FERC on April 19 approved tariff revisions for the New York Independent System Operator (NYISO) and ISO New England that the ISOs said will improve scheduling of wholesale electricity sales between the regions and reduce costs for consumers.
FERC’s approval of coordinated transaction scheduling (CTS) will allow the ISOs to make more efficient use of the transmission lines that connect the regions. The ISOs also said in a joint statement that currently, rules governing wholesale energy transactions between New York and New England can create market inefficiencies, adding that CTS implementation will improve the ability of market participants to access the lowest cost power source within the regions and lower the combined cost of operating the power systems in the regions.
Enhancements include increasing the frequency of scheduling energy transactions over the transmission network between regions, implementing software changes to allow the ISOs to coordinate selection of the most economic transactions and eliminating certain fees that hinder efficient trade between regions.
The ISOs also said that a study of external transactions from 2008 to 2010 showed that CTS could result in annual savings in the range of $60m in New England and $66m in New York.
According to the FERC order, CTS will provide substantial benefits to consumers in the regions by addressing inefficiencies present in the current external transaction scheduling process. Specifically, FERC added, ISO New England’s external market monitor Potomac Economics estimates that CTS will result in $129m to $139m in annual customer savings, and $9m to $11m in annual production cost savings for the combined ISO New England and NYISO region.
In late 2010, FERC said, the ISOs performed a joint study of their common border and issued a white paper on inter-regional interchange scheduling.
ISO New England, with Potomac Economics, identified inefficiencies with the current external transaction scheduling process, including that there is underused transmission capacity between New York and New England. The analysis also indicated that the current scheduling procedures often result in power flowing from the higher priced region to the lower priced region, and it revealed that the three central reasons for the economic inefficiencies were latency delay, non-economic clearing and cross-border transaction costs.
Two solutions were proposed to address inefficiencies, namely, CTS and tie optimization, which treats external transaction clearing similarly to the clearing of offers and bids at internal interfaces.
“As a major stakeholder in both regions, we stepped up to propose and, working closely with both ISOs, develop a compromise solution that ultimately led to CTS being approved by the stakeholders of both regions,” Peter Flynn, president of National Grid USA’s FERC-regulated businesses, said in a separate April 19 statement.
“Thinking about how to go forward, we played a lead role in developing a compromise proposal,” Flynn told TransmissionHub April 19, adding, “[W]e worked to tweak the proposal that New York had approved, which was CTS by building in this provision of taking a [look] in the future as to how well it’s working and if it’s not producing as much benefit as the alternate approach, then at that point, improvements would be made to CTS or at that point, the ISOs would switch over to this other approach called tie optimization.”
Indeed, FERC said the proposals submitted by the ISOs provide for CTS to be reevaluated at certain points after implementation, which may lead to the ISOs improving the design or operation of CTS or adopting a different methodology for scheduling external transactions, for example, tie optimization or a superior alternative, if it is determined that such changes could result in greater cost savings.
ISO New England President and CEO Gordon van Welie said in the ISOs’ joint statement: “Improving the ability for market participants to trade between regions not only increases competition, but also improves the utilization of the interconnections. The anticipated result will be lower wholesale costs.”
NYISO President and CEO Stephen Whitley said in the statement, “FERC’s approval of these new market rules is another important step in the broader regional markets initiative, and the resulting improvements in scheduling efficiency and system flexibility will benefit consumers in both regions.”
The ISOs said they will work on updating the software for scheduling energy transactions between regions.
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