ISO New England beefs up market monitoring

By the OGJ Online Staff

HOUSTON, May 23 -- The independent system operator of New England strengthened its market oversight capabilities to ward off noncompetitive behavior by market participants.

The ISO New England said today it will hire David Patton of the economic consulting firm Potomac Economics to serve as an independent market advisor to ISO's board of directors. Potomac Economics will provide advice on how to improve wholesale markets to make them more competitive and more efficient. Patton is currently working in the same capacity with the New York Independent System Operator. This will help coordinate a standard market design between the two regions. The standard design is scheduled for implementation in 2003.

The ISO New England also increased the size of its internal Market Monitoring and Market Power Mitigation Section and retained the strategic consulting firm of Caminus Corp. to provide extended market analysis capabilities.

"These expanded capabilities will become even more important during the next 2 years as we implement a Standard Market Design and a new set of rules and procedures that will introduce a day-ahead market and move us closer to a standard seamless and efficient market for power in the Northeast," said Kevin Kirby, ISO New England's vice-president.

The ISO also retained Caminus Corp. to provide extended market analysis capabilities.

Utilities in the Northeast have filed complaints to the Federal Energy Regulatory Commission claiming that monopoly conditions for generation exist in certain transmission constrained areas like Boston, so prices are not always "just and reasonable." Wholesale power prices have run up at times into the thousands of dollars per megawatt hour when the lines are fully loaded and no additional power can be imported to this area.

The utilities want caps on wholesale power prices during such times. Generators that own power plants inside the constrained area claim that the ISO's oversight is sufficient to keep prices from becoming distorted.

"By strengthening our oversight capabilities, we can ensure that everyone, literally, plays by the rules and that no one manipulates markets to the detriment of consumers," said Kirby.