FERC Prioritizes Interface Pricing Revisions, Reduces Priority for Buy-Through Congestion in Lake Erie Loop Flow Mitigation

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December 31, 2010

FERC has re-prioritized initiatives designed to mitigate the impacts of Lake Erie loop flows, emphasizing interface pricing revisions and congestion management/market-to-market coordination agreements while removing buy-through congestion as a top priority (ER08-1281).

FERC ordered that interface pricing revisions shall be completed concurrently for the New York ISO, PJM, and Midwest ISO by the second quarter of 2011.  FERC encouraged the jurisdictional RTOs to work with the Ontario Independent Electricity System Operator on this issue as well.

Specifically, FERC directed the NYISO to follow the current PJM and MISO approach to interface pricing, which uses NERC tag information regarding the source and sink of a transaction to determine the price the transaction receives or pays.  In contrast, the NYISO and IESO base the price on the path over which the external transaction is scheduled into their respective control areas.  

The NYISO has acknowledged that this difference creates incentives for market participants to schedule circuitous transactions which can exacerbate loop flow.  An analysis by the NYISO Independent Market Monitor also found that changes to market rules regarding the interfaces would address most of the problems associated with Lake Erie loop flow.  FERC noted that interface pricing reform could be implemented immediately and at minimal cost.

Furthermore, FERC required congestion management/market-to-market coordination agreements for the NYISO, PJM and MISO to be completed concurrently by the second quarter of 2011.  FERC dismissed arguments from the NYISO that congestion management/market-to-market coordination is dependent on the implementation of the parallel flow visualization tool.  "While the parallel flow visualization tool will provide additional data for analyzing loop flows, it is merely an update to the Interchange Distribution Calculator (IDC); it is not a new technology.  Indeed, some of the data required to address these problems can already be obtained from the existing IDC.  Nothing in the record demonstrates that the NYISO cannot take advantage of the existing technology and data," FERC said.

FERC deferred work on NYISO's buy-through congestion proposal, which was NYISO's top priority.  FERC held that one year after the implementation of interface pricing reform and congestion management/market-to-market coordination, the NYISO, in collaboration with its neighboring RTO/ISOs, NERC, and other market participants, shall submit a report addressing: (i) the effects of the reforms on reducing congestion that results from loop flows and the costs associated with mitigating congestion; (ii) the effects of the implementation of the enhanced interregional transaction coordination initiative; and (iii) recommendations and analyses as to whether the buy-through congestion proposal is required, and if so, when it should be implemented.

"NYISO did not adequately explain why this [buy-through congestion] proposal should be regarded as a top-priority initiative at this time," FERC said.

PAR Cost Allocation
Separately, in docket ER11-1844, FERC suspended for hearing tariff sheets filed by the Midwest ISO and International Transmission Company to recover the costs of Phase Angle Regulating Transformers (PAR) at Bunce Creek on the Michigan-Ontario border among MISO, NYISO, and PJM.  The PARs are meant to mitigate Lake Erie loop flow issues.

Specifically, the tariff sheets would assign the costs of the new ITC PARs as follows: 49.6 percent of the PARs' revenue requirements to Midwest ISO, 19.5 percent to PJM, and 30.9 percent to NYISO.

Finding that the filed tariffs have not been shown to be just and reasonable, FERC set the matter for hearing and settlement procedures.

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