In a controversial move, the New York Independent System Operator Friday adopted a $1,300/Mw-hr bid cap on electricity, rejecting a management committee recommendation for a lower $1,000/Mw-hr cap.
The board instructed the staff to file an application with the US Federal Energy Regulatory Commission for implementation July 7. The cap will be effective until Oct. 28, 2000.
The New York ISO's decision follows a similar one by the California Independent System Operator which voted Wednesday to lower the price cap on wholesale electricity purchases to $500/Mw-hr from $750/Mw-hr between July 1 and Oct. 15, 2000. California utilities, including Southern California Edison Co., Pacific Gas & Electric Co., and San Diego Gas & Electric Co., wanted to lower the cap to $250/Mw-hr. (OGJ Online, June 29, 2000)
In a statement, the board of the New York ISO said it rejected the staff proposal for a $1,000 Mw-hr cap after "careful consideration." Its decision to adopt a slightly higher price cap was done in recognition of the "relative youth" of the New York market, which warrants temporary outer bid limits, the board said.
"As we discussed the management committee's motion, we took into account the fact that a majority of the participants had voted at the management committee for bid caps, and much remains to be done with respect to liquidity in the new markets," said Chairman Richard Grossi.
He said the board was also mindful of concerns of wholesale electricity marketers and customers who complained about the $1,000/Mw-hr cap. But, he added, the board concluded there is not enough opportunity for a demand response to price in the market, and that is an issue the board is asking market participants to address quickly.
There is also need for siting of generation to move faster to reflect growing market demand, Grossi said. The higher bid cap adopted by the board will maintain the attractiveness of the New York market for investment in generation and for suppliers to have the option of selling into the regional market, he said.
Generators that sell power into the New York market, including PG&E National Energy Group, Sithe Energies Inc., and Orion Power Holdings Inc., had criticized the $1,000 bid cap and filed appeals to the ISO in protest. (OGJ Online, June 26,2000.)
They argued price caps will do nothing for electricity supply shortages. Some new generation will come on line by 2003 and 2004 but that will not help this summer and the next two summers.
