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First-Hand:The Evolution of the Independent Power System Operator in New York State

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Contributed By: Dean Chapman, IEEE Senior Life Member

The Independent Power System Operator or Regional Transmission Operator is a fairly new concept in the Electric Utility Industry. New York State was one of the early and more successful systems to transition to this new business model. I was fortunate enough to have participated in the transition into this new mode of electric system operation.

After spending the first half of my career in defense work, primarily Radar ECM and ECCM, I became interested in the use of computers for real time data acquisition and control. In 1977, I went to work for Niagara Mohawk Power Corporation in their Power Control Center. At the time, their Supervisory Control and Data Acquisition (SCADA) System was comprised of an IBM 1800 computer and a mini-computer-based data acquisition system, both featuring ferrite core memory. Later on, the system was greatly expanded and featured a large IBM Mainframe as its processor.

One of the important roles of the Niagara Mohawk SCADA system was to acquire real time readings of voltages, power flows, and circuit breaker status from the vast number of substations making up the 24,000 square miles of their power system and to transmit those readings to the New York Power Pool (NYPP) in Albany, NY. These readings were updated every 6 seconds. The NYPP was also gathering similar data from the other seven utilities in the state and using it to monitor the operation of the grid in the state.

The NYPP was a cooperative venture staffed by personnel who were recruited from the utilities and in fact still worked for the individual utilities comprising the pool. The NYPP was formed in 1966 in response to the first Northeast Blackout, which occurred on November 9th, 1965. It was found that an overseeing organization was necessary to attempt to prevent another occurrence of a widespread blackout.

When I first went to Niagara Mohawk, I worked for a gentleman who had been a part of the team that started up NYPP and had helped to formulate the major procedures and facilities that comprised the NYPP operation. I thought at the time that it must have been exciting to have taken part in such an historic project. Little did I know that I would later fill that same role in the next step in the evolution. In 1996, I went to work at NYPP as it was preparing to be replaced by something called the New York Independent System Operator. Let me try to explain why this change was necessary.

In addition to monitoring the state of the electric system, NYPP also facilitated an automatic wholesale power market between the utilities that were members of the pool. In 1977, the NYPP began doing a real time Economic Dispatch of the generation in the state every 5 minutes. Economic Dispatch adjusts all generators to minimize the total cost of generation to meet the current load. As generators were commanded up and down without regard for who owned them, the resulting implied sales of power between the members were tracked and settled out after the fact using a share-the-savings scheme. This was based on the fact that the total cost of meeting the load would be lower under centralized economic dispatch than if the generators had been dispatched by the individual companies independently. This system worked fine for a while but eventually several factors combined to effectively render this technique ineffective. The utilities were entering into more and more bilateral power sales agreements with each other and with other entities. These bilateral sales were attractive since they offered more price certainty than purchases on the open market. These contracts eventually reached the point of virtually bypassing the shared savings operation. Another factor that contributed to the problem was the advent of Independent Power Producers. These entities were originally spawned by legislation guaranteeing them a price and a captive market for their generated power. Later, some of the major utilities started selling their generators to Independent Producers as well. These generators were committed and dispatched by their respective owners and only responded to NYPP directives under emergency conditions.

Along with the fact that the electric energy market was bypassing NYPP, it was becoming increasingly difficult for NYPP Dispatchers to manage the loadings on the major transmission lines and interfaces. This is especially critical in the New York City area as was demonstrated in July of 1977 when a series of lightning strikes north of the city caused the transmission system into the city to fail, blacking out the city.

With so many energy transactions taking place without a central coordinating facility, it was difficult to know what transactions to cut in the event of a failure of a transmission line or generator. These cuts must be made quickly in order to prevent further problems caused by overloads on the remaining lines.

Finally the Federal Energy Regulatory Commission (FERC) stepped in and in a series of actions, began to encourage areas such as New York, New England, and California, to form independent entities that would manage the transmission system. NYPP on the other hand was comprised of members of the 8 NY Utilities who were involved in the market as participants. Therefore, they would not be independent and would be under pressure to protect their own interests rather than operating the transmission system in the manner that would be the most efficient or secure. The Independent System Operator would be a neutral entity that would not have a stake in the market.

The concept of the ISO as it was being proposed for New York State would be to form an independent not-for-profit company that would be empowered by FERC to operate the transmission system and to act as a broker to purchase from generators the power to meet the load and to sell it to the load serving entities. The dual role of the ISO would be to operate the market and to manage the transmission system to ensure it would operate reliably.

As I said, I went to work for NYPP in September of 1996. In 1998, I was appointed Director of Information Technology for NYPP. We were developing the software to operate the market that was being designed. It was based upon a relatively new concept called Locational Based Marginal Pricing or LBMP. It fit very well with the Security-Constrained Economic Dispatch that had been operating at NYPP since 1977. The LBMP algorithm allowed us to assign the cost of transmission based upon the marginal cost of generation in the various geographic areas of the state. The IT staff at NYPP was thin but through the superhuman effort of many very brilliant people, we were able to ready the system to go on line and to perform several on-line tests involving the new market participants.

At midnight on December 1st, 1999, the NYPP ceased to exist and the NYISO came into being. By any measure, it was a huge step. All generators in the state were now submitting bids via our secure web site and all load serving entities were being billed based upon the energy they consumed. The NYISO operators now had the authority to operate the transmission system in the best interests of the market as a whole and for maximum security. Because we were now independent, we as NYISO employees were required to resign from our respective companies and sign on with NYISO. We also were required to divest ourselves of any stock in those companies or any other market participant.

There were some bumps in the road for the first few months but no major catastrophes. One of the first hurdles we faced exactly one month after going on line was the infamous Y2K non-event. We were confident that nothing serious would happen but nevertheless, we stood in the back of the control room holding our breath as the clock ticked over midnight into the New Year. The network TV people had sent a crew to film any debacles that might occur and they went home with lots of unrecorded tape after it was over.

I retired from full-time work at NYISO in 2000 but continued on a part-time basis until 2006. As I look back on the evolution of the NYISO from the NYPP, one of the things that strikes me is that the company has evolved from a techno-centric group of power systems engineers, dispatchers, and IT Staff into a major financial institution. The NYISO handles many billions of dollars a year in energy transactions and even the smallest mistake can cost millions of dollars if it is not caught quickly. Therefore, extensive audits of procedures and software take place each year – something that never occurred “in the old days”. Redundant hardware and communications facilities abound and even the control center has a backup center about 15 miles away from the primary site with all systems fully replicated. Hardware and software upgrades are very carefully managed and the very valuable data is carefully replicated and protected. Both electronic and physical security are carefully managed, a sign of the times we in which we live.



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