David B. Patton, Ph. D., an independent market advisor for New York’s ISO, declared the state’s day-ahead power market competitive at a mid-October meeting of the board. (The real time market is not examined in his report; analysis of that market will be discussed in days ahead.)
“Even though we haven’t heard yet about the real time market, it should be noted that the day-ahead market represents 95 percent of all the electricity traded in New York and thus is the most significant in terms of volume,” stated Carol E. Murphy, executive director of the Independent Power Producers of New York Inc.
Patton assessed the market by looking at both market prices and outcomes as well as market participant offer patterns and behavior. While he acknowledged that power prices in eastern New York and New York City are often higher due to transmission limitations, he labelled the system itself one of “the most theoretically efficient.”
“I have not found that increased electricity prices were caused by the New York ISO’s market design or operations,” Patton told the board.
Instead, he pointed to the price increases in both the natural gas and oil arenas and the loss of nuclear capacity (1,000 MW) at Indian Point 2 as the most likely sources of the hike. Adjusting for those factors reduces the average price for power in western New York by 28 percent and in eastern New York by 48 percent. (See graphs)
“Except for several isolated instances which were mitigated prospectively, my analysis did not uncover offering behavior in the energy market constituting an exercise in market power,” Patton concluded. “That is, suppliers bid in a manner consistent with competitive markets during the vast majority of hours.”