FERC okays NY Lake Erie power grid flow plan

NEW YORK, Nov 17 (Reuters) - Federal regulators have approved the New York state electricity grid operator's proposal to transmit power around lake Erie by more direct routes, ending transmission methods that boosted costs to state ratepayers by $250 million, according to some estimates.

The revised New York Independent System Operator (NYISO) tariffs preclude the scheduling of power flows over eight transmission paths where there are more direct routes, the Federal Energy Regulatory Commission (FERC) said in a release.

These tariffs replace interim tariffs the NYISO put in place Aug. 21, 2008, the FERC said.

Beginning in January 2008, a small number of market participants placed an increasing number of transactions around Lake Erie under a schedule from New York to Ontario to the Midwest Independent System Operator (MISO) and ending in the PJM Interconnection, which includes New York's southern neighbors, Pennsylvania and New Jersey.

About 80 percent of the power actually flowed over the path of least resistance -- the common border between New York and Pennsylvania and New Jersey. This caused transmission costs to increase for New York ratepayers.

In the past, the NYISO has not publicly estimated how much the "loop flow" issue cost New Yorkers. When he asked FERC to investigate the issue over the summer, New York Senator Charles Schumer said the practice may have cost New Yorkers $250 million or more.

Officials at the NYISO were not immediately available for comment.

The circuitous scheduled routes took advantage of price differences between the four power grid operators surrounding Lake Erie. It was cheaper to schedule power from New York to Ontario to the Midwest ISO (Michigan and Ohio) and finally to PJM (Pennsylvania and New Jersey), than it was to schedule it directly from New York to PJM.

But the power did not flow along the scheduled path around the lake in part because the technology needed to control the flows was not in place. One example was the long-awaited phase angle regulators on the Michigan-Ontario border.

FERC wants the NYISO to work with neighboring grids to help prevent power from flowing along unscheduled paths.

The NYISO submitted, and FERC accepted, interim tariff revisions in August 2008. In that order, FERC disclosed that its Office of Enforcement had initiated a non-public investigation into the power flow problem in May 2008.

FERC said the Office of Enforcement's investigation was continuing and the Commission will determine what further actions may be appropriate after considering results of the staff investigation.

NYISO operates the grid serving New York State and administers the wholesale electricity market with a generating capacity of more than 40,000 MW. (Reporting by Scott DiSavino; Editing by David Gregorio)