148 FERC ¶ 61,181

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Cheryl A. LaFleur, Chairman;
Philip D. Moeller, Tony Clark,

and Norman C. Bay.

New York Independent System Operator, Inc.Docket No. ER14-473-000

ORDER ON COMPLIANCE
(Issued September 9, 2014)

1. On November 26, 2013, New York Independent System Operator, Inc. (NYISO)
submitted a filing to comply with the requirements of Order No. 784.1 In this order, we
find that NYISO partially complies with Order No. 784 and accept the proposed revisions to NYISO’s Market Administration and Control Area Services Tariff2 (Services Tariff) to bring it into compliance with this directive, effective November 27, 2013, subject to
NYISO filing a further compliance filing regarding the requirement to post Area Control Error data, as discussed below. We also deny NYISO’s request for waiver of Order
No. 784’s data posting requirements.

I.Background

2.On July 18, 2013, the Commission issued Order No. 784 to foster competition and

transparency in ancillary services markets. In Order No. 784, the Commission explained
that, under the then-current pro forma OATT Transmission Customers considering using
their own or third-party resources to self-supply Regulation Service are required to
demonstrate to the public utility Transmission Provider that they have made “alternative
comparable arrangements.”3 However, the Commission noted that the then-current pro

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forma OATT provided no information as to how such a determination would be made,
and contained no express obligation on the part of the Transmission Provider to consider
the relative speed and accuracy of resources a customer might desire to use in self-
supplying Regulation Service. Given this lack of clarity in the pro forma OATT, the
Commission found that if the performance characteristics of a Transmission Provider’s
regulation resources differed from those of a customer’s regulation resources, the
Transmission Provider may under- or overstate the regulation reserve requirements and
impair a Transmission Customer’s ability to self-supply Regulation Service at the lowest
possible cost.4 The Commission determined that certain reforms were necessary to
address this potential undue discrimination in the provision of Regulation Service.5

3. Thus, relevant here, Order No. 784 requires that each public utility Transmission Provider add to its OATT Schedule 3 (Regulation and Frequency Response Service) a pro forma statement that:

The Transmission Provider will take into account the

speed and accuracy of regulation resources in its

determination of Regulation and Frequency Response

reserve requirements, including as it reviews whether a

self-supplying Transmission Customer has made alternative

comparable arrangements. Upon request by the self-supplying
Transmission Customer, the Transmission Provider will share
with the Transmission Customer its reasoning and any related
data used to make the determination of whether the Transmission
Customer has made alternative comparable arrangements.6

4. In addition, to aid the Transmission Customer’s ability to make an “apples-to-
apples” comparison of regulation resources, Order No. 784 amended Part 37 of the Commission’s regulations7 to require each public utility Transmission Provider to post historical one and ten-minute Area Control Error (Area Control Error) data on its Open Access Same Time Information System (OASIS).8

4 Id. P 112.

5 Id. P 111.

6 Id. at Appendix B.

7 18 C.F.R. § 37.6(k) (2014).

8 Order No. 784, FERC Stats & Regs. ¶ 31, 349 at P1, 116.

Docket No. ER14-473-000- 3 -

5. NYISO states that it proposes a revision to Schedule 3 of its Services Tariff to
bring it into compliance with Order No. 784. NYISO explains that NYISO’s Open
Access Transmission Tariff (OATT) Rate Schedule 3 identifies the transmission
customers that are obligated to purchase Regulation Service from NYISO and describes
how their charges are calculated. However, Rate Schedule 3 of the NYISO Services
Tariff identifies eligible Regulation Service suppliers and specifies how they are
compensated. NYISO notes that it made the compliance tariff revisions required by
Order No. 755 to its Services Tariff rather than its OATT and the Commission accepted
this approach in N.Y. Indep. Sys. Operator, Inc., 133 FERC ¶ 61,072 (2012). Thus,
NYISO proposes to include language regarding accounting for the speed and accuracy of regulation suppliers in its Services Tariff.9

6. As discussed further below, in its compliance filing, NYISO asserts that it

provides customers with a wealth of market and transmission system information that
goes far beyond what the OASIS regulations, including section 37.6(k) require, and that
changing NYISO’s posting practices in accordance with section 37.6(k) would serve no
useful purpose in the context of NYISO, but would require NYISO staff time and
resources to implement. NYISO seeks a waiver of the posting requirement of Area
Control Error data.

II.Notice of Filing and Responsive Pleadings

7.Notice of the filing was published in the Federal Register, 78 Fed. Reg. 73,188

(2013), with interventions, comments, and protests due on or before December 17, 2013. NRG Companies10 and New York Transmission Owners11 (NYTO) filed timely motions to intervene. No comments or protests were filed.

9 NYISO Compliance Filing at 2 n.5.

10 The NRG Companies are: NRG Power Marketing LLC (NRG PML), GenOn Energy Management, LLC (GEM), Arthur Kill Power LLC, Astoria Gas Turbine Power LLC, Dunkirk Power LLC, Huntley Power LLC, NRG Bowline LLC, Oswego Harbor Power LLC and Energy Curtailment Services, Inc. (ECS).

11 Central Hudson Gas & Electric Corporation, Consolidated Energy Company of
New York, Inc., Long Island Power Authority, New York Power Authority, New York
State Electric & Gas Corporation, Niagara Mohawk Power Corporation d/b/a/ National
Grid, Orange and Rockland Utilities, Inc., and Rochester Gas and Electric Corporation
(referred to collectively as the “New York Transmission Owners” or “NYTO”).

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III.Discussion

A.Procedural Matters

Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.F.R.

§ 385.214 (2014), the timely-filed motions to intervene serve to make the entities that

filed them parties to this proceeding.

B.Substantive Matters

1.Speed and Accuracy of Regulation Resources

a.Compliance Filing

8.NYISO proposes to amend section 15.3.1.1 of Rate Schedule 3 to its Services

Tariff to include a statement that NYISO will “take into account the speed and accuracy
of regulation resources in determining reserve requirements for Regulation Service.”12
NYISO explains that the proposed language does not include a reference to NYISO
Transmission Customers making “alternative comparable arrangements” for self-supply,
because NYISO’s market design “does not provide for the traditional ‘physical’ form of
self-supply contemplated by Order Nos. 888 and 890.”13 NYISO adds that, under
NYISO’s Commission-approved tariff, Transmission Customers may enter into financial
hedging arrangements that are the functional economic equivalent of self-supply but may
not “physically ‘opt out’ of the centralized Regulation Service market by identifying and

12 NYISO Compliance Filing at 3; NYISO, NYISO Tariffs, OATT, Rate Schedule 3, § 15.3.1.1.

13 Id. (referring to Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by
Public Utilities and Transmitting Utilities, Order No. 888, 61 FR 21540 (May 10, 1996),
FERC Stats. & Regs. ¶ 31,036 (1996), order on reh’g, Order No. 888-A, 62 FR 12274
(Mar. 14, 1997), FERC Stats. & Regs. ¶ 31,048, order on reh’g, Order No. 888-B,

81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group v. FERC,
225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 (2002); and Preventing Undue Discrimination and Preference in Transmission Service, Order
No. 890, FERC Stats. & Regs. ¶ 31,241, order on reh’g, Order No. 890-A, FERC Stats. & Regs. ¶ 31,261 (2007), order on reh’g, Order No. 890-B, 123 FERC ¶ 61,299 (2008), order on reh’g, Order No. 890-C, 126 FERC ¶ 61,228, order on clarification, Order
No. 890-D, 129 FERC ¶ 61,126 (2009)).

Docket No. ER14-473-000- 5 -

providing Regulation Service from individually contracted-for resources.”14 NYISO
therefore submits that the compliance tariff language that it has proposed here should
likewise be accepted as “consistent with or superior to” the language specified by Order
No. 784.

b.Commission Determination

9.We accept NYISO’s proposal to amend section 15.3.1.1 of Rate Schedule 3 to its

Services Tariff by inserting the statement that NYISO will take into account the speed
and accuracy of regulation resources in determining reserve requirements for Regulation
Service, as “consistent with or superior to”15 the language specified in Order No. 784. As
stated by NYISO in its compliance filing, the NYISO tariff provides the functional
equivalent of self-supply in the form of financial hedging arrangements and as such does
not provide for the traditional “physical” form of self-supply contemplated by Order
Nos. 888 and 890.16 Therefore, we find that NYISO’s proposal to amend section

15.3.1.1 with respect to taking account the speed and accuracy of regulation resources in determining reserve requirements for Regulation Service is consistent with or superior to Order No. 784.

2.Area Control Error Data Posting

a.Compliance Filing

10.NYISO asserts that its existing Regulation Service market arrangements and data

posting practices already surpass the Area Control Error data posting requirements in new section 37.6(k). NYISO states that it provides six-second Area Control Error data to the North American Electric Reliability Corporation (NERC). NYISO argues that, given the nature of NYISO’s transmission model and markets, the Commission should find that the information NYISO currently posts is sufficient to satisfy section 37.6(k).17

11. Alternatively, to the extent that the Commission deems it necessary for
compliance with Order No. 784, NYISO seeks a waiver of the section 37.6(k)’s

14 Id. (citing NYISO, NYISO Tariffs, OATT, Rate Schedule 3, § 6.3).

15 18 C.F.R. § 35.28(c)(4)(ii) (2014).

16 See NYISO Compliance Filing at 3.

17 NYISO does not specify, in its transmittal, where it currently posts information that is sufficient to satisfy section 37.6(k).

Docket No. ER14-473-000- 6 -

requirements, noting that the Commission has granted NYISO waivers of other OASIS
posting regulations that are “incompatible with the transmission services” that NYISO
provides or are otherwise practically inapplicable.18 NYISO claims that it provides
customers with a wealth of market and transmission system information that goes beyond
the OASIS requirements, including the section 37.6(k) requirements, and includes
detailed Regulation Service price information. In addition, NYISO states that the
information that NYISO already makes available to all of its customers, including those
interested in “Regulation Service financial self-supply,” provides a great deal of value to
them.19

12. NYISO further claims that changing its posting practices would require staff time
and resources to implement, particularly in translating its existing six-second data into
one-minute and ten-minute blocks. It states that this translation would constitute another
software project, but notes that it could be considered for its “Maps and Graphs” project,
which is anticipated to be in place in 2015. NYISO also states that it already shares six-
second Area Control Error data with any Transmission Customer who requests such data
on a case by case basis.20

13. NYISO states that, under established precedent, in similar circumstances, the
Commission has granted tariff waivers when the waiver is of limited scope, a concrete
problem will be remedied by granting the requisite waiver, and the waiver does not have
undesirable consequences, such as harming third parties. NYISO asserts that each prong
of the waiver analysis would be satisfied in this instance. It asserts that it would be acting
in good faith, the waiver would be limited in scope to a single regulation, and the waiver
would avoid the concrete problem of requiring NYISO to expend time and resources
developing software posting functionality and related procedures that would neither be
necessary nor beneficial to NYISO stakeholders. For the same reason, NYISO asserts
that the waiver would not have undesirable consequences or harm third parties.

18 NYISO Compliance Filing at 6 (citing N.Y. Indep. Sys. Operator, Inc.,

133 FERC ¶ 61,208 (2010); Cent. Hudson Gas & Elec. Corp., 88 FERC ¶ 61,253 (1999); and N.Y. Indep. Sys. Operator, 130 FERC ¶ 61,104 (2010)).

19 See NYISO Compliance Filing at 5.

20 NYISO Compliance Filing at 5 n.17.

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b.Commission Determination

14.The ACE data posting requirement was meant to “ensure a level of transparency

adequate to support self-supply decision-making by transmission customers.”21 While NYISO’s regulation market does not permit physical self-supply, it does permit what NYISO terms “Regulation Service financial self-supply.” Accordingly, the question before us in this proceeding is whether NYISO’s current posting practices ensure a level of transparency adequate to support financial self-supply decision-making.

15. NYISO argues that given the nature of its transmission model and markets, the
Commission should find that the information NYISO currently posts is sufficient to
satisfy section 37.6(k). In this regard, NYISO states that it already makes available to all
of its customers, including those interested in “Regulation Service financial self-supply,”
information that provides a great deal of value to them. However, NYISO fails to specify
in its transmittal the location of currently posted information that is sufficient to satisfy
section 37.6(k) and ensure a level of transparency adequate to support financial self-
supply decision-making in its regulation market. Before the Commission can permit
NYISO to rely on what it currently posts, NYISO would need to make a further
compliance filing to provide the Commission with the location of this information and
demonstrate that it is consistent with or superior to the requirement of Order No. 784.
Alternatively, as discussed below, we find that NYISO may choose to come into
compliance by posting its existing six-second Area Control Error data which NYISO
contends would be less burdensome than posting one-minute/ten-minute average data as
otherwise required by Order No. 784.

16. We believe that posting Area Control Error data would not be overly burdensome
for NYISO. NYISO currently provides six-second Area Control Error data to NERC22
and there should be minimal incremental burden associated with posting it on OASIS.23
In Order No. 784 the Commission required the posting of one-minute and ten-minute
average Area Control Error data because shorter duration Area Control Error data is more
useful for the purpose of assessing the performance of regulation resources than the
monthly and 12-month rolling averages reflected in the NERC Control Performance

21 Order No. 784, FERC Stats & Regs. ¶ 31, 349 at P 116.

22 NYISO Compliance Filing at 5 n.17.

23 See Order No. 784, FERC Stats. & Regs. ¶ 31,349 at P 116 (finding that

historical one-minute and ten-minute Area Control Error data is already collected and

provided to NERC, through balancing area operators and reliability coordinators, so there should be minimal incremental burden associated with posting it on OASIS).

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Standard 1, Control Performance Standard 2, and Balancing Authority Area Control

Error Limit scores.24 In order to minimize the burden on respondents, the Commission

specified one-minute and ten-minute average data because the Commission believed such
data were already collected by most public utility transmission providers to produce those
scores.25 However, where even shorter duration Area Control Error data are available, as
here, such data can also be used to assess the performance of regulation resources
consistent with the goals of Order No. 784. If NYISO prefers to post its existing six-
second Area Control Error data because it reduces the burden of posting Area Control
Error data, instead of providing the Commission with the location of this information and
demonstrating that it is consistent with or superior to the requirement of Order No. 784,
we permit NYISO to choose to comply with Order No. 784 by posting Area Control
Error data on either a six-second or one-minute/ten-minute average basis and direct it to
inform us of its choice and the expected date in a further compliance filing.

17. Accordingly, in summary, we require NYISO to file a further compliance filing
with the Commission, to be submitted within 15 days of the date of this order, that either

(1) provides the location of the information it currently posts and demonstrates that it is
consistent with or superior to the requirement of Order No. 784, or (2) specifies the date
that it will begin posting Area Control Error data and whether the data will be posted on
a six-second or on a one-minute/ten-minute average basis. For the reasons stated above,
we deny NYISO’s requested waiver without prejudice, but may consider it again
following receipt of the required compliance filing or any subsequent modification by
NYISO.

The Commission orders:

(A) NYISO’s proposal to amend section 15.3.1.1 of Rate Schedule 3 to its Services Tariff, is hereby accepted, effective November 27, 2013, as requested.

(B) NYISO’s request for waiver of the Area Control Error data posting requirement contained in section 37.6(k) of the Commission’s regulations is hereby denied without prejudice, but the Commission may consider it again following receipt of the required compliance filing or any subsequent modification by NYISO.

24 Id. PP 113, 116.

25 Id. P 116 (explaining that “historical data for the most recent calendar year, updated once per year” should be adequate).

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requirement by posting Area Control Error data either on a six-second or one-minute/ten-
minute average basis, as discussed in the body of this order.

(D) NYISO is directed to file a compliance filing with the Commission, to be

submitted within 15 days of the date of this order, as discussed above in the body of this
order.

By the Commission. ( S E A L )

Nathaniel J. Davis, Sr.,
Deputy Secretary.