Like the quarrel between groups at the federal level, the argument in New York about the Independent System Operator's single-clearing-price auction has turned into a game of table tennis.
State Assemblyman Richard Brodsky, who has a bill to get rid of the single-price auction, engaged consultant Robert McCullough to produce a report supporting his view. Consultant Susan Tierney of Analysis Group produced a report opposing his view. Now McCullough has come back with another report.
The ISO's market adviser, David Patton, has told our colleague Eric Wieser that McCullough's work is just "factually inaccurate."
And the winner? The defenders of the status quo are likely to prevail. But it could be that dissidents will be a thorn in their side for a long time.
It's not really evident what Assemblyman Brodsky's driver is (this must be tough one to engage voter passions on), but he does seem to have invested some capital in the effort to show that the auction as designed is responsible for at least some of New York's high power prices.
The auction design -- the one used by all the ISOs -- has been targeted by the American Public Power Association for a few years, and APPA has drummed up a lot of support for its complaints. The Electricity Consumers Resource Council -- big industrials -- has backed up APPA's view, and they have enlisted AARP and dozens of consumer groups at one time or another to make noise against the auction. The Public Utility Law Project, in New York, has argued quite strenuously for the McCullough-Brodsky point of view.
The argument has come up in Texas, too, and has not gotten far there. In New York it may not go much further than it has, but it has drawn interest from at least one national-level group, the Electric Power Supply Association. EPSA, whose members are power generators and marketers, has spent the last few years slapping down APPA's auction-design attacks (no, that's not all it's been doing, but that chore keeps coming up to be done.) EPSA, like Patton, says McCullough's analysis is wrong. And it says “Despite recent detailed market monitor reports finding independently run regional wholesale electricity markets to be competitive, some opponents of competitive wholesale market continue to call for unnecessary overhauls without factual justification.”
Whether the single-price auction, where the highest market-clearing price is the price that all suppliers get, is the most efficient and effective may be a question forever. The critics say it gives low-priced power sources enormous windfalls and costs customers billions. The proponents say it produces the best signals to make the marketplace perform optimally. McCullough says the auction is too opaque; the ISO says revealing too much information too soon would allow bad market behavior.
The chairman of the state Public Service Commission, Garry Brown, has defended the auction. PULP points out that he is a former vice president of external affairs at the ISO. ... If someone perfect would please come along with the perfectly transparent and incontrovertible explanation of whether this auction is the best thing available, or it is not, we could all avoid some years to come of this ping pong. To which the Federal Energy Regulatory Commission appears to have grown quite immune.
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