By the OGJ Online Staff
HOUSTON, Oct. 24, 2001 – Disputing a recent study, the New York Independent System Operator said extending real-time prices and dispatch in the Northeast would probably increase power prices for New York consumers.
The New York ISO disagreed with conclusions of a study done on behalf of energy merchant Mirant Corp. that estimated savings could total $440 million/year, if real-time dispatch were implemented interregionally through a Northeast Regional Transmission Organization. The Mirant study was conducted by Energy & Environmental Analysis Inc. and released last month.
The New York ISO commissioned its own study of real-time pricing by LECG LLC. It found prices would increase for New York’s customers and fall in the PJM Interconnection LLC region, if real-time dispatch was done in one combined region. A Northeast Regional Transmission Organization is under consideration by all three ISOs and the specific market design remains a point of contention. The Northeast RTO would combine the New York ISO, the ISO New England and PJM.
New York ISO said the $440 million in savings estimated by the Mirant study are “seriously flawed,” because it ignores significant transmission constraints that restrict power flows between PJM and New York and within those areas.
“EEA’s analysis neither accounts for the hours in which real-time flows between PJM and New York were constrained nor uses a measure of available transmission capacity that reflects the actual capacity available during unconstrained hours,” New York ISO said.
When these constraints are taken into account, the benefits of implementing interregional real-time dispatch would be questionable for New York. “The penalty for New York could be as much as $90 million in higher costs to consumers,” New York ISO said.
The Mirant analysis of energy flows between New York and PJM compared day-ahead prices with real-time energy flows. That’s like comparing “apples to oranges,” said New York ISO.
Even if the ‘apples to oranges’ approach is accepted, New York’s study could not replicate the Mirant study’s conclusion of $440 million of savings. Rather, the New York study came up with $139 million in savings for New York and $50 million in savings for PJM.
But the New York ISO study said even those figures are flawed because Mirant’s study used prices in New York prior to Oct. 11, 2000, when the New York market was experiencing market “anomalies.”
“During this period all three Northeast ISOs encountered ‘sham’ transactions by market participants that appear to have intended to distort real time prices. Since that time this problem has been corrected,” said Steven Sullivan, spokesman for the New York ISO.
The Mirant study doesn’t take the corrections into account, New York ISO said. Analyzing the real-time prices and energy flows between Oct. 11, 2000, and Aug. 31, 2001, instead showed that implementing interregional real-time dispatch would reduce PJM prices but have little effect or -significantly increase – New York prices, New York said.
New York’s study attributed the increased prices in New York and decreased prices in PJM to the elimination of uneconomic power flows from PJM to New York. “Eliminating these uneconomic flows would result in significant cost savings in PJM and would raise New York prices,” said New York ISO.