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Report: Plant outage raised power costs for all New Yorkers The Associated Press 10/20/00 5:16 PM

ALBANY, N.Y. (AP) -- An increase in gas and oil prices and the February outage of a Consolidated Edison nuclear power plant raised the wholesale price of power this summer and resulted in bigger bills for New York ratepayers, according to an independent market analyst.

The outage of Indian Point 2 plant in Westchester County was felt most heavily in the New York City area, said David Patton, appointed by the Independent System Operator to conduct annual reviews of the wholesale electricity market in New York.

The largest factor leading to high electricity prices statewide was the nearly threefold increase in gas and oil costs over the past two years, according to Patton's analysis. Many of New York's electricity producers are powered by gas, oil or a combination of both, so an increase in fuel costs translates to an increase in supply cost, Patton said.

"As they go up, the electric prices will go up with them," he said.

In western New York, prices were generally lower, thanks in part to lower demands and alternative power sources like Niagara Mohawk's hydroelectric plants, he said.

Indian Point 2's outage had a twofold effect, Patton said.

"Not only does it take a bunch of cheap power supply out of the most constrained part of the state -- driving prices up -- (Con Ed) has to go to the market and buy replacement power," Patton said.

The high price of Con Ed's replacement electricity was passed along to customers, Con Ed spokesman Joseph Petta said Friday.

Petta said the outage raised ratepayer bills by about $2 per month and is only a part of a higher overall increase.

The ISO was created under New York's utility deregulation to manage the electricity wholesale market. It operates a sort of a daily auction for electricity purchases for utilities that need to buy power. It is supposed to match the daily power demands of distributors with the available supply reported by producers and arrive at a fair price.

The ISO has attracted attention because of the wild fluctuations in the prices utilities have been facing -- $15 per megawatt hour in low-demand hours to as much as $1,000 per megawatt hour during peak-demand hours. In late July, the Federal Energy Regulatory Commission imposed a cap on ISO-sponsored spot purchases of $1,000 a megawatt hour until Oct. 28.

The state Public Service Commission, state Attorney General Eliot Spitzer and the Federal Energy Regulatory Commission are all looking into whether the ISO unfairly contributed to higher utility bills for some New Yorkers.

Utilities in New York buy about half their power in long-term contracts and the other half through purchases in the spot market.

Petta said Con Ed has asked FERC to look into the any bids over $250 per megawatt hour in an effort to prevent "potential market abuses" by producers.

"The numerous market design problems and severe price spikes suggests a market that needs substantial and immediate correction and enhancement," Petta said.

Included in Patton's findings was the discovery that some electricity producers artificially raised the wholesale price in September by reporting nonexistent power sales to neighboring states, leading to a supposed supply shortage. The false reporting tipped the demand-supply equation and threw ISO's price calculations off.

Patton said such price manipulation occurred only over a few days and their effect on electricity prices was "nearly inconsequential."

ISO spokesman Ken Klapp said the agency has since intervened and the problem no longer exists.

-- Martin Thompson (, October 20, 2000

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