Con Ed files with FERC to correct alleged market power abuse

By Ann de Rouffignac
OGJ Online

HOUSTON, Mar. 6, 2001—Consolidated Edison Co. of New York filed Mar. 1 with federal regulators requesting additional measures be adopted to protect against alleged market power abuse by generators in New York City.

The utility sold off its generation as part of restructuring 2 years ago and must buy power on the wholesale market to serve customers. After the law was passed, Consolidated Edison said it identified loopholes in measures intended to protect against market power that could lead to excessive prices.

"The loopholes identified by the company can inflate prices by as much as $20 million in some months," said Kevin Burke, president of Consolidated Edison, in a release.

Consolidated Edison claimed generators in New York City can bid up prices in the real-time market limited only by a $1,000/MW-hr cap.

It said exercise of market power is likely in the real-time market because there are even fewer generating units which can compete than in the day-ahead market. Competition in the real-time market is limited to units already committed in the day-ahead market but not fully utilized or to units that can start up quickly. Units not committed in the day-ahead market or that have long start-up times cannot compete. Fewer units means more potential for market power abuses.

But, according to the filing, no market power mitigation measures have been adopted in the New York area real-time market. The price in the day-ahead market, however, is subject to mitigation. When bids exceed the market-clearing price at a generator's location by 105% of the price at Indian Point 2, mitigation kicks in.

The price is automatically adjusted, including fuel costs, to an average bid the generator has accepted during similar but unconstrained periods during the previous 90 days. This measure applies only to the day-ahead market and not the real-time market.

"In real-time generators can, and do, bid far above competitive levels, knowing that they can force these prices upon in-City consumers," according the Federal Energy Regulatory Commission filing.

Because there are no corresponding constraints on the real-time market, this creates perverse incentives in the day-ahead market, Consolidated Edison said. Utilities that serve customers bid for most of their power needs in the day-ahead market in an effort to avoid the expensive real-time market. Consolidated Edison said the system leads to excessive unit commitment and additional costs.

Consolidated Edison alleged it has already found evidence of real-time market problems this winter without the stress of summer demand.

"When system conditions and weather problems caused the NYISO [New York Independent System Operator] to constrain imports into the in-City load pockets, real time prices skyrocketed there to as high as $1,000/MW-hr," according to the filing.

Consolidated Edison pointed to local reliability requirements that create "must-run" situations as another instance in which the exercise of market power become possible. This occurs when owners of units that must run can charge prices in excess of competitive levels—knowing that there is no choice but to pay—according to the filing.

Consolidated Edison said it found in December 2000 and January 2001 there was at least one call per day for a must-run plant in New York City. Unit owners know must-run situations occur frequently. When they do, Consolidated Edison said, unit owners adjust bids upwards in real-time while the problem exists.

Because owners know their generation is urgently needed, the situation is described in the filing as handing owners "a blank check."


Sponsored by FLSmidth

Related Articles

JEMB, Harbert Power increase investment for Astoria I Natural Gas Power Plant

East River FundCo, a partnership of JEMB Family LP, and Harbert Power Fund V have increased their investment in Astoria Project Partners’ Astoria I natural gas power plant in Queens, New York.

Con Ed to pay part of $24M gas plant cleanup

Consolidated Edison Co. (Con Ed) will have to pay part of an estimated $24 million in cleanup costs tied to a former polluted manufactured gas plant, a New York federal judge ruled on Nov. 21.

Follow Power Engineering on Twitter
Latest News

Oklahoma attorney general challenges EPA's clean-air plan

A plan by the U.S. Environmental Protection Agency to reduce emissions from coal-fired power ...

Wave Energy Week will mix marine energy developers with traditional hydropower

Oregon Gov. Kate Brown, Democrat, has proclaimed “July 13-17, 2015 to be Oregon Wave Week in ...

Public Service Company of Oklahoma seeks rate increase

Public Service Company of Oklahoma is asking for a 13.6 percent rate increase it says is need...

GAO looks at reliability impacts of changing power generation mix

The Government Accountability Office (GAO) on June 29 released a study provided a month befor...

On the day after MATS decision, Bernstein sees only a limited reprieve for coal units

In light of the U.S. Supreme Court ruling against the EPA's Mercury and Air Toxics Standards ...

Pence says Indiana will not comply with coal plant regulations

Indiana will not comply with President Barack Obama's plan to battle climate change by requir...

Westermost Rough offshore wind park enters operations

The 210-MW offshore wind power plant, Westermost Rough, has entered operations. The project w...

Duke Energy to upgrade energy storage system at Notrees Windpower Project

Duke Energy (NYSE: DUK), Samsung SDI and Younicos will work together to update Duke Energy's ...

Power Engineering Current Issue

Volume 118, Issue 12
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

National Grid Drives Innovation Through REV Demonstration Projects

National Grid Drives Innovation Through REV Demonstration Projects

Cardinal Resources' $28.8 Million Cameroon Red Bird Contract Advances; Company Expects Financing Completed, Implementation, in Q3-15

Cardinal Resources' $28.8 Million Cameroon Red Bird Contract Advances; Company Expects ...

Letter From CGE Energy (McKenzie Bay Intl.) President Bryan Zaplitny

Letter From CGE Energy (McKenzie Bay Intl.) President Bryan Zaplitny

Globalstar and Global Telesat Communications Celebrate 5,000th SPOT Device Sales Milestone

Globalstar and Global Telesat Communications Celebrate 5,000th SPOT Device Sales Milestone

ACORE Releases Public Policy Insights and Recommendations for Renewable Energy

ACORE Releases Public Policy Insights and Recommendations for Renewable Energy

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 >>