WPCNR THE POWER NEWS.  Special to WPCNR September 14, 2008(EDITED) : WPCNR has obtained a detailed statement distributed privately by  Senator Charles Schumer’s office Friday in which the Senator charges energy traders with artificially inflating the costs of New York electricity, costing consumers tens of millions of dollars, contributing in part, to the 67% increase in electric rates alone experienced here in White Plains and Westchester County.

The Senator asks that the Federal Energy Regulatory Commission provide the New York Independent System Operator bidding and scheduling information, which NYISO “market monitors” have not  received previously. NYISO has indicated to WPCNR previously "confidentiality" is needed to maintain competitive markets. Schumer's statement implies NYISO has not had access to this information for years,  hampering the NYISO's ability to spot spot alleged profiteering. Schumer’s statement strongly implies  NYISO might have prevented a circuitous electricity routing practice and other possible cost-sensitive circumstances if NYISO had this information.

Schumer’s office  release states --  a July 21^st filing with FERC  (Federal Energy Regulatory Commisson) by the New York State Independent System Operator (NYISO), states beginning in at least January of this year, one or more market participants began to schedule circuitous and inefficient routes for transmission of electricity between states.

Direct transactions between two points – principally from New York to the PJM Service Territory in either Pennsylvania or New Jersey – were scheduled to be “sent” on a roundabout course that purportedly would travel around Lake Erie, transporting power through Ontario, Michigan and Ohio and then back to the intended destination in Pennsylvania or New Jersey, raising the cost of electricity by millions of dollars for months.

While the New York Independent System Operator (NYISO) has yet to determine the exact costs of these trading practices, some estimate that increased congestion and “uplift” fees have cost consumers as much as $125 million in April and May of this year alone, and as much as $240-290 million overall, Schumer’s release states.

Schumer charges this practice may have played at least a part in New Yorkers’ utility bills, and the record bills faced by many municipal electric utilities. The scheduling concealed the volume of traffic that would travel on certain transmission paths.

The Runup on the Runaround

While the New York Independent System Operator (NYISO) has yet to determine the exact costs of these trading practices, some estimate that increased congestion and “uplift” fees have cost consumers as much as $125 million in April and May of this year alone, and as much as $240-290 million overall. It appears that this practice may have played at least a part in New Yorkers spiking utility bills, as well as the record bills faced by many municipal electric utilities.

Furthermore, as the scheduling concealed the volume of traffic that would travel on certain transmission paths, system reliability was threatened due to unanticipated power loads traveling on already highly congested lines. Without proper monitoring, this could lead to regional and more system-wide outages and blackouts.

The unannounced power flowing over portions of the transmission grid had several serious economic impacts on New York ratepayers, Schumer’s office alleges, including --

• Uplift Charges: The scheduling over circuitous paths increase unexpected congestion on transmission lines the cost of which is not attributable to a particular market participant. Then, in the Day-Ahead Market, the NYISO was forced to increase congestion charges to all users of the interface. That creates “uplift” in prices for all customers, the burden of which is passed onto to residential on commercial users.
•  
• Congestion Rent Shortfalls: The NYISO issues Transmission Congestion Contracts (TCC) with owners of transmission that rely on fully utilizing their capacity. These contracts can provide a benefit to consumers because, when capacity is maximized, the transmission owners pay a credit back to their customers under an arrangement with NYISO. However, if they cannot collect rents from all those who are using the lines – because some are piggybacking for free – a diminished credit is given. DC Energy, a party to this case with FERC estimates that congestion rent shortfalls has cost consumers on the order of $40 million since the beginning of 2008.
•  
• Costly Generation: With congestion clogging up transmission lines, utilities cannot rely on buying cheap power and must ramp up costly generation. In these instances, the NYISO would have to pay a premium to generators to hastily supply power when it cannot be brought in through transmission. This expensive fix would, again, be passed on directly to the consumer.

$800,000 in Overcharges in a Single Day. FERC Does Not Stop It for 2 Months.

To illustrate the cost of this practice on a single day,  Schumer’s release, continues, the NYISO calculated that on May 26, 2008 over 2000 megawatts (MW) were scheduled on the circuitous Lake Erie route: travelling to western New York before entering Ontario, then the Midwest Independent System Operator via Michigan and Ohio and then back to PJM in New Jersey or Pennsylvania. According to their analysis, on this day alone, $800,000 in uplift and congestion fees was attributable to this trading practice.

In Upstate New York, small cities like Plattsburgh, Rouses Point and Tupper Lake, for example, have been hit with exorbitant uplift fees from NYISO, hundreds of thousands of dollars in excess of what they usually pay, the statement says.

Schumer wrote FERC in August, demanding an end to these procedures:  “It is absolutely critical that FERC determine exactly who has been engaging in these practices; for how long has they have been occurring; and how much it has cost New York consumers and municipalities.”

FERC subsequently announced that they had begun the investigation in May of 2008, during the period when circuitous route trades were occurring. However, they did not put a stop to these trades until petitioned by the NYISO in July, 2008.

NYISO Monitors Have Not Gotten Bidding, Scheduling Info. Confidentiality Cited.

Schumer asked FERC to grant the NYISO’s request that NYISO Market monitors be given better access to NERC tag information and bidding and scheduling information. NYISO apparently does not receive this informationnow and have not for years, according to the tenor of the Senator's statement.

The NYISO has asked that market monitors be given the authority to share bidding and scheduling information between different Regional Transmission Organizations such as New York’s NYISO, Ontario's IESO, the Mid-Atlantic states’ PJM, the Midwest’s MISO, and ISO-New England.

In filings  according to the release circulated to WPCNR sources Friday, “the NYISO has asserted that that the inability of market monitors to share confidential information with each other impeded its efforts to try to identify and resolve the loop-flow issue.”

 Schumer asked that the market monitors be given this authority immediately, subject to suggested confidentiality provisions, to prevent further transmission problems.

U.S. Senator Charles E. Schumer announced Friday he will meet with Federal Energy Regulatory Commission Chair Joseph Kelliher to press for a public investigation of  what his news release calls an “energy trading scam”  .

“We must get to the bottom of this greedy scheme. New Yorkers may have been cheated out of hundreds of millions of dollars because of a rogue energy trading scheme and there are a mess of questions left unanswered,” Schumer is quoted in his news release, said. “There are still too many questions that need immediate answers: how much did these trades cost New Yorkers; when did FERC first know about this and are there other loopholes that could be exploited? In our meeting, I will urge Mr. Kelliher to conduct a thorough and public investigation into these matters so that we can get to the bottom of what happened and swiftly nip any future problems in the bud.”