FERC sets sanction higher than Northeast ISO requests

Dec. 14, 2000—The Federal Energy Regulatory Commission rejected an ISO New England's request to cap rates for its so-called installed capability (ICAP) market at 17 cents/kW-month, calling it a �token� amount, and reinstated an $8.75/kW-month charge.

The charge is intended to encourage new generation and is levied against New England utilities or other load entities that don�t contract for enough electricity to serve customers and maintain a reasonable generation margin, or the so-called ICAP. The charge or fine is paid to generators.

FERC sees the charge as a way to provide monetary incentives to manage congestion by stimulating new generation supply. The agency said the $8.75/kW-month is an approximation of the cost to install a peaking unit and represents a reasonable basis for encouraging construction of new generation.

�The ICP deficiency charge needs to be high enough to influence behavior and serve a reliability function," according to the FERC order. "The charge should be related to the actual harm created by ICAP deficiencies.�

In a June 28 order, FERC permitted ISO New England to eliminate the ICAP auction market Aug. 1 because the commission found it wasn't useful and could produce inflated prices unrelated to actual harm created by ICAP deficiencies.

Instead, the federal agency ordered the ISO to revert to levying administratively administered sanctions against companies that failed to comply with ICAP requirements. The ISO proposed the 17 cents/kW-month charge based on the average clearing price in the ICAP auction market in 1999. But FERC agreed with those who argued for the higher rate, which was in effect before the ISO was created.

�We are evaluating FERC�s order,� says Ellen Foley, spokeswoman for the ISO New England.

The ISO could implement the new charge or challenge the order in federal court, an action still not decided.

Separately, FERC agreed to extend a $1,000/MWh cap on the wholesale (operating reserve) electricity market until March 31, 2001. The temporary bid cap was put in place July 26 at the request of the ISO and was set to expire Dec. 31.

The ISO said the extension was necessary due to continuing flaws in its markets and the potential for price spikes during periods of high demand in the winter as well as summer. Generators argued the cap will discourage investment in new generation exacerbating supply problems in the region, but FERC said the cap "allows a significant margin for profit above the marginal costs of the most expensive unit existing or planned in New England."

Sponsored by FLSmidth

Related Articles

Wisconsin Electric gets no bids to buy Presque Isle coal plant

Wisconsin Electric Power hasn't gotten any purchase bids at this point off a recent request for proposals (RFP) that it issued for the coal-fired Presque Isle power plant in Michigan's Upper Peninsula.

Gas, renewables account for new generation additions in February

Basin Electric Power Cooperative has commissioned its 45-MW Pioneer 2 peaking unit in North Dakota and it was the largest conventional peaking plant to come online during February as renewables accounted for the rest of the new generation.

Follow Power Engineering on Twitter

Latest News

Shutterstock coal production trucks

Weekly Coal Production

The Weekly Coal Production shows how much coal is being produced across the U.S.

Federal Reserve Bank of Dallas Weekly Economic Indicators financial business

The Federal Reserve Bank of Dallas' Economic Indicators

The Federal Reserve Bank of Dallas offers a glimpse into how the markets are doing domestical...

Kvaerner awarded contract for gas-fired power plant in Delaware

Kvaerner North American Construction Inc. and its joint venture partner, Parsons Brinckerhoff...

Canadian Solar purchases two solar projects

Canadian Solar Inc. has acquired a majority interest in two utility-scale solar power project...

Operators Restart Unit 2 at PPL Susquehanna

Unit 2 at the PPL Susquehanna nuclear power plant near Berwick, Pa. resumed generating electr...

Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlemen...

Toshiba in talks to sell portion of Westinghouse nuclear unit

Toshiba Corp is in talks  to sell up to 16% of its stake in the Westinghouse Electric Co...

Utah nixes nuclear waste storage facility

Plans to park radioactive waste at a storage facility in Utah have been officially called off.

Power Engineering Current Issue

Volume 118, Issue 3

Products Showcase

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Power Industry Wire News

DPG Investments, LLC Welcomes New Talent, Touts 2014 Team Achievements

DPG Investments, LLC Welcomes New Talent, Touts 2014 Team Achievements

MCW Energy Group Details Further Progress of Its Initial Oil Sands Extraction Plant in Utah

MCW Energy Group Details Further Progress of Its Initial Oil Sands Extraction Plant in ...

American Power Group Corporation Reports Fourth Quarter and Fiscal 2014 Results

American Power Group Corporation Reports Fourth Quarter and Fiscal 2014 Results

Ambient Water Releases Letter to Shareholders

Ambient Water Releases Letter to Shareholders

Western Gas Partners Announces Expiration of Third Party Option

Western Gas Partners Announces Expiration of Third Party Option

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>