Flawed Report, Subsequent Debate Should Advance Understanding of Nyiso Market

Michael Giberson

In New York, a debate over the NYISO market design initiated by a report by Robert McCullough and committee hearings in the state legislature.

The initial McCullough report asserted that the NYISO’s use of a uniform clearing price auction (the report calls it a “market-clearing price auction”, but “uniform clearing price” is technically more accurate) resulted in $2.2 billion in excessive charges for power customers in the state. I think the polite response is that McCullough’s analysis and conclusions are not well thought out. See NYISO external market monitor David Patton’s testimony to the state legislative committees for a good explanation of the economic analysis of the uniform clearing price issue.

NYISO contracted electric-power-economics heavyweight Sue Tierney to write an analysis of the McCullough Report, and Tierney’s assessment readily knocks down many points of the initial McCullough Report. The New York Public Service Commission also produced a counter-analysis of the first McCullough Report.

Perhaps to no one’s surprise, McCullough struck back with another report, this one mostly directed at points made by Tierney and then providing additional analysis on “hockey stick bidding” in the NYISO market.  McCullough also advocates for greater market transparency.

McCullough’s work often strikes me as more founded in political opportunism than economic analysis – the economics equivalent of ambulance chasing – but I think McCullough gets off a few good responses to Tierney in this second report. I’m a fan of increasing ISO market transparency, too, so I’m inclined to favor McCullough’s positions on those issues.

While the report that sparked the exchange was badly flawed, I think the ongoing debate will prove productive. (At least so long as the New York state legislature doesn’t muck things up by trying to put McCullough worst ideas into law.)

NOTES:

The Public Utility Law Project of New York (PULP) has been following the issue, see the blog posts here and here for their views and many related links. Also, see related news stories on this list managed by PULP. Stories by the Times-Union newspaper also cover the activity, here and here, and related blog posts here and here.

The NYISO is the independent power system and power market operator for the electric power industry in New York. I realize that not all of our readers instantly recognize the acronym or know what the ISO does. Someday I’ll get around to writing a good, basic explanation of what these markets are and why they work the way they do. (Does such an explanation already exist somewhere online? If you know of one, post a link in the comments and save me the trouble of writing one myself.)

2 thoughts on “Flawed Report, Subsequent Debate Should Advance Understanding of Nyiso Market”

  1. You’re so polite, Mike. “Economic ambulance chasing” is a great description, but still quite gentle. Ghost Hunter? UFOlogist? Conspiracy Theorist? In the skeptic community we know that such people are believed by significant numbers of people, whether they are effectively repudiated or not. In this case we have people who *think* they have a financial interest in tearing down markets financing these outrageous claims that have been repudiated many times over. How many times do we have to explain that pay-as-bid isn’t an improvement? It’s not a technical objection at this point, it’s just doubt-raising political influence, aimed at impressionable voters and legislators.

  2. Pingback: Connecticut Attorney General proposes new state energy agency to combat incentives for economic efficiency « Knowledge Problem

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