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Positive ruling shows way ahead -- Imbalance penalties

A recent unanimous vote by the Federal Energy Regulatory Commission (FERC) will bring relief from penalties suffered by New York wind power producers when their output deviates from scheduled generation. It also offers a strong indication of the FERC's thinking on a national policy on the issue.

The ruling raises from 500 MW to 1000 MW the amount of generation that is exempt from penalties and came in response to a request by the New York Independent System Operator (NYISO). "The fact that it was a unanimous vote is very telling," says Mike Jacobs of the American Wind Energy Association (AWEA). "The penalties are meant to discourage bad behaviour. Wind imbalances are not due to bad behaviour and should not be penalized. What we're clarifying is that a punitive penalty is inappropriate."

Jacobs says such penalties are intended to keep generators from gaming the system and milking higher prices. "The theory only holds if you have some control over what you're doing," he says. "And the conclusion is that wind doesn't have control. But it doesn't mean that the pursuit of loopholes will go un-policed."

preparing the ground

In advance of the ruling, AWEA organized its members in a forecasting workshop held by NYISO, while the Alliance for Clean Energy New York helped host ISO staff and executives at wind farm tours. "One of the things we've been pushing is for the ISO to see the fact that a lot of megawatts of wind are going to be coming online in New York," says the alliance's Carol Murphy. "We have 368 MW now but there's 5000 MW somewhere in the queue. We could reach 1000 MW by the end of 2007."

Details of FERC's recent ruling are unique to the New York proposal and not the same as in the reform docket for nationwide rules, says to Jacobs. AWEA hopes that a nationwide change to imbalance penalties will be part of FERC's 888 Tariff reform, now under consideration by the agency's commissioners. "But the overall end result of eliminating punitive penalties does apply to both the New York proposal and the discussion in the nationwide forum," he adds. "The specifics differ but the results would be about the same."

Although FERC has no deadline for creating a national policy, Jacobs expects to see something definitive within a few months. "What this shows is that ISOs are a good place to define policies," Jacobs says. "We can work out what makes good policy through forecasts with stakeholders. In other words, get a good [wind output] projection in on time and any penalties should be pretty small."

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