August 27 2002 – The organizations that run the wholesale power markets and transmission systems in New York and New England filed with federal energy regulators Friday to merge into one regional operator serving more than 14 million electric customers in seven states.

A combined Northeast market, which is designed to increase electric reliability and market efficiency, would eliminate the multiple charges companies currently pay for moving power between New York and New England, the New York Independent System Operator and ISO New England said in their filing with the Federal Energy Regulatory Commission.

But federal and state energy regulators must first develop a system to allow transmission line owners to recover the revenues they’ll lose through the elimination of these so-called border charges, the grid operators said.

The proposed Northeast market would include day-ahead and real-time energy markets, reserve markets, locational marginal pricing, financial transmission rights and a uniform installed capacity market, according to New York and New England. The groups said a combined market could begin operating in 2005 or 2006.

An independent board consisting of five directors from each of the existing ISO boards and two new directors – who don’t do business in either market or hold stock in companies that do – will oversee the Northeast regional operator, the grid groups said. The board will elect a chief executive officer and other officers to run the regional organization, according to the ISOs.

If FERC approves the filing by January, the grid groups said they could have the market’s board and executives in place six months later.

The Northeast market operator will establish an advisory committee of state regulatory officials and will develop a process to give market participants a voice in the newly-configured market, according to New York and New England.

And the Northeast organization will work with developing markets in Ontario and New Brunswick to ensure their rules and market operations are compatible and to reduce problems in shipping power between the regions.

New York and New England, which last year processed about $7 billion worth of power transactions, began working to develop a joint market proposal in January in an effort to advance an order FERC issued last summer directing the formation of several large, regional power markets across the U.S. The order was designed to place control of transmission lines in independent hands to spur the development of competitive power markets.

The commission is still seeking that goal but has backed away from its requirement that all utilities and existing market operators join a regional grid operating group.

New York and New England’s joint market proposals contains many of the elements FERC said it would like to see in markets across the U.S.