By Michael Kuser

FERC last week allowed NYISO to temporarily waive energy offer caps in response to recent natural gas price spikes stemming from this winter’s extreme cold snap in the Northeast.

The commission’s order granted NYISO a limited waiver on incremental energy offer caps in both the real-time and day-ahead markets from Jan. 4 through Feb. 8, allowing generators to recover exceptional costs for procuring high-priced fuel (ER18-604).

“The waiver addresses the concrete problem that generators might be required to provide service to reliably serve load but without being able to recoup the incremental operating costs that they incur, which could discourage generators from offering service at a time when they are needed,” the commission said.

In its Jan. 4 filing, the ISO noted that New York City temperatures were 24 degrees Fahrenheit below average early this month and that the resultant spike in natural gas prices could cause some generators’ actual costs to exceed the offer restrictions.

In granting NYISO’s request, the commission noted that such waivers will no longer be necessary at the end of this year when the ISO implements the reforms required by Order 831 “because these reforms are intended to provide for a long-term solution to the issues associated with NYISO’s offer cap.” Order 831, issued in November 2016, requires each RTO/ISO to cap a resource’s incremental energy offer at the higher of $1,000/MWh or its verified cost-based incremental energy offer, and cap verified cost-based incremental energy offers at $2,000/MWh when calculating LMPs.

The commission said the ISO’s Market Mitigation and Analysis Department will verify after-the-fact analysis of costs submitted by generators. It directed NYISO to file by March 28 the total amount of energy that received compensation under the terms of the instant waiver; the related costs in total and on a unit cost basis; and a list of rejected requests for compensation under the waiver and why the ISO rejected them.

Record Cold, Record Gas Pull

NYISO noted that Jan. 5 day-ahead natural gas prices at the Transco Z6 NY hub exceeded $48.99/MMBtu, “more than double the highest price posted for that hub in 2016 and 2017, and more than five times the highest price seen at the Transco Z6 NY hub in January or February of 2017.”

Gas prices at the hub exceeded $100/MMBtu on Jan. 6, after NYISO submitted its filing.

John F. Kennedy International Airport set a record low of 8 degrees on Jan. 6 and several ski resorts in Vermont shut down that day because of wind chill factors as low as minus 50.

According to the Energy Information Administration, during the recent cold snap, more natural gas was withdrawn from storage fields around the country than at any other point in history: “Net withdrawals from natural gas storage totaled 359 Bcf for the week ending Jan. 5, exceeding the previous record of 288 Bcf set four years ago.”