154 FERC ¶ 61,152
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Norman C. Bay, Chairman;
Cheryl A. LaFleur, Tony Clark,
and Colette D. Honorable.
New York Independent System Operator, Inc.Docket No. ER16-425-000
ORDER ACCEPTING PROPOSED TARIFF REVISIONS SUBJECT TO CONDITION
(Issued March 1, 2016)
1. On November 30, 2015, pursuant to section 205 of the Federal Power Act (FPA),1
the New York Independent System Operator, Inc. (NYISO) filed proposed revisions to
the scarcity pricing logic NYISO uses in its real-time market, set forth in its Market
Administration and Control Area Services Tariff (Services Tariff) and Open Access
Transmission Tariff (OATT). According to NYISO, the proposed revisions will
improve NYISO’s existing scarcity pricing logic by incorporating scarcity pricing into
the real-time optimization. In this order, we accept NYISO’s filing, subject to condition,
effective upon NYISO’s implementation of the necessary software changes, as discussed
below.
I.Background
2.NYISO uses shortage pricing to refer to the value placed on reserves when the
market is short of operating, regulation, or transmission reserves. NYISO uses scarcity
pricing to refer to the pricing rules used for energy and certain ancillary services in
real-time during periods when NYISO has called on Special Case Resources2 and the
1 16 U.S.C. § 824d (2012).
2 “Special Case Resources” are “Demand Side Resources whose Load is capable of being interrupted upon demand at the direction of the ISO, and/or Demand Side
Resources that have a Local Generator, which is not visible to the ISO’s Market
Information System and is rated 100 kW or higher, that can be operated to reduce Load from the NYS Transmission System or the distribution system at the direction of the ISO . . . .” NYISO, Services Tariff, § 2.19 (11.0.0).
Docket No. ER16-425-000- 2 -
Emergency Demand Response Program3 (SCR/EDRP) to provide load reduction to
assist in maintaining system reliability. The purpose of scarcity pricing is to ensure that
real-time energy prices appropriately reflect the costs associated with deploying these
SCR/EDRP resources. Under NYISO’s existing ex post scarcity pricing logic, NYISO
uses a “but-for test” to determine whether SCR/EDRP resources will set real-time energy
prices.4 Pricing occurs after resource schedules have been established, in the load zone(s)
in which SCR/EDRP resources will be activated. Per the “but-for test,” NYISO adjusts
real-time prices if it determines that the amount of SCR/EDRP resources called on to
provide load reduction was greater than the amount of unscheduled (or latent) 30-minute
reserve capability available from eligible resources. Thus, the “but-for test” provides an
indication of whether NYISO would likely have experienced a shortage of operating
reserves absent, or “but-for,” the activation of SCR/EDRP resources.
3. Over time, NYISO has filed iterative improvements to its scarcity pricing logic,
the most recent of which the Commission approved in 2013.5 In that 2013 order, the
Commission approved NYISO’s existing scarcity pricing mechanism, noting improved
price signals resulting from that mechanism, but also recognized that extensive system
changes may be required to optimize the mechanism and stakeholders should have an
opportunity to consider whether that effort is warranted.6 The Commission stated that,
“[w]hile we accept NYISO’s revised proposal as an improvement over its existing market
rules, we will require NYISO to submit an informational report” with “a comprehensive
evaluation of both how well the revised scarcity pricing mechanism achieved its
objectives . . . and the existence of any undesirable effects on market outcomes,” and
“a description of the steps that would need to be taken, and the resources required, to
implement a real-time scarcity pricing optimization engine... ”7 In the requisite
informational report, NYISO explained that, during the summer of 2013, it activated its SCR/EDRP resources on five consecutive days, and that NYISO’s scarcity pricing
3 The “Emergency Demand Response Program” is “[a] program pursuant to which the ISO makes payments to Curtailment Service Providers that voluntarily take effective steps in real time, pursuant to ISO procedures, to reduce [New York Control Area]
demand in Emergency conditions.” NYISO, Services Tariff, § 2.5 (7.0.0).
4 NYISO, Services Tariff, § 15.4.6.2 (5.0.0).
5 N.Y. Indep. Sys. Operator, Inc., 144 FERC ¶ 61,013 (2013).
6 Id. P 27.
7 Id. P 28.
Docket No. ER16-425-000- 3 -
mechanism successfully incorporated the cost of these resources in the cost of energy.8
Overall, NYISO concluded that its scarcity pricing mechanism did not produce
undesirable outcomes, but that it would be beneficial to employ scarcity pricing at proxy generator buses, in addition to internal locations.9 With regard to implementing a real-
time scarcity pricing optimization engine, NYISO stated that such a change would
require significant effort to design and strong stakeholder support.10 NYISO explained
that it would be undertaking a comprehensive evaluation of scarcity pricing in early 2014. This filing is a result of that evaluation.11
II.NYISO’s Filing
4.According to NYISO, its existing ex post scarcity pricing logic has the potential to
cause inconsistencies between resource schedules and pricing outcomes, which could
result in uplift costs.12 NYISO explains that its existing scarcity pricing mechanism also
does not apply to NYISO’s proxy generator buses, which may result in inefficient
scheduling of imports and exports during the periods when NYISO is likely to activate
SCR/EDRP resources.13 NYISO states that its Market Monitoring Unit (MMU) has
previously recommended that NYISO extend scarcity pricing to its external interfaces.
NYISO contends that incorporating scarcity pricing into the real-time optimization will
improve NYISO’s existing scarcity pricing mechanism by: (1) ensuring consistency
between resource schedules and pricing outcomes in real-time when NYISO activates
SCR/EDRP resources, thereby reducing the potential for uplift costs; and (2) reflecting
8 New York Independent System Operator, Inc., Informational Report, Docket No. ER13-909-001, at 3 (filed Oct. 31, 2013).
9 Id. at 8-11.
10 Id. at 11-14.
11 NYISO November 30, 2015 Transmittal Letter at 3 (NYISO Transmittal).
12 Id. at 2.
13 NYISO defines “Proxy Generator Bus” as: “A proxy bus located outside the
[New York Control Area] that is selected by the ISO to represent a typical bus in an
adjacent Control Area and at which [Locational Based Marginal Prices] are calculated.
The ISO may establish more than one Proxy Generator Bus at a particular Interface
with a neighboring Control Area to enable the NYISO to distinguish the bidding,
treatment and pricing of products and services available at the Interface.” NYISO,
OATT, § 1.16 (7.0.0).
Docket No. ER16-425-000- 4 -
the impacts of scarcity pricing at proxy generator buses, thereby facilitating more
efficient interchange transactions when NYISO activates SCR/EDRP resources in real-
time.14
5. NYISO proposes to incorporate scarcity pricing into the real-time optimization by
establishing a supplemental 30-minute reserve requirement in real-time during the
periods when NYISO has called upon SCR/EDRP resources to provide load reduction
(Scarcity Reserve Requirement).15 NYISO states that it will seek to procure the Scarcity
Reserve Requirement from eligible suppliers located within the load zone(s) in which it
has activated SCR/EDRP Resources (Scarcity Reserve Region).16 NYISO will price any
resulting shortage in meeting the Scarcity Reserve Requirement at $500 per MW (the
same value NYISO assigns to SCR/EDRP resources under the existing scarcity pricing
mechanism).17
6. NYISO explains that the amount of the Scarcity Reserve Requirement is based, in
part, on the expected load reduction to be provided by the SCR/EDRP resources that
NYISO has activated, calculated using historical performance of SCR/EDRP resources.
NYISO notes that certain stakeholders raised concerns about the use of a 30-minute
reserve product resulting in inefficient dispatch of resources or in triggering scarcity
pricing when the system has sufficient resources available to meet all energy and reserve
requirements absent the Scarcity Reserve Requirement. NYISO states that, in response to
these concerns, it now proposes to call on the amount of energy production capability that
14 NYISO Transmittal at 3.
15 Id. at 11-12. NYISO proposes to define “Scarcity Reserve Requirement” as:
“A 30-Minute Reserve requirement established by the ISO for a Scarcity Reserve Region in accordance with Rate Schedule 4 of this ISO Services Tariff.” Proposed NYISO
Services Tariff § 2.19; see also Proposed NYISO OATT § 1.19.
16 NYISO Transmittal at 11. NYISO proposes to define “Scarcity Reserve
Region” as: “A Load Zone or group of Load Zones containing EDRP and/or SCRs that
have been called by the ISO to address the same reliability need, as such reliability need
is determined by the ISO.” Proposed NYISO Services Tariff § 2.19; Proposed NYISO
OATT § 1.19. NYISO explains that the Scarcity Reserve Region defines the geographic
area within which resources must be located in order to provide the additional 30-minute
reserve requirement that NYISO will utilize to incorporate scarcity pricing into the real-
time optimization. In addition, NYISO states that, if NYISO activates SCR/EDRP
resources in different geographic areas in response to different reliability needs, NYISO
may establish more than one Scarcity Reserve Region in real-time. NYISO Transmittal
at 11.
17 NYISO Transmittal at 11.
Docket No. ER16-425-000- 5 -
could be provided by available resources in greater than 30 minutes, but less than or
equal to 60 minutes (available operating capacity), within the Scarcity Reserve Region prior to activating SCR/EDRP resources. NYISO explains that it will subtract the
amount of available operating capacity from the expected load reduction to be provided by SCR/EDRP resources that NYISO has activated and will use the resulting value to establish the Scarcity Reserve Requirement.18
7. To effectuate the incorporation of scarcity pricing into NYISO’s real-time
optimization, NYISO proposes to increase the value of Southeastern New York 30-
minute reserves from $25 per MW to $500 per MW, effective at all times. According to
NYISO, this increase appropriately recognizes that NYISO has historically called upon
SCR/EDRP resources to protect reserves in Southeastern New York. NYISO explains
that this proposed change aligns the value of reserves with the actual cost of providing
such resources.19 NYISO states that this proposed increase in Southeastern New York
30-minute reserves necessitates a corresponding increase in the value of the middle
pricing point of the regulation service demand curve (i.e., relating to shortages of
regulation service greater than 25 MW, but less than 80 MW) from $400 per MW to
$525 per MW, effective at all times.20 Similarly, NYISO explains that the proposed
increase in Southeastern New York 30-minute reserves necessitates a reduction in the target level for Southeastern New York 30-minute reserves to zero during storm watch events (i.e., during actual or anticipated severe weather conditions).21 Lastly, NYISO also proposes to increase the New York Control Area 30-minute reserve demand curve values priced at less than $500 per MW to $500 per MW, effective in real-time during any SCR/EDRP resource activation.22
8. NYISO requests Commission action within 60 days of the date of its filing (i.e., by
January 29, 2016) to provide NYISO and market participants with timely notice, to allow
NYISO to confidently proceed with developing and deploying necessary software
changes, and to enable NYISO to achieve the desired effective date for its proposal.
NYISO requests a flexible effective date and proposes to submit a compliance filing at
least two weeks prior to the proposed effective date that will specify the proposed
effective date. NYISO states that it anticipates an effective date on or before June 30,
18 Id. at 4-7.
19 Id. at 8.
20 Id.
21 Id. at 8-9.
22 Id. at 9.
Docket No. ER16-425-000- 6 -
2016. To the extent necessary, NYISO seeks waiver of the Commission’s regulations to
allow NYISO to make this filing more than 120 days prior to the date on which the
proposed service is to become operational. NYISO contends that no market participants
will be prejudiced because the implementation timeframe was developed in consultation
with market participants and NYISO will provide at least two weeks’ prior notice.23
III.Notice of Filing and Responsive Pleadings
9.Notice of NYISO’s filing was published in the Federal Register, 80 Fed.
Reg. 76,013 (2015), with interventions and protests due on or before December 21,
2015. The New York State Public Service Commission filed a notice of intervention. The Utility Intervention Unit of the New York State Department of State (UIU), NRG Companies,24 Exelon Corporation, Electric Power Supply Association (EPSA),
Independent Power Producers of New York, Inc. (IPPNY), PSEG Companies,25 and New York Transmission Owners (NYTOs)26 filed timely motions to intervene. IPPNY and EPSA (jointly, IPPNY/EPSA) and NYTOs filed comments in support of the filing. UIU filed a protest to the filing. NYISO filed an answer to UIU’s protest.
A.Comments in Support
10.IPPNY/EPSA assert that the Commission should accept NYISO’s proposal
because it will improve the accuracy of real-time prices, support efficient dispatch, and
reduce uplift costs. IPPNY/EPSA also contend that NYISO’s proposal is consistent with
the Commission’s price formation efforts because it will improve price formation during
periods of scarcity by more accurately and transparently reflecting scarcity situations in
23 Id. at 16-17 (citing 18 C.F.R. § 35.3(a)(1) (2015)).
24 NRG Companies consist of NRG Power Marketing LLC and GenOn Energy Management, LLC.
25 PSEG Companies consist of PSEG Power LLC, PSEG Energy Resources & Trade LLC, and PSEG Power New York LLC.
26 NYTOs consist of: Central Hudson Gas & Electric Corporation, Consolidated
Edison Company of New York, Inc., Niagara Mohawk Power Corporation, New York
Power Authority, New York State Electric & Gas Corporation, Orange and Rockland
Utilities, Inc., Power Supply Long Island, and Rochester Gas and Electric Corporation.
Docket No. ER16-425-000- 7 -
market outcomes.27 IPPNY/EPSA add that the supplemental 30-minute reserve
requirement is more likely to incent market participants to take actions and make
investments in their capabilities to respond to shortage pricing signals, which, in turn,
will support reliability. IPPNY/EPSA assert that, while this proposal is an improvement, NYISO and the Commission should continue to pursue additional improvements to price formation, consistent with the price formation principles.28
11. NYTOs support NYISO’s proposal, stating that NYISO’s existing scarcity pricing
mechanism can cause inconsistent real-time prices for different products at a given
location. According to NYTOs, this can result in some generators realizing windfall
profits when capacity that was scheduled to provide one product in the day-ahead market
is scheduled to produce a second product in the real-time market if the real-time price of
the first product does not reflect scarcity conditions while the real-time price of the
second product reflects scarcity conditions. NYTOs contend that NYISO’s proposal
avoids these inconsistencies. Although NYTOs support NYISO’s proposal, they note
that NYISO’s proposal relies on modifications to 30-minute reserve requirements to
ensure that real-time prices reach appropriate levels during scarcity conditions, which
can produce some adverse consequences, such as a less efficient dispatch, in certain
conditions. Under an alternative design that NYTOs proposed in the stakeholder process,
NYTOs explain that NYISO would have defined separate 30-minute reserve and scarcity
reserve requirements. NYTOs argue that this alternative design would have avoided
those adverse consequences, but also would have taken considerably longer to implement
and cost considerably more. NYTOs concluded that it would be better to promptly
implement NYISO’s scarcity pricing proposal. However, NYTOs also believe that this
issue should be revisited once NYISO has sufficient experience with these proposed
changes to assess whether further improvements are justified.29
B.Protest
12.UIU argues that there are three flaws with NYISO’s proposal and that, therefore,
the Commission should reject the proposal. First, UIU contends that NYISO’s filing
27 IPPNY/EPSA December 21, 2015 Comments at 2-3 (IPPNY/EPSA Comments) (citing Price Formation in Energy and Ancillary Services Markets Operated by Regional Transmission Organizations and Independent System Operators, Docket No. AD14-14-
000, Notice, at 2 (June 19, 2014); Settlement Intervals and Shortage Pricing in Markets Operated by Regional Transmission Organizations and Independent System Operators, 152 FERC ¶ 61,218, at P 51 (2015)).
28 Id. at 2-3.
29 NYTOs December 21, 2015 Comments at 2-4 (NYTOs Comments).
Docket No. ER16-425-000- 8 -
misses an opportunity to improve the efficiency of the existing SCR/EDRP resource
deployment strategy by incorporating economic factors into the deployment logic.
UIU explains that, instead, NYISO proposes to maintain the existing practice of basing
SCR/EDRP resource deployment solely on operational factors without regard to market
conditions. According to UIU, considering economic factors would allow NYISO to
better tailor the timing and magnitude of SCR/EDRP resource deployments, resulting in a
more accurate market representation of these resources and a higher degree of economic
efficiency.30
13. Second, UIU argues that, “NYISO’s proposal would . . . implement a phantom
reserve constraint [(i.e., the Scarcity Reserve Requirement)] that yields artificial price
increases.”31 In addition, UIU expands by stating that the proposal fails to remedy the
“flaw” in NYISO’s existing scarcity pricing mechanism that SCR/EDRP resources “do
not submit demand bids analogous to generation supply bids and are not subject to all
security constraints as part of the real-time market optimization.”32 UIU explains that
the proposed Scarcity Reserve Requirement would provoke market impacts, but those
impacts would occur after NYISO has deployed the SCR/EDRP resources, while the
price of the SCR/EDRP resources themselves would remain an out-of-market
determination. UIU asserts that this flaw in NYISO’s existing mechanism leads to higher costs to customers.33
14. Third, UIU asserts that, “NYISO’s proposed artificial load and contingency
requirements would lead to inefficient generation commitments.”34 In particular, UIU argues that, “NYISO’s proposal would mandate higher operating reserve requirements whenever [SCR/EDRP] resources are deployed—whether or not they are ultimately
necessary—and, consequently, may result in a recommitment and dispatch of generating resources.”35 UIU contends that this would increase the total production costs of meeting load, and thus, is less efficient than NYISO’s existing mechanism.36
30 UIU December 21, 2015 Protest at 2 (UIU Protest).
31 Id. at 2.
32 Id. at 3.
33 Id.
34 Id. at 3.
35 Id.
36 Id.
Docket No. ER16-425-000- 9 -
C.NYISO’s Answer
15.NYISO asserts that UIU’s first two arguments are about flaws in NYISO’s
existing scarcity pricing mechanism and would require a fundamental redesign that is
beyond the scope of this proceeding. NYISO explains that its proposal is not intended
to address the dispatch procedures for SCR/EDRP resources; instead, it is intended to
improve real-time price formation during periods when NYISO deploys such resources,
while simultaneously reducing the potential for uplift cost impacts during such periods.
NYISO contends that UIU should pursue any proposed redesign of the existing scarcity
pricing mechanism as part of the normal stakeholder process to ensure all interested
parties have an opportunity to review the proposed redesign, as well as consider the appropriate priority to assign to such a project.37
16. As for UIU’s third argument, NYISO responds that its proposal will reduce the
potential for uplift costs, thereby improving price formation and transparency. In
addition, NYISO explains that reflecting the impacts of scarcity pricing at proxy
generator buses will facilitate more efficient scheduling of interchange transactions when
NYISO has activated SCR/EDRP resources, which will, in turn, improve the reliability of
the system. Moreover, according to NYISO, prices that fail to accurately reflect system
needs and resource costs will result in incorrect signals, leading to inefficient decisions
and ultimately higher costs for consumers. NYISO states that it conducted a consumer
impact analysis as part of its stakeholder discussions, analyzing potential market
outcomes if NYISO’s proposal had been in effect during SCR/EDRP resource activations
in 2013. NYISO explains that its analysis identified potential annual energy cost
savings for consumers when NYISO activates SCR/EDRP resources of approximately
$46.7 million.38 NYISO notes that its analysis also indicated that, in years when NYISO
does not activate SCR/EDRP resources, its proposal could result in an annual energy cost
increase of approximately $14.6 million, driven by the corollary changes necessitated by
the proposal to ensure proper pricing outcomes. NYISO argues that its proposal will
improve its existing scarcity pricing mechanism, as well as provide benefits to consumers
and the marketplace as a whole.39
37 NYISO January 5, 2016 Answer at 4-5 (NYISO Answer).
38 Id. at 5-7 & n.16.
39 Id. at 7.
Docket No. ER16-425-000- 10 -
IV. Discussion
A.Procedural Matters
17.Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure,40 the
notice of intervention and timely, unopposed motions to intervene serve to make the
entities that filed them parties to the proceeding.
18.Rule 213(a)(2) of the Commission’s Rules of Practice and Procedure prohibits an
answer to a protest unless otherwise ordered by the decisional authority.41 We accept
NYISO’s answer because it has provided information that has assisted us in our decision-
making process.
B.Commission Determination
19.For the reasons discussed below, we accept NYISO’s filing, subject to condition,
effective upon NYISO’s implementation of the necessary software changes, as
requested.42 We agree with NYISO that the proposal will improve NYISO’s existing
scarcity pricing mechanism, as well as provide benefits to consumers and the marketplace as a whole.43 Thus, we find that, subject to NYISO submitting compliance filings, as discussed below, NYISO’s proposed revisions are just and reasonable.
20. Under NYISO’s existing scarcity pricing mechanism, NYISO performs an after-
the-fact test (the “but-for test”) that determines whether a scarcity event occurred (i.e.,
whether the amount of SCR/EDRP resources NYISO activated exceeded the amount of
unscheduled operating reserves). Here, NYISO proposes to incorporate this process into
the real-time optimization, which will improve real-time price formation, reduce the
potential for uplift costs, and increase price transparency. Thus, incorporating scarcity
pricing into the real-time optimization will reflect actual operator actions without the
need to adjust prices on an after-the-fact basis. Once these changes are implemented,
prices will more accurately reflect resource costs, which will send market participants
40 18 C.F.R. § 385.214 (2015).
41 Id. § 385.213(a)(2).
42 The Commission can revise a proposal filed under section 205 of the Federal
Power Act as long as the filing utility accepts the change. See City of Winnfield v. FERC, 744 F.2d 871, 875-77 (D.C. Cir. 1984). The filing utility is free to indicate that it is
unwilling to accede to the Commission’s conditions by withdrawing its filing.
43 NYISO Answer at 7 & n.16 (explaining the consumer impact analysis results).
Docket No. ER16-425-000- 11 -
improved market signals.44 In addition, incorporating scarcity pricing into the real-time optimization will reflect the actual opportunity cost to resources of providing energy, as opposed to reserves. Because NYISO currently implements scarcity pricing on an ex post basis, energy prices reflect scarcity levels on an after-the-fact basis, but operating
reserves prices do not because real-time dispatch cannot go back and re-determine
ancillary service schedules to reflect each provider’s opportunity cost.45 Furthermore,
unlike NYISO’s existing scarcity pricing mechanism, NYISO’s proposal recognizes that capacity that is available within 30 to 60 minutes can be dispatched to meet load prior to activating SCR/EDRP resources. Thus, NYISO will procure a greater amount of
available operating capacity from the market before relying on SCR/EDRP resources and triggering scarcity pricing than under its existing rules.
21. In addition to incorporating scarcity pricing into the real-time optimization,
NYISO also proposes to apply scarcity pricing to proxy generator buses. NYISO
currently only applies scarcity pricing to internal locations, resulting in large differences
in real-time prices between internal locations and proxy generator buses. As a result,
when NYISO is likely to call on SCR/EDRP resources, the price signals are asymmetric
when comparing resources inside of the New York Control Area to the proxy generator
buses. Therefore, the true value of imports is not currently represented during scarcity
events.
22. UIU argues that NYISO’s filing misses an opportunity to remedy an alleged flaw
in NYISO’s existing scarcity pricing mechanism. UIU contends that SCR/EDRP
resources should submit demand bids analogous to generation supply bids and should be
subject to all security constraints as part of the real-time market optimization.46 This
argument is beyond the scope of NYISO’s section 205 filing, which proposes to
44 See Price Formation in Energy and Ancillary Services Markets Operated by
Regional Transmission Organizations and Independent System Operators, Docket
No. AD14-14-000, Notice, at 3 (June 19, 2014) (“To the extent that actions taken to
avoid reserve deficiencies are not priced appropriately or not priced in a manner
consistent with the prices set during a reserve deficiency, the price signals sent when the
system is tight will not incent appropriate short- and long-term actions by resources and
loads.”).
45 See N.Y. Indep. Sys. Operator, Inc., 144 FERC ¶ 61,013, at PP 14, 28 (2013)
(describing NYTOs’ protest to NYISO’s existing scarcity pricing mechanism and
recognizing that the existing scarcity pricing mechanism, while an improvement, should
be re-evaluated to consider implementing real-time scarcity pricing optimization).
46 UIU Protest at 2-3.
Docket No. ER16-425-000- 12 -
incorporate scarcity pricing into the real-time optimization, and not to change the way in
which NYISO commits and dispatches SCR/EDRP resources in the real-time market.
23. As to UIU’s argument that the proposal could result in less efficient dispatch of
generating resources and higher production costs, we find that the benefits of increasing
price transparency and incorporating scarcity pricing in the real-time market software
outweigh such concerns.47 NYISO’s proposal increases price transparency by ensuring
consistency between resource schedules and pricing outcomes in real-time when NYISO
activates SCR/EDRP resources, thereby reducing the potential for uplift costs.48 With
that said, we recognize that additional system changes may be required to further
optimize the scarcity pricing mechanism and avoid the potential issues UIU and NYTOs identify. We encourage NYISO to continue working with its stakeholders on optimizing its scarcity pricing mechanism.
24. In accepting NYISO’s proposal as just and reasonable, we require NYISO to
submit a compliance filing within 30 days of the date of this order clarifying its proposed
Services Tariff and OATT provisions to clearly identify and state where they apply to
shortage events versus scarcity events. For example, in proposed Services Tariff section
15.4.7(i), NYISO appears to describe the price points when it has called a shortage event; however, based on the proposed language, it is unclear whether these provisions apply to shortage pricing or scarcity pricing. We therefore direct NYISO to clarify its proposed Services Tariff and OATT provisions to ensure they clearly state whether they apply to scarcity events, shortage events, or both.
25. We also require NYISO to submit a further compliance filing with no less than two weeks’ notice of the proposed effective date.49
47 UIU Protest at 3.
48 See Price Formation in Energy and Ancillary Services Markets Operated by Regional Transmission Organizations and Independent System Operators, Docket
No. AD14-14-000, Notice, at 3 (June 19, 2014) (“Use of uplift payments can undermine the market’s ability to send actionable price signals. Sustained patterns of specific
resources receiving a large proportion of uplift payments over long periods of time raise additional concerns that those resources are providing a service that should be priced in the market or opened to competition.”).
49 We find good cause to grant NYISO’s request for waiver of the prior notice requirements of section 35.3 of the Commission’s Rules and Regulations, 18 C.F.R. § 35.3 (2015), to permit the filing to be made more than 120 days in advance of the proposed effective date because this will allow NYISO additional time to develop the software changes necessary to implement its proposed revisions.
Docket No. ER16-425-000- 13 -
The Commission orders:
(A) NYISO’s filing is hereby accepted, subject to condition, effective upon
NYISO’s implementation of the necessary software changes, as discussed in the body of this order.
(B) NYISO is hereby directed to submit a compliance filing within 30 days of the date of this order, as discussed in the body of this order.
(C) NYISO is hereby directed to submit a compliance filing with no less than
two weeks’ notice of the proposed effective date, as discussed in the body of this order.
By the Commission.
( S E A L )
Nathaniel J. Davis, Sr.,
Deputy Secretary.
