Can probing the New York Independent System Operator generate any buzz around the Empire State?
Launching a salvo on August 2nd in his run for the Democratic nomination for state attorney general, Assemblyman Richard Brodsky picked the ISO as his target. It's true that New York voters have a better chance than most of relating to the subject of electricity, having paid among the highest electricity rates of anyone in the US, for years. But still. As one Albany Times-Union blogger put it, "Brodsky wonks out."
Like any good candidate, Brodsky used some strong words when he spoke at a news conference on the steps of New York City Hall. Generators are making "obscene" profits, he said. "This is robber-baron stuff from the late 19th century, but it has the gloss of high tech and corporate blessing on it." He spoke of "price-fixing, pure and simple."
His target, as ever, is the single-clearing-price mechanism that the ISO uses in its wholesale power auction. Same as the mechanism that other ISOs around the country use, but Brodsky has had the same problem with it that the American Public Power Association has: Customers could pay less, but they do not because all generators get the same price, the price paid for the highest-cost power that clears the market.
APPA has won no support from interests with any sway in the national policymaking arena, and New York Attorney General Andrew Cuomo has not so far shown any inclination to get into the issue in that state. But Brodsky, who has railed against the ISO from his seat in the Legislature, says that if he is elected, he will immediately launch an investigation of the ISO and will use securities-fraud and monopolistic practice laws, and laws governing non-profits, to try changing the market structure. He told our colleague Milena Yordanova-Kline that he also would inquire into ISO salaries and board member selection, among other issues.
A complaint: "The ISO operates in complete secrecy." On that point, Brodsky may be exaggerating. The organization posts a lot of material at its web site. It doesn't, however, let some people -- news media, for example -- dial in to its various meetings as most of the country's other ISOs do.
The ISO may or may not be very worried about Brodsky. He isn't the front-runner, at least not so far. And basically, said ISO Vice President Tom Rumsey, wholesale power costs more than $2 billion less a year now than when the ISO was formed 10 years ago. He suggested Brodsky's attack means the ISO needs to focus on outreach so officials can understand the market's benefits. From just a news organization's point of view, maybe one way to start is to let us dial in?
Kathy,
Not all ISOs use single-clearing-price mechanisms - PJM, CAISO, Ercot (expected Dec 2010) all use nodal models to better reflect pricing signals; especially, in light of congestion.
Best,
Mohit
Mohit, thanks for making this observation. But while it's true that some of the ISOs have gone to nodal markets, I believe that still, the price at each node (or zone, in zonal markets) is set by the clearing price, which might also be called the marginal price. I think Brodsky's argument is with that basic mechanism.