By the OGJ Online Staff
HOUSTON, June 19 -- A national electric power trade group said ISO New England Inc. and the Massachusetts attorney general are making a mistake, if they focus an investigation of market power solely on "generator behavior."
Limiting the scope of the study to generator behavior presumes a "foregone conclusion" that undue market power exists, said the Electric Power Supply Association, a trade group representing merchant energy generators, power marketers, and independent power producers. The ISO and the Massachusetts attorney general are investigating whether market power was exercised in the region by comparing marginal costs of energy production with wholesale clearing prices.
EPSA called the approach inadequate and urged the ISO and politicians to avoid factual and political mistakes that could destroy "confidence in competitive energy markets." The trade group said the New England marketplace suffers from many problems, including operational efficiencies, lack of demand response, the impact of ISO actions on efficient market operation, the inability to import and export energy and capacity efficiently, and "serious" energy and ancillary service market design flaws.
EPSA urged the grid operator to broaden the study to include the "many factors" potentially contributing to the structural and market rule flaws in the New England electricity marketplace. A recent plant reliability analysis commissioned by New England's grid operator said it should closely monitor new combined cycle power plants which performed poorly during the past 2 years, for example.
Any analysis should examine the entire market structure and the actions of all parties affecting the market, EPSA said, including generators and sellers of energy, energy buyers, the ISO, state regulators, and elected officials. It also recommended the study be extended to cover regional trade across the entire Northeast.
"Comparing forward and real-time prices in adjacent markets with the relevant prices in New England can show regional price relationships, highlighting the impacts of differing market rules, transmission congestion, 'seams,' and other challenges to liquid interregional trading markets," the EPSA said.
Specifically, the EPSA recommended the following:
� Allow market participants to contribute to development of the study.
� Subject to confidentiality concerns -- share data -- not just results with the Federal Energy Regulatory Commission.
� Share preliminary results with market participants, especially if the results are to be shared with state officials and others.
� Seek input from market participants in implementing improvements in the market identified in the study.
� Consider the overlap and possible uses of information obtained from the study in market redesign efforts in the ongoing regional transmission organization formation process.
Separately, the ISO New England and the New York Independent System Operator reported reaching an agreement expanding reserve-sharing procedure during short-term generation or transmission line interruptions.
The operators of their region's bulk power grids have agreed to share operating reserves. The grid operators said total operating reserve requirements will not be reduced for either region.
There are two types of bulk power reserve intended to meet real-time power grid interruptions in 10 min or less and to provide additional back-up power in case of a second event. Reserve generation is required to be available at all times to protect against an on line power plant or transmission facility tripping off line.
The expanded reserve-sharing procedure allows each region to count on operating reserves to be made available by the other region following a system interruption. This procedure is intended to provide flexibility in committing resources to recover lost generation and help maintain continuous system operations through a facility interruption, the grid operators said.
Gordon van Welie, ISO New England's CEO, said the agreement is another step toward further interregional coordination under the Northeast ISO's Memorandum of Understanding.