RE: Automatic Mitigation

"Kirkpatrick, Joe" <joe.kirkpatrick@nrgenergy.com< writes to the
NYISO_TECH_EXCHANGE Discussion List:

Mark

Thanks for the clarification, regardless of what triggers mitigation it
is still an automated process that bypasses due process. System, unit
and market conditions are dynamic and therefore the circumstances to
determine market power are dynamic, you would assume that they are
fixed. Reference prices are dynamic based on many of the complexities of
the system. As a simple example I would offer gas basis as a complexity
that is not even taken into consideration.
Gas basis can have the result of increasing costs to a generator by as
an example $20/MMbtu, who at the NYISO is monitoring this on an hourly
basis?

If the most expensive unit on the system is given a reference price of
$150 what would be the highest clearing price you would expect to see
that would be set by an internal generator?

Since the NYISO reference bids for generators involved approximately
zero discussion with generators would you consider that following the
Market Mitigation Plan?

The default reference price for a generator's energy is based on
recently accepted bids for energy from that generator. In the event that
such data are unavailable a default reference price is either(1) by
negotiation with the generator, or (2) by an estimate of cost.

What defines an accepted bid? Is it the dispatch of a generator with
payment being either its bid or the LBMP price at the bus whichever is
higher. This is not clear to me.
What happened to the negotiation part?

In training material provided by the NYISO they clarify that a generator
must include all of its costs in its bid to ensure cost recovery, part
of those costs are fixed cost recovery. None of the default reference
bids assigned by the NYISO include any these costs.

Thanks

Joe

-----Original Message-----
From: Mark Younger [mailto:mdy@slater-consulting.com]
Sent: Saturday, April 28, 2001 8:20 AM
To: market_relations@nyiso.com; nyiso_tech_exchange@global2000.net
Subject: RE: Automatic Mitigation

"Mark Younger" <mdy@slater-consulting.com< writes to the
NYISO_TECH_EXCHANGE Discussion List:

Your discussion is based on a misunderstanding. The $150 price is the
lowest point at which the AMP will check for whether there needs to be
any
mitigation. This price was picked to avoid the AMP running when it is
highly unlikely that any mitigation will in fact be needed.

The $150 price will not trigger mitigation in and of its. Whenever one
of
the zones has a price that is above $150 the AMP will run to determine
if
any units have crossed the conduct threshold. If there are any units
that
have crossed the conduct threshold then those units will be set at their
reference bids and the market will be rerun to determine if the impact
threshold has been triggered. If the impact threshold is triggered in
any
zone then the final runs will be done with the mitigated (i.e.
reference)
bids for those units that triggered the conduct threshold. If the
impact
threshold is not triggered then the original bids for all units will be
used.

-----Original Message-----
From: owner-nyiso_tech_exchange@lists1.thebiz.net
[mailto:owner-nyiso_tech_exchange@lists1.thebiz.net] On Behalf Of
Kirkpatrick, Joe
Sent: Saturday, April 28, 2001 9:03 AM
To: nyiso_tech_exchange@global2000.net
Cc: market_relations@nyiso.com
Subject: Automatic Mitigation

"Kirkpatrick, Joe" <joe.kirkpatrick@nrgenergy.com< writes to the
NYISO_TECH_EXCHANGE Discussion List:

The NYISO has chosen $150 as representative of a level to trigger market
mitigation. I believe the basis for this was a determination of a price
that was calculated to be representative of the statewide price of $50.
A 300% increase or an increase of $100 is $150, coincidently the same
price.

I am questioning the determination of this price ($50) and its
application in the market mitigation plan.

In determining market power according to the market mitigation plan
specific generator or unit bids are examined to identify economic
withholding. How does the $50 price reference a specific unit, I am not
sure where in the Market Mitigation Plan it says to examine the entire
statewide price and then compare it to a generator's bid.

If a generator's fuel costs (without fixed cost recovery) is $150 that
unit would presumably never bid below its cost, it would always bid as a
minimum $150. How could that generator exceed the thresholds identified
in the market mitigation plan. A 300% increase would be $450 and an
increase of $100 would be $250, and yet using the AMP interpretation of
the mitigation plan the threshold for identifying economic withholding
is $150.
It would seem that the AMP methodology is improperly applying the Market
Mitigation Plan. The Mitigation Plan is supposed to identify generator
conduct and clearly in the application of the AMP it is not.

The simple question would be is the $150 threshold representative of
every generator's bid to determine economic withholding. The answer can
only be no, how can it be?

The Market Mitigation Plan was intended to determine whether a generator
was exercising market power. The determination of whether a generator
was exercising market power would and should take into consideration all
of the prevalent market, unit and system conditions to determine if that
unit was in fact exercising market power. The more complex the system
the more complex the analysis of whether marker power was exercised.

How does a price trigger (or any automatic threshold) take all of the
complexities of a situation into account? It cannot, I suspect that is
why due process is required whether it is a court case or a market power
determination. The full facts are presented and evaluated, every case is
unique and requires deliberation and analysis of every supporting fact.
In other words automatic judgement is not an option and yet under the
NYISO AMP it is offered as a solution.

I do agree that prices should not be posted in the DAM if they are high
as a result of market power. A better solution would be to delay the
prices or hold them in reserve until a proper determination is made. In
the same way that prices are held in reserve for software flaws they
should be held in reserve for determination of market power. Prices can
be posted and flagged subject to change pending review of market power,
at least then due process can be followed. Market participants can be
consulted in accordance with the Plan and if required SCUC can be rerun.

External proxy bus prices may need to be frozen to ensure that flows are
consistent with the orginal DAM posting if a longer period of time is
required for market power evaluation. The AMP is still in place but is
only used to identify potential market power until a "human" evaluation
is done.

Joe Kirkpatrick