Subject: Reissuance of ECA20001006B
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Fri, 8 Dec 2000 08:00:00 -0800 (PST)

What follows is a memorandum from William J. Museler to me invoking the
Temporary Extraordinary Procedures and requesting me to reissue ECA20001006B.
Immediately following the memorandum is the ECA itself.  It now carries the
number ECA20001208B.  The memorandum and the ECA are also being posted on the
OASIS.

MEMO

Date:          December 8, 2000

From:          William J. Museler, President & Chief Executive Officer

To:       Steven J. Balser, Manager of Market Monitoring and Performance
James H. Savitt, Market Monitor

Re:       Extraordinary Corrective Action to Address a Market Design Flaw:
External Proxy Bus Prices During Transmission Constraints
(ECA 20001208B; re-issuance of ECA 20001006B)

Thank  you  for  the  presentation of the Market Monitoring and Performance
Unit  and  the Market Advisor regarding the progress that has been made with 
the
Market Participants in addressing the market design flaw in the Real-Time 
energy
markets  concerning  external  proxy  bus  prices during transmission 
limitation
periods.  I am pleased that the Business Issues Committee gave unanimous 
support
to  the  NYISO  to  re-issue  ECA  20001006B  until  the Market Participants 
can
consider  and  approve, and the NYISO can implement, a tariff change required 
to
permanently address the Market Design Flaw.

As  stated  in  my Memorandum to you of October 6, 2000, I agreed with your
conclusion that the conduct identified at that time constituted a 

?Market Design
Flaw?  as  defined  in  Attachment  Q  to  the ISO OATT, Temporary 
Extraordinary
Procedures  for  Correcting  Market  Design  Flaws  and  Addressing 
Transitional
Abnormalities (the ?TEPs?).  As further stated in that Memorandum, I agreed 
with
your  analysis that prices produced by exploiting this Market Design Flaw 
would,
absent  appropriate  action,  remain  different  from what would otherwise 
occur
during periods of efficient competition.

I  have  now  determined,  based  on  consultations  with ISO Staff and the
support  of the Business Issues Committee, that it is appropriate to maintain 
in
effect  the  corrective measures adopted as ECA 20001006B while consultation 
and
cooperation with the Market Participants and jurisdictional agencies is 
on-going
to  develop  and  implement appropriate rules or rule changes in accordance 
with
the ISO Agreement.

Please re-issue the text of the Extraordinary Corrective Action (?ECA?) and
post  it  on  the  OASIS,  for implementation effective at the expiration of 
ECA
20001006B.  The ECA shall be effective for a period of ninety (90) days.

William J. Museler, President and CEO
New York Independent System Operator

cc:  Market Participants via OASIS

New York Independent System Operator

Extraordinary Corrective Action 20001208B

Market Design Flaw Regarding Real-Time External Proxy Bus Prices

Applicability

This  Extraordinary  Correction Action (ECA) shall apply when the following
two conditions are met:

?    Transactions are proposed for an operating hour at an External Proxy Bus;
and
?    The Balancing Market Evaluation (BME) resolves transmission congestion
constraints at the External Proxy Bus for the operating hour, resulting in
transmission congestion charges in the Hour-Ahead Market (HAM).

Rationale

When BME solves for proposed transactions at an External Proxy Bus, and the
total  proposed  transactions  exceed  the available transfer capacity, BME 
will
resolve binding constraints at that External Proxy Bus using the decremental 
bid
price  or  the sink price cap bid indicated by the Market Participants 
proposing
the transactions.

In  the  operating hour, the transfer capability and scheduled flows at the
External  Proxy  Bus  are  fixed,  and  SCD  is  not  required  to  resolve  
for
transmission  congestion  costs  associated  with  the  scheduled  
transactions.
Therefore, in operating hours where an External Proxy Bus constraint is 
binding,
Real-Time  prices at the External Proxy Bus will be significantly different 
from
the  HAM  prices,  due  to  the  absence  of transmission congestion costs 
being
reflected  in  the Real-Time price.  Currently, scheduled HAM transactions at 
an
External  Proxy Bus are settled at the Real-Time price at the External Proxy 
Bus
during  the operating hour, and the import transactions receive a Bid 
Production
Cost Guarantee for the deviation in price between the HAM and Real-Time price.

The  Market  Design  Flaw  in  the  current  process  is  that transmission
congestion  constraints  present  when  BME  schedules  HAM transactions are 
not
reflected  in the Real-Time settlement prices.  Under the rules set forth 
below,
the  transmission  congestion  costs present in BME will be reflected in the 
SCD
prices, so that a Market Participant proposing a HAM transaction will be 
charged
the  full  cost of supplying that transaction, up to the decremental bid cost 
or
sink  price  cap  bid  indicated  by  the Market Participant at the time the 
HAM
transaction was proposed.

Implementation Rules

1.   These rules apply in hours that HAM import or export transactions are
constrained in BME at an External Proxy Bus (EPB) by a transmission limitation
or Desired Network Interchange (DNI) limit (an ?EPB Limit?).

2.   For each hour in which an EPB Limit constrains net imports to NYCA from 
an
External Proxy Bus in the HAM, the Real-Time settlement price at that External
Proxy Bus will be the lesser of the real-time LBMP or the BME price at that
External Proxy Bus.

3.   For each hour which an EPB Limit constrains net exports from NYCA to an
External Proxy Bus in the HAM, the Real-Time settlement price at that External
Proxy Bus will be the greater of the real-time LBMP or the BME price at that
External Proxy Bus.

Issued:  December 8, 2000, 3:00 p.m.
Effective:  January 10, 2001, Operating Hour Beginning 0000