry in December 1999, the New York ISO assumed responsibility for management of the state's electric grid from the former New York Power Pool. The ISO administers the competitive wholesale market and is responsible for maintaining the safe and reliable operation of the grid.

Related Articles

IHS sees second-half end of US output surge

02/03/2015

Expectations are moderating about growth of oil production in the US this year.

Anadarko reports 2014 loss, remains upbeat about Wattenberg

02/03/2015 Anadarko Petroleum Corp. announced a 2014 net loss of $1.75 billion, or $3.47/share diluted, including a net loss of $4.05 billion associated with ...

CNOOC cuts capital budget, starts production from Jinzhou 9-3

02/03/2015 CNOOC Ltd. is slashing its capital budget for 2015 by 26-35% to $11.25-12.86 billion compared with last year’s budget. Capital expenditures for exp...

Seven Group buys into Beach Energy

02/03/2015 Media group Seven Group Holdings, Perth, has bought 13.8% of Adelaide-based Beach Energy Ltd. through share purchases fuelling speculation of a pos...

MARKET WATCH: NYMEX crude oil stays positive on lower rig count

02/03/2015 Oil prices on the New York and London markets closed higher Feb. 2 on positive momentum generated by a falling US rig count, suggesting cuts in pro...

Obama’s proposed fiscal 2016 budget recycles oil tax increases

02/02/2015 US President Barack Obama has proposed his federal budget for fiscal 2016 that he said was designed to help a beleaguered middle class take advanta...

Pessimism mounts over UK offshore industry

02/02/2015

Pessimism about the UK offshore oil and gas industry is gaining momentum.

Syncrude sees additional $260-400 million in possible budget cuts

02/02/2015 The estimate for capital expenditures has also been reduced to $451 million net to COS, which includes $104 million of remaining expenditures on ma...

Union strike under way at US refineries, petchem plants

02/02/2015 The United Steelworkers Union (USW) has instituted a strike at nine US refining and petrochemical production plants following a breakdown in negoti...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected