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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Fromer, Howard </O=ENRON/OU=NA/CN=RECIPIENTS/CN=HFROMER< X-To: /o=ENRON/ou=NA/cn=Recipients/cn=notesaddr/cn=a3a4cb81-65db1a4f-862569e7-6cfe2f </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=a3a4cb81-65db1a4f-862569e7-6cfe2f<, Ader, Jeff </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=d5962049-d79f431e-86256a08-720861<, Aucoin, Berney C. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Baucoin<, Bachmeier, Rick </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=f20847ab-ec9e41eb-86256571-783da2<, Brown, Jeff </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Notesaddr/cn=abb1ec7f-b734205a-86256a48-6e45c0<, Brown, Michael (EES) </O=ENRON/OU=NA/CN=RECIPIENTS/CN=MBROWN9<, Davis, Dana </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Ddavis<, Duran, W. David </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Dduran<, Dutta, Tom </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Tdutta<, Ferris, Frank </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Fferris<, Guerrero, Janel </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jguerre<, Gulmeden, Utku </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Ugulmede<, Gupta, Gautam </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Ggupta<, Hamlin, Mason </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Mhamlin<, Hammond, Pearce W. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Phammon<, Hinrichs, Lance </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Lhinrich<, Letzerich, Palmer </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Wletzeri<, Llodra, John </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jllodra<, Lydecker Jr., Richard </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rlydeck<, May, Tom </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Tmay<, Meyn, Jim </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jmeyn<, Misra, Narsimha </O=ENRON/OU=NA/CN=RECIPIENTS/CN=NMISRA<, Montovano, Steve </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Smontova<, Nicolay, Christi L. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cnicola<, Novosel, Sarah </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Snovose<, Padron, Juan </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jpadron<, Philip, Willis </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Wphilip<, Ring, Richard </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rring<, Sacks, Edward </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Esacks<, Scheuer, Janelle </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jscheue<, Sewell, Doug </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Dsewell<, Staines, Dan </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Dstaine<, Steffes, James D. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jsteffe<, Sullivan, Kathleen </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Ksulliva<, Thomas, Paul D. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Pthomas2<, Thompkins, Jason </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Jthompk<, Wheeler, Rob </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Rwheele2< X-cc: X-bcc: X-Folder: \JSTEFFE (Non-Privileged)\Steffes, James D.\Inbox X-Origin: Steffes-J X-FileName: JSTEFFE (Non-Privileged).pst Earlier today, FERC issued the attached order approving an extension of the= NYISO's Automated Mitigation Procedures (also known as the AMP or Circuit = Breaker) through April 30, 2002, rather than until October 31 as had been s= ought by the ISO. Enron had submitted comments opposing the ISO's request. = FERC also directs the ISO to file a comprehensive mitigation proposal that = addresses FERC's concerns with the AMP as well as FERC's concerns regarding= how the ISO's overall mitigation measures work together. This proposal is = due by March 1, to be effective May 1.=20 =20 FERC acknowledges two problems with the AMP that the NYISO has already comm= itted to fix: limiting the mitigation to specific zones and hours that fail= the impact test, and exempting bids of less than 50 MW unless thee is a de= monstrated market power concern. In addition, FERC directs the ISO to work= with market participants to (1) examine whether the AMP may serve as a bar= rier to entry for new generation, and whether such new generation should be= exempted from the AMP; (2) examine whether other energy limited resources,= including those constrained by environmental rules, should be exempted fro= m or accommodated in the AMP. Currently, only hydro units are exempted beca= use their volatile bids often reflect their opportunity costs, not market p= ower. FERC believes this logic applies to all energy limited resources as w= ell; (3) file a comprehensive mitigation proposal which also explains how t= he AMP will work in conjunction with other mitigation measures already in e= ffect or proposed, including the in-city mitigation measures. FERC is conc= erned here that that all the pieces may not fit together and there may be i= nconsistencies and gaps; and (4) consider must-run mitigation measures con= sistent with ISO-NE and PJM. Again, FERC seems to be concerned here with tr= ansmission constraints within NYC. (Note that the Con Ed distribution syste= m is not secured by the ISO and this has been at the root of most of the ou= t-of-merit calls in the City.) Finally, FERC cautions the NYISO that it ex= pects one mitigation plan for the Northeast as part of the RTO process, and= it encourages them to collaborate with PJM and ISO-NE in formulating its M= arch 1 comprehensive mitigation plan. =20 -----Original Message----- From: Leonardo, Samuel=20 Sent: Tuesday, November 27, 2001 11:24 AMexamine=20 To: Nicolay, Christi L.; Fulton, Donna; Stroup, Kerry; Novosel, Sarah; Lind= berg, Susan Cc: Fromer, Howard Subject: NYISO.Order approving extension of automatic mitigation procedures= subject to conditions.11/27 =20 97 FERC ? 61, 242 =20 UNITED STATES OF AMERICA = =20 FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Pat Wood, III, Chairman; William L. Massey, Linda Breathitt, And Nora Mead Brownell. =20 New York Independent System Operator, Inc. Docket No= . ER01-3155-000 =20 ORDER APPROVING EXTENSION OF AUTOMATIC MITIGATION PROCEDURES SUBJECT TO CON= DITIONS (Issued November 27, 2001) On September 28, 2001, the New York Independent System Operator, Inc. (NYIS= O) filed, pursuant to section 205 of the Federal Power Act (FPA), [1] a req= uest to extend the termination date for the Automated Mitigation Procedures= (AMP) [2] to=20 October 31, 2002. The Commission's June 28, 2001 order [3] in this proceed= ing approving the AMP required those automated procedures to expire on Octo= ber 31, 2001. In this order, we accept NYISO's proposed extension of the A= MP until April 30, 2002, and we direct NYISO to file a comprehensive mitiga= tion proposal that addresses the Commission's concerns with the AMP set for= th in this order, as well as our concerns regarding how NYISO's overall mit= igation measures work together. NYISO is directed to file the comprehensiv= e mitigation proposal by March 1, 2002 to be effective May 1, 2002. The Co= mmission's action here benefits customers by protecting them from market po= wer, while establishing procedures to modify and improve the AMP mechanism,= as well as other mitigation measures in NYISO. =20 =20 =20 I. Procedural Background =20 In a November 23, 1999 order, [4] the Commission accepted in part and rejec= ted in part the market monitoring and mitigation plans filed by NYISO. In = instances where NYISO concludes that a specific market participant is exerc= ising market power, the Commission accepted NYISO's proposal to allow it to= engage in discussions to resolve the issues informally or issue demand let= ters requesting the participant cease certain behavior. In addition, the C= ommission stated that NYISO could file on a case-by-case basis under sectio= n 205 of the FPA to impose specific mitigation measures, or to make such fi= lings based on recurring types of conduct that warrant mitigation. However= , the Commission did not allow NYISO to reduce bid flexibility, impose fina= ncial obligations to pay for operating reserves, or impose default bids, be= cause this would give too much discretion to NYISO in price-setting and oth= er similar regulatory functions without Commission review. The Commission = determined that NYISO had not described with sufficient specificity the typ= es of conduct that would trigger the imposition of these measures; it had n= ot established specific thresholds or bright line tests that would trigger = the conclusion that market power had been exercised. =20 In a March 29, 2000 order, [5] the Commission further clarified NYISO's aut= hority under the plans. Among other things, the Commission accepted the sp= ecific thresholds proposed by NYISO to trigger possible mitigation, but rej= ected NYISO's proposal to keep them confidential. The Commission also allo= wed NYISO limited discretion as to when to mitigate (e.g., NYISO may choose= not to impose mitigation if it is satisfied with the party's explanation f= or its behavior) and for how long, but required NYISO to clarify that mitig= ation for market power may be imposed only prospectively.=20 =20 In a complaint filed in Docket No. EL01-55-000, the Mirant Companies (Miran= t) alleged that NYISO improperly intended to implement the AMP without fili= ng any changes to the MMM pursuant to either section 205 or 206 of the FPA.= In its May 9, 2001 order on Mirant's complaint, [6] the Commission found = that part of NYISO's proposal is within the bounds of its existing tariff, = in that section 3.2(b) of the Market Mitigation Measures (MMM) specifically= envisions use of the Security Constrained Unit Commitment (SCUC) [7] to id= entify questionable conduct. However, the Commission also found that NYISO= 's AMP proposal needed to be examined in greater detail before it could be = approved. Further, the Commission noted that section 205© of the FPA req= uires that NYISO keep on file with the Commission "practices and regulation= s" affecting its rates, and that NYISO's tariff did not contain language ad= equately specifying the timing and the process that are contained in the AM= P. Accordingly, the Commission concluded, that if NYISO wishes to implemen= t its AMP proposal, it must file revised tariff sheets pursuant to section = 205 of the FPA to set forth the AMP procedures. In that filing, the Commis= sion added, NYISO must address the concerns raised by the parties in the Mi= rant complaint proceeding, including: (1) whether the AMP provides sufficie= nt opportunity for meaningful consultation; (2) whether inaccurate market-c= learing prices will result even if the party whose bid was improperly mitig= ated is ultimately made whole; (3) whether the AMP would establish a new $1= 50 threshold that never appears in the MMM; and, (4) whether NYISO proposes= to exclude hydro units, imports, and exports from the AMP. =20 On March 17, 2001, in Docket No. ER01-2076-000, NYISO filed a new Attachmen= t H to its Services Tariff which incorporated the proposed AMP procedures (= March 17 Filing). By order issued June 28, 2001, [8] the Commission accept= ed NYISO's March 17 Filing allowed NYISO to implement the AMP mechanism for= 2001 summer capability period when supplies may still be tight and when th= e effectiveness of new demand response mechanisms are uncertain. The Commi= ssion viewed the proposed mechanism as only a temporary solution, and agree= d with certain of the intervenors that the proposed AMP may mitigate bids i= n situations where market power is not the cause for high or volatile bids,= and may not provide for sufficient consultation with generators to reasona= bly establish that particular bids were attempts to exercise market power. = The Commission further explained that automatic market power mitigation ma= y be most appropriate where it is tied to structural market power problems,= such as must-run situations where generators would otherwise be in a posit= ion to name their price, and noted that both PJM and ISO-NE use this more l= imited approach to automatic mitigation. =20 =20 II. NYISO's Market Mitigation Procedures, Including AMP =20 Under Commission orders allowing NYISO to implement its MMM, [9] = NYISO's Market Monitoring Unit (MMU), in consultation with NYISO's Market = Advisor, is responsible for monitoring the markets administered or controll= ed by NYISO and for mitigating a market party's conduct when NYISO determin= es that market power has been exercised. The MMM has specific threshold va= lues for identifying generators or transmission facilities that exercise ma= rket power. NYISO imposes mitigation when a market party's conduct has a m= aterial effect on prices or on guarantee payments. Conduct and impact crit= eria must be satisfied before NYISO may mitigate a generator's bid. NYISO = may not mitigate market prices retroactively.=20 =20 Under its manual procedures, prior to implementation of the AMP, NYISO is a= ble to identify conduct and pricing impacts that exceed the MMM standards o= nly after the SCUC runs for a given day-ahead market have been completed, w= hich means that mitigation cannot be implemented until the next day's day-a= head market. The primary purpose of the AMP is to eliminate the one-day la= g inherent in the manual application of the market mitigation thresholds th= at currently exist in NYISO's market mitigation. That delay can be importa= nt when market conditions arise that permit an exercise of market power. T= he AMP procedures are activated when the SCUC that calculates day-ahead mar= ket prices makes a preliminary determination that prices in a given area of= New York will exceed $150 absent mitigation. [10] Once the AMP is activat= ed, it only mitigates bids if specific thresholds for both bidding conduct = and market impact are crossed. The conduct and impact thresholds used by t= he AMP are the same thresholds approved by the Commission under NYISO's Mar= ket Mitigation Measures. Under the automated procedures of the AMP, non-co= mpetitive bidding behavior is still mitigated prospectively, as authorized = in the MMM, but the mitigation will occur within the SCUC runs in which the= conduct and price effect thresholds of the MMM are crossed, without the on= e-day delay that occurs under the manual procedures.=20 III. This Filing =20 On September 28, 2001, NYISO filed to extend the AMP, which would otherwise= expire on October 31, 2001, until October 31, 2002. [11] NYISO requests = waiver of the 60-day prior notice requirement to permit a November 1, 2001 = effective date. NYISO states that good cause exists for the waiver in orde= r to prevent a gap in the availability of the AMP. =20 NYISO believes the performance of the AMP was consistent with its design, w= hich is to eliminate the delay of one Day-Ahead Market cycle inherent in ma= nual application of the market mitigation thresholds. NYISO explains that = during Summer 2001, prices hit the $150 level 12 times, but the AMP imposed= bid caps only four times. Of those four times, the largest average number= of megawatts mitigated was 481, while customers were protected from more t= hat $11 million in unwarranted energy costs. NYISO further states that onl= y twice did AMP mitigation apply to more than one entity in one zone. NYIS= O concludes that while the AMP is an automated procedure, it does not autom= atically apply bid caps whenever prices are high. =20 =20 Absent mitigation, NYISO states that significant unwarranted wealth transfe= rs from buyers to sellers could take place especially during high-load summ= er months when supply may be tight. NYISO asserts however, that transmissi= on constraints can create tight market conditions in small areas even durin= g shoulder months. =20 NYISO states that the conditions necessitating the need for the AMP are alm= ost certain to be present this coming summer as they were this past summer,= and with the potential for market power problems to arise in shoulder peri= ods as well, it is preferable to keep the AMP in place while improvements a= re implemented and additional analysis under taken, rather than to summaril= y terminate the AMP. =20 NYISO states that the AMP, while working as intended, is subject to improve= ments. Specifically, NYISO states that it intends to make two improvements= in the AMP prior to Summer 2002. The proposed modifications will have the= effect of narrowing the scope of the AMP to mitigate prices only when mark= et power exists. First, NYISO proposes to exclude from mitigation by the = AMP a Market Participants' bids that trigger the conduct test for mitigatio= n if the total quantity of those bids is 50 MW or less, unless analysis sho= ws the relevant units are in a position to exercise market power at those q= uantity levels. At present, the AMP excludes bids by bidding entities with= 50 MW or less of capacity. NYISO stated the reason for exempting such bid= s was because the withholding of such small amounts will rarely have a mate= rial effect on prices. =20 Second, NYISO proposes to limit mitigation to zones in which the price impa= ct test for mitigation is met by implementing at least one additional AMP p= ass in SCUC. This proposed change would fine-tune the application of the A= MP to limit mitigation to the specified zones and hours where the price imp= act test is met. At present, under the AMP, all bids subject to the AMP, t= hat exceed the conduct thresholds in the areas where zonal prices exceed $1= 50, are tested for their impact on prices in a single SCUC pass. If the pr= ice impact threshold is exceeded in any hour or any zone, the results of th= e mitigated pass are used to determine the Day-Ahead prices. The proposed = modification will appropriately exclude mitigation from occurring in those = areas or hours where the price impact test is not met. =20 NYISO states that it will be working on correcting other minor flaws [12] i= n the AMP and that it is committed to working with Market Participants to d= etermine if other refinements or changes in the AMP design should be consid= ered. =20 IV. Notice of Filing and Pleadings =20 Notice of NYISO's filing was published in the Federal Register, 66 Fed. Reg= . 51,650 (2001), with comments, protests, and interventions due on or befor= e October 19, 2001. Motions to intervene were filed by Constellation Power= Source, Inc., et al.; HQ Energy Services (U.S.) (late); the Member Systems= ; [13] NRG Companies; and the PSEG Companies. Motions to intervene and co= mments in support of NYISO's filing were filed by the City of New York; Con= solidated Edison Company of New York, Inc., and Orange and Rockland Utiliti= es, Inc. (ConEd); the New York Consumer Protection Board (Consumer Board); = the New York State Public Service Commission (New York Commission); and the= Multiple Intervenors. Protests and motions to intervene were filed by Aqu= ila Energy Marketing Corporation, et al. (Aquila); Dynegy Power Marketing,= Inc. (Dynegy); The Electric Power Supply Association (EPSA); Enron Power M= arketing, Inc. (Enron); The Independent Power Producers of New York, Inc. (= Independent Producers) ; KeySpan-Ravenswood, Inc. (Keyspan) (late); the Mir= ant Companies, et al. (Mirant); and Williams Energy Marketing & Trading Com= pany (Williams).=20 =20 Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure, 1= 8 C.F.R. ? 385.214 (2001), all the timely motions to intervene are granted = and all late motions to intervene filed before the issue date of this order= are granted. Granting late intervention at this stage of the proceeding w= ill not disrupt the proceeding or place additional burdens on existing part= ies. =20 On October 31, 2001, the New York Commission filed a motion for leave to an= swer the protests and comments. Although Rule 213(a)(2) of the Commission'= s Rules of Practice and Procedure, 18 C.F.R. ? 385.213(a)(2) (2001), genera= lly prohibit answers to protests, we will accept the New York Commission's = answer because it helps clarify issues under consideration in this proceedi= ng. =20 Intervenor Protests and Comments =20 Five parties, as identified above, support NYISO's proposal. New York City= believes that the extension of the AMP is a necessary (but not sufficient)= measure for mitigating excessive prices. It maintains that the AMP does n= ot adequately protect New York City consumers from excessive wholesale pric= es because it sets too high a trigger for implementing the mitigation, noti= ng that the AMP was not triggered on August 9, 2001, when day-ahead energy = prices reached a record $1024/MWH in New York City. Similarly, ConEd belie= ves that the AMP remains necessary to prevent or identify and mitigate the = exercise of market power in New York's day-ahead market. It asserts that e= xtending the AMP will permit NYISO to assess further the coordinated operat= ion of the various mitigation measures that it administers.=20 =20 The New York Commission asserts that the AMP is needed throughout the year,= focuses only on high prices caused by market power, and has not unreasona= bly disadvantaged generators. It also believes that the AMP complements bu= t does not duplicate the in-city mitigation measures, remains necessary des= pite price-capped load bidding and virtual bidding, and conforms to the Com= mission's preference for ex ante mitigation. The Consumer Board maintains = that the fundamental rationale for the AMP has not changed, the AMP is work= ing as intended and has not unduly interfered with the performance of compe= titive markets, NYISO has committed to make improvements in the AMP before = next summer. The Multiple Intervenors also agree that the AMP is necessary= to prevent the exercise of market power and believe that the Commission sh= ould encourage NYISO to continue to improve the AMP. =20 =20 Eight parties, as identified above, filed protests concerning NYISO's propo= sal. Mirant asserts that NYISO has not shown the AMP is needed or addresse= d the flaws in the AMP identified by the Commission. It also states that t= he AMP resulted in the improper mitigation of economically justifiable bids= during the 2001 Summer Capability Period and is likely to harm consumers b= y discouraging efficient supply-side and demand-side decisions. EPSA and W= illiams make similar arguments. EPSA further asserts that mitigation measu= res should not be a part of the discussions to form a Northeastern RTO. Th= e Independent Producers maintain that the AMP is flawed because it improper= ly mitigates bids that do not cross the impact threshold required for mitig= ation, and because it mitigates a generator's bids for quantities that are = not large enough to represent an exercise of market power. They further st= ate that some units were improperly mitigated as a result of flawed calcula= tions of reference level curves, that the AMP has not been tied to structur= al market power problems, and that the AMP improperly inhibits ICAP generat= ors from managing their risk by choosing whether to sell in the day-ahead o= r in the real-time market. Enron supports the protests of EPSA and the Ind= ependent Producers. =20 Aquila makes many of the arguments described above and also asserts that NY= ISO's AMP extension request ignores the improvements in market conditions t= hat have occurred over the summer of 2001. Aquila maintains that at a mini= mum, the Commission should deny NYISO's request to continue the AMP, withou= t prejudice to a subsequent filing by NYISO that address the flaws with the= current version of the AMP. Keyspan suggests as an alternative that the A= MP should only be extended until April 30, 2002, and only if the 50 MW exem= ption is extended, the consultation process is revised, a structural power = screen is added, and a firm timetable for completion of the items discussed= in NYISO's filing is provided. =20 =20 In addition to arguments made by other protesters, Dynegy asserts that the = AMP has not worked as designed, and that on August 9, 2001, 22 of its day-a= head market bids for August 10 for its Roseton Units 1 and 2 had been mitig= ated. Dynegy maintains that these should not have been mitigated since the= y did not cross the "conduct threshold" in NYISO's MMP, and that Dynegy sti= ll has not received a direct explanation from NYISO as to why its bids were= mitigated, although recent NYISO reports and statements indicate that a mi= stake was made with respect to Dynegy's bids. Dynegy states that an explan= ation of the performance of the AMP was provided in a memorandum (now avail= able on NYISO's website) made available to those that attended a joint meet= ing of the Scheduling & Pricing Working Group and the Market Structures Wor= king Group held on October 9, 2001. According to Dynegy, at that meeting, = NYISO claimed that the AMP worked as designed since the coding for the comp= uter programs worked as intended, although certain upstream data inputs cau= sed Dynegy's bids to be improperly mitigated. Further, Dynegy asserts that= NYISO has dropped the $100 million day price spike (June 26, 2000) as just= ification for the AMP and now concedes that the price spike was due to seam= s problems. =20 Answers=20 =20 In its answer, the New York Commission reaffirms its support for the propos= ed extension of the AMP until October 31, 2002. The New York Commission st= ates that the AMP is necessary to ensure that wholesale prices are just and= reasonable in light of the tight supply situation and transmission constra= ints that continue to exist in New York. =20 In response to the arguments presented by the generators opposing the exten= sion of the AMP, the New York Commission submits that: the AMP adequately d= istinguishes between high prices associated with market power and high pric= es associated with scarcity; the AMP properly evaluates the combined impac= t of generators; and the AMP is needed through the year, not just during th= e summer capability period during high load periods, given transmission con= straints and scheduled and unscheduled outages during shoulder months. Fin= ally, in response to generators' concerns that the AMP may mitigate in cert= ain situations where mitigation should not have taken place, the New York C= ommission says that it is just as important to protect against the occurren= ce of market power that goes unmitigated should the AMP not be extended. A= bsent the AMP, the New York Commission states the harm of permitting unmiti= gated market power would be far greater than any harm caused by improper mi= tigation. The New York Commission compares the $11 million withheld from g= enerators as a result of the AMP being in effect during Summer 2001 with th= e $100 million resulting from a single day of unmitigated market power in 2= 000. =20 V. Discussion =20 NYISO has proposed to extend the same AMP the Commission approved in the Ju= ne 28 Order, without modification. NYISO states that it is committed to ma= king further refinements to narrow the impact of the mitigation performed u= nder the AMP and states it is committed to making what it refers to as two = major improvements prior to Summer 2002: limiting the mitigation to specif= ic zones and hours that fail the impact test and exempting bids of less tha= n 50 MW unless there is a demonstrated market power concern. = =20 =20 Our review of the AMP indicates that it appropriately attempts to distingui= sh between market power and scarcity. The AMP closes the one day lag inhe= rent in the manual application of mitigation measures in the current MMM an= d thus advances the ability of NYISO to mitigate market power. Implementat= ion of the AMP is not without concerns, however. The AMP, as noted by NYIS= O and other market participants, requires some refinements and additional r= eview, e.g., determination of Reference Prices, unnecessary mitigation, app= lication to energy limited resources. =20 =20 Also, AMP may be one of the many barriers to entry for new generating facil= ities. We direct NYISO to work with market participants, especially the Ne= w York Commission, to examine barriers to entry for new generation. As par= t of this process, the NYISO may consider exempting new generators from AMP= in its March filing. We note that generators in PJM have an exemption fro= m must-run mitigation. If NYISO chooses to exempt new units, NYISO should = address whether the exemption would encourage more rapid entry of new gener= ators and the effect of such exemption would have on NYISO's comprehensive = mitigation proposal. =20 NYISO proposes to exempt hydro units from the AMP. NYISO believes that hyd= ro units should not be subject to such mitigation because their volatile bi= ds often reflect their opportunity costs, not market power. The Commission= believes this logic applies to all energy limited resources, including tho= se constrained by environmental rules. Therefore, we direct NYISO to work = with market participants to determine whether there are other energy limite= d resources and to develop an appropriate accommodation within the AMP proc= edures. This coordination should develop both standing protocols as well a= s an accounting for possible day-to-day considerations affecting bids. = =20 =20 Accordingly, we will extend the AMP until April 30, 2002, subject to the fo= llowing conditions. We note that NYISO has already indicated that it is co= mmitted to working with market participants to determine if other refinemen= ts or changes in the AMP design should be considered. We direct NYISO meet= with market participants and to file a comprehensive mitigation proposal w= hich addresses the Commission's concerns expressed in this order concerning= the AMP, as well as explain how AMP will work in conjunction with other mi= tigation measures already in effect or proposed for NYISO. [14]=20 In this regard, we note that NYISO has several mitigation measures in place= or proposed, including its existing MMM and its proposed AMP, as well as = In-City mitigation. We are concerned that these measures may not fully fi= t together in a way that adequately addresses market power problems while a= voiding unnecessary mitigation. On the one hand, these measure may not mit= igate all significant exercises of market power. For example, the existing= MMM allows suppliers to exercise market power for one day before mitigatio= n goes into effect. On the other hand, other measures may create the poten= tial for unnecessary mitigation.=20 =20 We also direct NYISO to consider must-run mitigation measures consistent wi= th ISO-NE and PJM. The In-City mitigation measures address market power p= roblems created by transmission constraints into New York City, but not tho= se created by transmission constraints within New York City or elsewhere. = PJM and ISO-NE both have mitigation measures which provide for automatic mi= tigation in defined must-run situations. =20 =20 Accordingly, we direct NYISO to file a comprehensive mitigation proposal by= March 1, 2002 to be effective May 1, 2002. When developing a comprehensiv= e mitigation plan, NYISO should bear in mind that the Commission expects on= e mitigation plan for the Northeast as part of the RTO process. Therefore, = we strongly urge NYISO to collaborate with PJM and ISO-NE in formulating it= s comprehensive mitigation plan.=20 =20 The Commission orders: =20 (A) NYISO's request to extend the AMP is granted until April 31, 2002, sub= ject to the conditions set forth in the body of this order. =20 =20 (B) Waiver is granted to permit the proposal to take effect November 1, 200= 1. =20 =20 =20 =20 =20 =20 =20 =20 (C) NYISO is directed to file a comprehensive proposal for mitigation as d= iscussed herein on or before March 1, 2002 to be effective May 1, 2002. =20 By the Commission. =20 ( S E A L ) =20 =20 David P. Boergers, Secretary. =20 _____ =20 [1]16 U.S.C. ? 824(d) (1994). [2]The AMP provisions appear in Attachment H to NYISO's Market Administrati= on and Control Areas Services Tariff (Services Tariff).=20 [3]95 FERC ? 61,471 (2001). [4]Central Hudson Gas & Electric Corp., et al., 89 FERC ? 61,196 (1999). [5]Central Hudson Gas & Electric Corp., et al., 90 FERC ? 61,317 (2000), cl= arified, 91 FERC ? 61,154 (2000). [6]95 FERC ? 61,189 (2001). [7]The SCUC is NYISO's Day-Ahead Software computer algorithm. It performs = a series of passes, or computer runs, that sequentially evaluate the genera= tion resources bid into the Day-Ahead Market against demand bids, NYISO loa= d forecasts, ancillary services needs and reliability requirements. Throug= h this analysis, the SCUC selects the optimal least-cost, security-constrai= ned dispatch of generation and load. [8]New York Independent System Operator, Inc., 95 FERC ? 61,471 (2001). [9]86 FERC ? 61,062 (1999), 89 FERC ? 61,196 (1999), and 90 FERC = ? 61,317 (2000). [10]NYISO explains that this threshold was selected because it is unlikely = that the thresholds for mitigation of bids will be exceeded if prices are b= elow $150. =20 [11]No tariff sheets were submitted as part of the filing. [12]NYISO describes minor changes that it will fix regarding the way it com= putes reference levels that may have understated appropriate levels for uni= ts whose final output blocks should have much higher reference levels. [13]The Member Systems include Central Hudson Gas & Electric Corporation, C= onsolidated Edison Company of New York, Inc., LIPA, Orange and Rockland Uti= lities, Inc., the Power Authority of the State of New York, and Niagara Moh= awk Power Corporation.=20 [14]See Consolidated Edison Company of New York, Inc., 96 FERC ? 61,095 (20= 01), reh'g denied, 97 FERC ? 61,050 (2001) (orders directing NYISO to addre= ss concerns regarding the coordination of NYISO's mitigation measures when = NYISO files to extend any of its various temporary mitigation measures beyo= nd October 31, 2001).
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