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Suppliers' Complaint Against Implementation of Buyer-Side Market Power Mitigation Amounts to "Conspiracy Theories," NYISO Says

August 3, 2011
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The latest complaint from certain capacity suppliers in New York regarding buyer-side market power in the ICAP market amounts to "conspiracy theories" with no factual evidence, the New York ISO said in an answer at FERC (EL11-50).

In their latest bid to raise the capacity prices paid by load, Astoria Generating Company, L.P. and TC Ravenswood, LLC filed a complaint to impose an offer floor on the new 575 MW generating facility owned by Astoria Energy II LLC and potentially the approximately 512 MW generating facility being developed by Bayonne Energy Center, LLC (see 7/13).

Complainants blamed a cratering in the ICAP prices on the new Astoria Energy II facility competing in the ICAP auctions.

However, NYISO said that the complaint makes, "[an] unsupported and disconnected leap from the fact that July In-City ICAP Spot Auction prices were lower than Complainants anticipated to the claim that this can only be the result of artificial price suppression due to a faulty [offer floor] exemption determination."

Indeed, the New York Power Authority and other New York municipal loads noted that ICAP prices since the Astoria Energy II facility came online are similar to the Summer 2008 average price, prior to the retirement of the Poletti facility which led to a spike in capacity prices.

"[T]he July 2011 New York City installed capacity (In-City ICAP) spot market auction prices were well within the range projected by the NYISO's independent Market Monitoring Unit (MMU), [and] reflect normal and expected fluctuations associated with the retirement of existing generating facilities and addition of new sources of supply, and therefore are just and reasonable," NYPA said.

Specifically, the Poletti retirement led prices to jump from $5.98/kW-month for the Summer 2008 period to $12.99/kW-month for the Summer 2010 period. With new capacity coming online, results for the July 2011-August 2011 capability period returned to $5.80/kW-month, consistent with the levels seen prior to the Poletti retirement, NYPA said.

"[W]hile Complainants make much of the fact that prices fell by 50% this summer, they pointedly fail to note that that those same capacity prices had doubled in February 2010 when Poletti ceased operation," NYPA said.

"[T]he current price level does not represent a 'devastating' decline in the clearing price. Rather, it represents the same price that existed in 2008 when the amount of In-City capacity was approximately at the same level," NYPA added.

Furthermore, "[t]he July 2011 Spot Auction Price of $5.76/kW-month, the price that Complainants argue is a per se indication of 'uneconomic' entry is the same price that [market monitor] Dr. Patton testified would have been the competitive price for the 2007 auction – but for the economic withholding of the Ravenswood unit," NYPA said.

"Complainants want the Commission to prevent new entrants from competing against them if the (natural and expected) result of such competition is that In-City ICAP prices fall. Their position is wholly contrary to the primary reason that the Commission and the NYPSC decided to move from a fully regulated, vertically-integrated utility regime to a lightly regulated, broad-based, competitive paradigm," NYPA added.

When restructuring was first launched, "[t]he Commission would not allow utility companies to hinder competition and block the private generating companies then, and it should not allow those private companies to now hinder competition and block developers of new, substantially more energy-efficient and cost effective generating facilities," NYPA said.

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