Message-ID: <10135027.1075850996418.JavaMail.evans@thyme>
Date: Thu, 14 Dec 2000 08:30:00 -0800 (PST)
From: howard.fromer@enron.com
To: tom.dutta@enron.com, john.suarez@enron.com, doug.sewell@enron.com, 
	richard.ring@enron.com, suneet.sharma@enron.com, 
	gary.keevill@enron.com, john.llodra@enron.com, tom.may@enron.com, 
	christi.nicolay@enron.com, sarah.novosel@enron.com, 
	dan.staines@enron.com, w.duran@enron.com, richard.lydecker@enron.com, 
	richard.shapiro@enron.com, steven.kean@enron.com
Subject: NYPSC Interim Pricing Report on ISO
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Earlier today, the New York Public Service Commission released a 122 page 
draft report prepared by its staff evaluating the NYISO. The report concludes 
that the ISO must pursue a wide range of operational reforms and other 
consumer safeguards to "ensure a more efficient and stable electric market 
that will better protect consumers from dramatic price increases." The report 
culminates a months-long investigation begun by the PSC last summer in 
response to problems and price run-ups in the wholesale market.

The major recommendations in the Report, some of which have already surfaced 
in recent ISO Committee meetings, would be devastating to a competitive 
wholesale market and would largely reregulate prices in New York. They 
include the following (taken directly from the PSC's Press Release):

Reforming rules and procedures to improve the efficiency of the market and 
minimize opportunities for market manipulation, or "gaming," by owners of 
electricity generating facilities;
Initiating a $150 per megawatt hour price cap on generators to maintain 
reasonable market clearing prices;
Creating a "circuit-breaker" mechanism that will prevent market power abuses 
at levels below $150/MWH;
Lowering price thresholds significantly to allow the NYISO to step in more 
quickly to investigate and mitigate price spikes;
Granting the NYISO retroactive refund authority to return to consumers gains 
that generators improperly derive from market power abuse; and,
Creating a strong deterrent against price abuses by penalizing generators who 
repeatedly use improper tactics to raise prices above competitive levels.

The NYPSC, of course, has no legal authority to impose any of these 
recommendations. However, they are likely to muster support from the 
Transmission Owners, governmental entities and loads, that usually control 
enough votes to just  pass a motion at an ISO Committee. This will set up a 
confrontation with the ISO Board, which is walking a delicate tightrope 
between maintaining its independence and supporting a competitive wholesale 
market on the one hand, and dealing with the politics of a hostile 
Administration in New York. Last summer, as you may recall, the Board 
rejected the $1000 bid cap pushed through by the PSC, voting instead for a 
$1300 cap. That action was set aside by FERC, which reimposed the $1,000 
level and then made it applicable in New England as well so that there would 
be consistency among the three Northeast ISOs (PJM already had the $1,000 
cap.) 

Thus, whether NY follows the lead of California is likely to be determined by 
FERC, and it will have to carefully consider the consistency concerns it 
raised last summer in ultimately deciding whether it's OK for New York to set 
price caps below its neighboring ISOs.

Attached is a copy of the PSC's Press Release and Report.

http://www.dps.state.ny.us/fileroom/doc8945.pdf