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New England Market Monitoring Issues

New England Market Monitoring Issues. Paul Peterson Synapse Energy Economics 22 Pearl Street, Cambridge, MA 02139 www.synapse-energy.com Massachusetts Roundtable January 18, 2002. Synapse Reports. Best Practices in Market Monitoring:

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New England Market Monitoring Issues

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  1. New England Market Monitoring Issues Paul PetersonSynapse Energy Economics 22 Pearl Street, Cambridge, MA 02139 www.synapse-energy.com Massachusetts Roundtable January 18, 2002 Synapse Energy Economics

  2. Synapse Reports Best Practices in Market Monitoring: A Survey of Current ISO Activities and Recommendations for Effective Market Monitoring and Mitigation in Wholesale Electricity Markets The Other Side of Competitive Markets: Developing Effective Load Response in New England’s Electricity Market www.synapse-energy.com Synapse Energy Economics

  3. Undesirable Features of N.E. Wholesale Markets • No demand curve to restrain supply bids • No “market” as demand approaches limits of available supply • Single settlement system • Limited congestion pricing signals • $1,000 bid cap in all markets Synapse Energy Economics

  4. Patton Report • Comprehensive and detailed analysis of market rules inhibiting appropriate price signals • Apply similar analysis to other market rules related to high prices • Notes limitations of ISO-NE to improve market rules without multi-settlement and an effective congestion management system • General support for the recommendations in the report • Concern over how recommendations are implemented Synapse Energy Economics

  5. ISO-NE Proposed Changes • Appropriate deferral of some issues to SMD • Improvement in transaction rules with NYISO • Revised ECP eligibility rules • Reserve Market reforms Synapse Energy Economics

  6. ISO Experiences to date: CA and PJM • California (old) • No requirement for generation units to bid into the market • Load-servers required to purchase from spot market • Price caps in CA below market prices in other states • Withholding and other gaming activities • PJM • $1,000 bid cap since inception • Continuation of vertically integrated utilities • 1999 and 2001 hourly ECPs above $900/MW • De-listing of capacity resources; ICAP market power concerns; and gaming in the FTR auction market Synapse Energy Economics

  7. ISO Experiences to Date: N.E. and NY • New England • Elimination of Operable Capacity market in 1999 due to gaming • Bid mitigation in ICAP market in early 2000; later revisions to ICAP • $6,000 ECP in May, 2000; $1,000 bid cap imposed by FERC • $1,000 ECPs in summer 2001 • New York • Bid cap imposed as a precaution in July, 2000 • Enhanced bid mitigation implemented by NY ISO • Physical withholding in reserve market led to a bid cap Synapse Energy Economics

  8. Issues • Generator Unit availability: insufficient outage data • $1,000 bid cap: no analytical basis for price signal • Proxy cost of peaking unit • Opportunity cost • Reference price in other markets • Hydro bids • Load Response • Cost-based dispatch analysis Synapse Energy Economics

  9. National Issues • RTO governance structure • Role of Market Monitoring • Independent Market Advisor • Market power analyses (structural) • Rule-making (section 205 rights) Synapse Energy Economics

  10. Upcoming Events (Opportunities) • FERC RTO process (Northeast mediation) • FERC’s new market power screen (pivotal test) • Summer 2002 rule changes • Standard Market Design in New England • Quarterly and Annual Reports • ISO-NE Board of Directors Synapse Energy Economics

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