On May 20, 2010, FERC accepted a request by the New York Independent System Operator, Inc. (“NYISO”) to subject three generators to a new market mitigation rate schedule (“Rate Schedule M-1”). 

On September 4, 2009, NYISO filed a request to apply a new rate schedule to three specific generators in response to conduct that NYISO identified as an abuse of market power.  NYISO said that in August 2009, the three generators, Saranac Power Partners, L.P. (“Saranac”), Seneca Power Partners L.P. (“Seneca”), and Sterling Power Partners L.P. (“Sterling”), were committed for reliability as Day-Ahead Reliability Units or through Supplemental Resource Evaluations (see November 13, 2009 edition of the WER ).  NYISO said they placed bids in such a way that resulted in excessive guarantee uplift payments when the generators were committed out-of-merit.  The Commission conditionally accepted Rate Schedule M-1 on November 3, 2009, pending additional information on Location-Based Marginal Prices, which NYISO uses to calculate guarantee payments to generators. (see November 13, 2009 edition of the WER). 

The Commission’s May 20, 2010 Order allows NYISO to apply Rate Schedule M-1 to the three generators only, effective as of September 8, 2009.  The Commission disagreed with Seneca and Sterling’s arguments that they had to bid more than marginal cost to maintain their high-cost units, or risk their livelihood. 

Under the new mitigation rate schedule, NYISO will substitute a default bid at the generator’s reference level for the generator’s submitted offer to determine the guarantee payment if a certain threshold is passed.  Rate Schedule M-1would be triggered if the generator’s accepted bid or bid components: (i) exceeded the minimum generation bid reference level by the greater of 10 percent or $10/MWh; (b) exceeded the incremental energy bid by the greater of 10 percent or $10/MWh; (c) exceeded the start-up bid reference level by 10 percent; (d) exceeded the minimum run time reference level by more than 1 hour; or (e) exceeded the minimum generation megawatt reference level by more than 10 percent.

The Commission found that the default bid mitigation should apply when the generator in question is the only one available to solve reliability issues because that is when the generator has market power.  The Commission ordered NYISO to file revisions to its Services Tariff to clarify that market mitigation is contained in Attachment H of the Services Tariff and file, within 90 days of the May 20, 2010 Order, a report on the progress of NYISO and its stakeholders to develop a market mitigation measure that would be applied to all market participants outside of New York City.

A copy of the Commission’s Order can be found at www.ferc.gov under Docket No. ER09-1682-000.