FERC approves New York ISO price control plan


By the OGJ Online Staff

HOUSTON, June 29 -- The Federal Energy Regulatory Commission Thursday approved a plan allowing the New York grid operator to institute a system to control electricity price spikes in the state's supply-constrained market.

However, FERC said because of concerns the so-called "automated mitigation procedure" could hold down prices at times when market power is not the cause for high or volatile bids, it set an expiration date of Oct. 31.

That will allow the New York Independent System Operator to get through summer. The ISO said the extra check was needed because prices could exceed an existing $1,000/Mw-hr energy bid cap on "super-peak" demand days.

ISO Pres. Richard Museler Friday denied the system constituted a bid cap and said it will "carefully slice out" uncompetitive conduct without damaging the free market. "We believe this customized approach is quite advanced, and is the first of its kind in any wholesale electricity market in the nation," he said.

Museler also said the plan will not eliminate price spikes caused by true scarcity, one of FERC's concerns, but only those caused by economic withholding. He said it is preferable to fixed caps that can reduce supply from internal sources or imports with marginal costs higher than the bid cap, to soft bid caps that may also reduce resources in New York, and retroactive remedies that could cause price uncertainty.

Even though the ISO has tools to restrain uncompetitive behavior once it's spotted and few examples of such behavior have ever surfaced, Museler said the FERC-approved plan prospectively eliminates the problem before noncompetitive bids set the market clearing price.

Under the plan, the ISO will automatically review generators' bids when power prices exceed $150/Mw-hr when plants are off line and during times of high demand. Bids more than $100 or 300% above historic averages for an individual plant will be reviewed for signs of market manipulation.

If a generator can't explain the deviation, the ISO would automatically lower the bid to the historic average. The ISO claimed the procedure would have resulted in mitigation in less than 0.25% of the hours in 2000.

In setting the October deadline, FERC agreed with generators the proposal may not provide "sufficient consultation" to establish particular bids were attempts to exercise market power. And federal regulators said they don't share the ISO's view automatic mitigation is best done based solely on an examination of bidding behavior without determining if there is an underlying structural market power problem.

FERC said, for instance, transmission constraints into New York City could confer market power on all sellers in such a load pocket. It said it preferred the more limited approach used by PJM Interconnection Inc., the mid-Atlantic grid operator, and ISO New England.

New York officials also urged FERC to institute a separate proposal pending before the commission that would allow the ISO to assess fines and publicize the names of generators' deemed to be charging excessive prices.

Related Articles

Marathon cuts 2015 budget amid ‘current price environment’

12/18/2014 Marathon Oil Corp. expects to spend $4.3-4.5 billion in its capital, investment, and exploration budget for 2015. That total represents a 20% decli...

Russia’s Turkey pipeline deal possibly may keep door to Europe ajar

12/18/2014 Russia’s memorandum of understanding to build a natural gas pipeline to Turkey after canceling its South Stream project could help keep the door op...

MEG Energy cuts capital spending for 2015 to $305 million (Can.) from $1.2 billion

12/18/2014

MEG Energy Corp., Calgary, is reducing its 2015 capital spending plans to $305 million (Can.) from the original budget of $1.2 billion.

Severance tax would backfire, Pennsylvania association leaders warn

12/17/2014 Enacting a severance tax aimed at Pennsylvania’s unconventional natural gas activity would substantially harm the commonwealth beyond the industry ...

MARKET WATCH: Oil prices held steady on NYMEX awaiting crude inventory

12/17/2014 Oil prices held fairly steady on the New York market in Dec. 16 trading while Brent crude oil prices fell by more than $1/bbl on the London market....

Encana to focus spending on four core shale assets in 2015

12/16/2014 Encana Corp., Calgary, reported plans to spend $2.7-2.9 billion on its capital budget with roughly 80% of this total directed towards four of what ...

Cenovus trims budget, slows oil sands work

12/16/2014 Cenovus Energy Inc., Calgary, is trimming its capital spending in response to declining crude oil prices and will slow development of some of its t...

MARKET WATCH: Oil prices continue falling awaiting economic statistics

12/16/2014 Oil prices on the New York market dropped in Dec. 15 trading following reports of supply disruptions in Libya and awaiting reports of economic stat...

MARKET WATCH: OPEC basket price closes below $59/bbl

12/15/2014 The average crude oil basket price for the 12 members of the Organization of Petroleum Exporting Counties closed below $59/bbl on Dec. 12 while cru...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

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