Assembly Committees Hold Hearing to Discuss NYISO Practices and High Electric Prices

A joint hearing by the Assembly Committee on Energy and the Committee on Corporations, Authorities, and Commissions was held on March 5th to discuss the practices of the New York Independent System Operator (“NYISO”). See New York State Assembly Committees to Hold Hearings on NYISO Wholesale Electricity Pricing.

The NYISO is a not-for-profit corporation that began operations in 1999, operating New York’s bulk electricity system and administering the wholesale electricity markets. The Assembly Corporations Committee, chaired by Richard Brodsky, held a press conference earlier in the week to release a report by McCullough Research, “New York Independent System Operators Market-Clearing Price Auction Is Too Expensive for New York”, which reveals $2.2 billion in excessive electric bills for New Yorkers caused by the NYISO spot market system that privately sets artificially high unregulated market prices for electricity through its “Market-Clearing Price” auctions.

One of the major issues that the Committees sought clarification on is the NYISO’s practice of employing “Market-Clearing Price” auctions, which require the buyer to pay to all sellers the highest price calculated by a complex computer program at the NYISO. The Assemblymen are concerned that using Market-Clearing Price auctions require utilities to pay excessive amounts of money to generators, which yields excessive electric bills for ratepayers. They are also concerned about the secretiveness of the bidding process.

The hearing consisted of four panels.

The first included government and quasi-government personnel involved with running or overseeing the NYISO. The NYISO presented testimony of its CEO and of its "Market Monitor."

The second panel included Robert McCullough, Cornell Professor Timothy Mount, Russ Haven, Legislative Director of NYPIRG, the Working Families Party, APPA General Counsel Sue Kelly, and PULP's Executive Director, Gerald Norlander, who discussed their concerns with the current market results and bidding processes and offered suggestions for reforms and alternative mechanisms.

The third panel included representatives from four distribution utilities that purchase electricity from the NYISO.

The fourth panel included speakers from the Independent Power Producers of New York and the Alliance for Clean Energy.

Legislators indicated that there would need to be more exploration of the impact of the NYISO markets and the need for reforms.

Lou Manuta

UPDATE

3-15-09 Schumer: Investigate NY Electric rates.