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NYISO draft proposal on buyer-side mitigation raises concerns


From the December 12, 2012 issue of Public Power Daily

Originally published December 12, 2012

By Robert Varela
Editorial Director
A preliminary draft proposal outlined by New York Independent System Operator staff to exempt certain new merchant plants from buyer-side mitigation has concerned public power utilities—and others—in the state. "As proposed, the Competitive Entry Exemption appears to be discriminatory in allowing developers to obtain long-term contracts with private entities, but not with municipal utilities or public authorities," said Paul J. Pallas, president of the New York Association of Public Power (NYAPP).

"The proposal that municipal utilities and public authorities cannot use the exemption to build a unit themselves needs to be clarified to protect our ability to self-supply our own loads," said Pallas, who is also the superintendent of the electric system at the Village of Rockville Centre. Noting that the proposal rolled out on December 4 by the NYISO staff was preliminary, he said NYAPP "looks forward to working with NYISO staff and other stakeholders to improve the proposal. We in New York should be looking to avoid mistakes made in PJM and not repeat them."

As outlined by PJM Principal Economist for Market Design Nicole Bouchez, the proposed exemption from the ISO’s mitigation rules would aid competitive entrants who "may legitimately have a different view of the market than specified by the tariff formula." However, a distribution utility, municipal utility or any governmental entity could not get an exemption for self-supply and private developers could not qualify for the exemption if they have a long-term contract with a distribution utility, municipal utility or any governmental entity, Bouchez said.

A study by Christensen Associates Energy Consulting found that a significant portion of generation built since 1999 was financed not in reliance on NYISO market revenues, but through long-term bilateral contracts, utility self-supply or with federal and state renewable energy incentives. For example, 68 percent of proposed generation additions through 2016 is being constructed under long-term bilateral contracts or utility ownership, said the study, which was sponsored by APPA, NYAPP and the National Rural Electric Cooperative Association. The study is available on APPA’s website.

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