172 FERC ¶ 61,058
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Neil Chatterjee, Chairman;
Richard Glick, Bernard L. McNamee,
and James P. Danly.
New York Independent System Operator, Inc.Docket No. ER16-1404-001
New York Independent System Operator, Inc.Docket No. ER16-1404-002
ORDER ADDRESSING ARGUMENTS RAISED ON REHEARING AND
COMPLIANCE
(Issued July 17, 2020)
In the February 2020 Order,1 the Commission accepted in part, subject to
condition, and rejected in part the New York Independent System Operator, Inc.’s
(NYISO) April 13, 2016 compliance filing to implement renewable resources and self-
supply exemptions to its buyer-side market power mitigation rules. The Commission
conditionally accepted Market Administration and Control Area Services Tariff (Services
Tariff) revisions to be effective for the Class Year 20192 and directed NYISO to file,
within 30 days of the date of the February 2020 Order, a further compliance filing with
the proposed revisions to its Services Tariff.3 As discussed below, we accept, subject to
condition, NYISO’s compliance filing in response to the February 2020 Order, with the
conditionally accepted Services Tariff revisions to be effective for the Class Year 2019.
1 N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,121, at P 1 (February 2020
Order).
2 Id. P 17 (noting that “[t]o provide greater certainty for Class Year 2019
participants,” the Commission is “conditionally accepting NYISO’s Services Tariff
revisions to implement the renewable resources and self-supply exemptions effective for the Class Year 2019”).
3 Capitalized terms that are not defined in this order have the meaning specified in the tariff.
Docket Nos. ER16-1404-001 and ER16-1404-002- 2 -
Pursuant to Allegheny Defense Project v. FERC,4 the rehearing requests filed in
this proceeding may be deemed denied by operation of law. As permitted by section
313(a) of the Federal Power Act (FPA),5 however, we are modifying the discussion in the
February 2020 Order and continue to reach the same result in this proceeding, as
discussed below.6
I.Background
NYISO’s buyer-side market power mitigation rules provide that, unless exempt
from mitigation, new capacity resources must enter the New York City or G-J Locality
Installed Capacity (ICAP) markets (mitigated capacity zones)7 at a price at or above an
applicable offer floor until their capacity clears 12 monthly auctions.8 NYISO will
exempt a new entrant from the offer floor if the new entrant passes either Part A or Part B
of the mitigation exemption test.9 Under Part A, NYISO will exempt a new entrant from
the offer floor if the forecast of capacity prices in the first year of a new entrant’s
operation is higher than the default offer floor, which is 75%t of the net cost of new entry
(CONE) of the hypothetical unit modeled in NYISO’s most recent demand curve reset.
Under Part B, NYISO will exempt a new entrant from the offer floor if the forecast of
4 Allegheny Defense Project v. FERC, No. 17-1098 (D.C. Cir. June 30, 2020).
5 16 U.S.C. § 825l(a) (2018) (“Until the record in a proceeding shall have been
filed in a court of appeals, as provided in subsection (b), the Commission may at any
time, upon reasonable notice and in such manner as it shall deem proper, modify or set
aside, in whole or in part, any finding or order made or issued by it under the provisions
of this chapter.”).
6 Allegheny Defense Project, slip op. at 30. The Commission is not changing the
outcome of the February 2020 Order. See Smith Lake Improvement & Stakeholders Ass’n
v. FERC, 809 F.3d 55, 56-57 (D.C. Cir. 2015).
7 The Services Tariff defines “Installed Capacity” as “External or Internal
Capacity, in increments of 100 kW, that is made available pursuant to Tariff requirements
and ISO Procedures.” NYISO, Services Tariff, § 2.9 (27.0.0). The G-J Locality
(mitigated capacity zones) consists of Load Zones G, H, I, and J, zones “within which a
minimum level of Installed Capacity must be maintained.” Id. § 2.12 (8.0.0) (defining
“Locality”).
8 Id. § 23.4.5.7 (26.0.0).
9 Id. § 23.4.5.7.2 (26.0.0).
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capacity prices in the first three years of a new entrant’s operation is higher than the unitspecific net CONE of the new entrant.
A. Complaint Order and April 2016 Compliance Filing
In 2015, the Commission granted in part, and denied in part, the complaint filed by
the New York Public Service Commission (New York Commission), New York Power
Authority (NYPA), and New York State Energy Research and Development Authority
(NYSERDA) (collectively, the Complainants), alleging that NYISO’s buyer-side market
power mitigation rules are unjust, unreasonable, or unduly discriminatory or preferential
because the rules are overbroad and result in over-mitigation.10 In the Complaint Order,
the Commission found NYISO’s Services Tariff to be unjust, unreasonable, or unduly
discriminatory or preferential insofar as the buyer-side market power mitigation rules
therein applied to certain narrowly defined renewable and self-supply resources that have limited or no incentive and ability to exercise buyer-side market power to artificially suppress ICAP market prices.11 The Commission therefore required NYISO to make a compliance filing to revise its buyer-side market power mitigation rules to exempt a
narrowly defined set of renewable and self-supply resources.12
With regard to the renewable resources exemption, the Commission found that
applying NYISO’s buyer-side market power mitigation rules to certain renewable
resources up to a megawatt (MW) cap was unjust, unreasonable, or unduly discriminatory
or preferential because such resources, narrowly defined, have limited or no incentive and
ability to exercise buyer-side market power to artificially suppress ICAP market prices.
The Commission explained that intermittent renewable resources13 with low capacity
factors and high development costs, including many wind and solar resources, narrowly
defined, have limited or no incentive and ability to exercise buyer-side market power.14
In order to ensure that the renewable resources exemption is limited to only renewable
resources with limited or no incentive and ability to exercise buyer-side market power,
10 N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 153 FERC ¶ 61,022 (2015) (Complaint Order), reh’g denied, 154 FERC ¶ 61,088 (2016).
11 Complaint Order, 153 FERC ¶ 61,022 at PP 2, 36.
12 Id. P 2.
13 The Commission defined “intermittent renewable resources” for purposes of the renewable resources exemption to mean renewable resources that cannot be stored by the facility owner or operator and that have variability beyond the control of the facility
owner or operator. Id. P 47 n.116 (citations omitted).
14 Id. P 2.
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the Commission required NYISO to define the exemption to limit the type and amount of renewable resources that may qualify.15 The Commission stated that NYISO should
work with its stakeholders to develop a MW cap for renewable resources eligible for
exemption based on NYISO’s mitigated capacity zones and to provide support for the
proposed limitation.16
As for the self-supply exemption, the Commission found that certain self-supply
resources, narrowly defined, have limited or no incentive and ability to exercise buyer-
side market power. The Commission reasoned that, if a load serving entity, such as a
municipality, cooperative, or single customer entity, self-supplies the majority of its
needed capacity, the amount of capacity it procures from the ICAP markets will be
relatively small. Therefore, the Commission explained, uneconomic entry would reduce
the cost of procuring this portion by less than the cost of financing the uneconomic entry
in the first place.17 The Commission required NYISO to exempt from its buyer-side
market power mitigation rules those load serving entities whose ICAP portfolios are
consistent with reasonably anticipated levels of their future ICAP obligations, as
measured by use of appropriate net-short and net-long thresholds.18 The Commission
also directed NYISO to consider: (1) the impacts of state decisions to subsidize resources
that are owned or contracted for by a self-supplied load serving entity; (2) whether to bar
from the self-supply exemption projects that have irregular or anomalous cost or revenue
advantages that do not reflect arms-length transactions or that are not in the ordinary
course of the self-supply load serving entity’s business; and (3) whether to exclude from
the self-supply exemption load serving entities that have arrangements for payments or
subsidies specifically tied to the load serving entity clearing its project in NYISO’s ICAP
market or to the construction of the project.19
On April 13, 2016, in compliance with the Complaint Order, NYISO filed
proposed revisions to its Services Tariff to implement renewable resources and self-
supply exemptions to its buyer-side market power mitigation rules (April 2016
Compliance Filing). NYISO’s April 2016 Compliance Filing included rules governing
eligibility for both exemptions, rules addressing the revocation of each exemption, a MW
cap on the amount of ICAP eligible for the renewable resources exemption in a given
Class Year, net-short and net-long thresholds for the self-supply exemption, certification
15 Id. PP 49-50.
16 Id.
17 Id. P 61.
18 Id. P 62.
19 Id. P 63.
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and acknowledgement requirements for the self-supply exemption, and limits on requesting multiple exemptions in the same Class Year.20
B.February 2020 Order
In the February 2020 Order, the Commission accepted in part, subject to
condition, and rejected in part, NYISO’s April 2016 Compliance Filing to implement
renewable resources and self-supply exemptions, directing that the conditionally accepted Services Tariff revisions be effective for the Class Year 2019. The Commission also directed NYISO to submit a further compliance filing within 30 days.21
Relevant to this order, the Commission accepted in part NYISO’s proposed
eligibility criteria for the self-supply exemption, but rejected NYISO’s proposal to allow certain instrumentalities of the State to be eligible for the exemption. Specifically, the Commission rejected NYISO’s proposal to allow “public authorit[ies] or corporate
municipal instrumentalit[ies], including a[ny] subsidiary thereof, created by the State of New York that own[] or operate[] generation or transmission and that [are] authorized to produce, transmit or distribute electricity for the benefit of the public,” to be eligible for the self-supply exemption, finding that it would be contrary to the rationale underlying the self-supply exemption, as set forth in the Complaint Order.22
Also, as relevant here, the Commission rejected NYISO’s proposed annual 1,000
MW cap on the renewable resources exemption (measured in ICAP), finding that
NYISO’s proposed cap failed to comply with the Complaint Order.23 Specifically, the
Commission found that, rather than basing the cap on the mitigated capacity zones, as
noted in the Complaint Order, NYISO proposed a cap based on historical entry of all
resource types across the entire New York Control Area (NYCA). Therefore, the
20 NYISO conducts its interconnection process through Class Years, by which a
new generator elects to join a Class Year and provides NYISO the required information,
including any application for an exemption to the buyer-side market power mitigation
rules. See NYISO, Open Access Transmission Tariff (OATT), Attach. X, § 30.1 (9.0.0)
(defining Class Year); NYISO, OATT, Attach. S, § 25.5.9 (11.0.0) (explaining Class
Year start date and schedule); NYISO, Services Tariff, Attach H. § 23.4.5.7.9.1 (26.0.0)
(regarding requesting a competitive entry exemption); Proposed Services Tariff
§§ 23.4.5.7.13.1, 23.4.5.7.14.1.1(a) (regarding requesting a renewable resources or selfsupply exemption).
21 February 2020 Order, 170 FERC ¶ 61,121 at P 1.
22 Id. PP 53, 65, 66.
23 Id. PP 48, 49.
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Commission directed NYISO to submit a revised cap that would be: (1) narrowly
tailored to the mitigated capacity zones, and not based on the entire NYCA; and (2) based on unforced capacity (UCAP) 24 rather than ICAP. The February 2020 Order emphasized that the MW cap would limit “the risk that the renewable resources exemption will
significantly impact market prices and it is such limitation that makes this tariff revision just and reasonable.”25 The Commission further directed NYISO “to be mindful of the relationship between: (1) the size of the MW cap; and (2) the limit the MW cap imposes on the renewable resource exemption’s impact to market prices.”26
II. Requests for Rehearing of the February 2020 Order
On March 20, 2020, the New York Commission, NYSERDA, NYPA, and Long
Island Power Authority (LIPA) (collectively, NY Parties), filed a request for rehearing of the February 2020 Order. On March 23, 2020, the American Public Power Association (APPA) filed a request for rehearing of the February 2020 Order. As discussed more
fully below, NY Parties and APPA seek rehearing regarding the Commission’s finding
that public power entities should not be eligible for NYISO’s self-supply exemption. NY Parties also seek rehearing regarding the Commission’s rejection of the 1,000 MW cap
for the renewable resources exemption.
A.Substantive Matters
1.Excluding State Entities from Self-Supply Exemption
a.Requests for Rehearing
APPA and NY Parties argue that the February Order’s exclusion of public power
entities from the self-supply exemption is arbitrary and capricious because it is
inconsistent with the Commission’s directives in the Complaint Order and fails to address
24 ICAP represents the installed capacity or nameplate of a facility, while UCAP is the amount of ICAP that NYISO has qualified to participate in the ICAP market, which takes into account forced outages and forced deratings. The Services Tariff defines
“Unforced Capacity” as the “measure by which Installed Capacity Suppliers will be
rated, in accordance with formulae set forth in the ISO Procedures, to quantify the extent of their contribution to satisfy the NYCA Installed Capacity Requirement, and which will be used to measure the portion of that NYCA Installed Capacity Requirement for which each [load serving entity] is responsible.” NYISO, Services Tariff, § 2.21 (3.0.0); see
also supra note 6 (defining “Installed Capacity”).
25 Id. P 48.
26 Id.
Docket Nos. ER16-1404-001 and ER16-1404-002- 7 -
provisions of the self-supply exemption that prevent public power entities from
exercising market power. Specifically, APPA and NY Parties argue that the Commission
ignores the fact that the self-supply exemption includes a net-long threshold, and a limit
on eligibility for the self-supply exemption to load serving entities with a history of self-
supplying their ICAP requirements.27 APPA and NY Parties contend that the
Commission should have addressed these elements of the self-supply exemption in
explaining its exclusion of public power entities from the exemption. NY Parties add that
ignoring the effect of the net-long threshold is inconsistent with the Commission’s
directive in the Complaint Order to limit the potential for instrumentalities of the State to
suppress ICAP prices on a state-wide basis because “[t]he primary reason for inclusion of
the net-long threshold in the NYISO self-supply exemption proposal is to address the
NYISO potential to impact ICAP prices.”28 Thus, APPA and NY Parties argue, the
Commission’s concern regarding the potential incentives of public power entities like
NYPA were sufficiently addressed in NYISO’s 2016 Compliance Filing through the net-
long threshold and the requirement that eligible entities have a history of self-supplying
their ICAP purchase obligations.29
Moreover, APPA and NY Parties disagree with the Commission’s finding that,
because public power entities, like NYPA, act on behalf of all customers across the New
York State, such entities have the incentive and ability to artificially suppress ICAP
market prices. They state that the evidence cited for this assertion is a quote from a
NYPA annual report describing the broad public purposes behind NYPA’s mission.30
Such a general mission statement, APPA and NY Parties argue, does not support the
assumption that NYPA would have an incentive to pursue strategies to suppress ICAP
prices regardless of the potential impact on the customers it serves.31 APPA contends
that, by relying on NYPA’s mission statement, the Commission misunderstood NYPA’s
mission and dismissed the effectiveness of the net-short and net-long thresholds as
27 APPA Rehearing Request at 8; NY Parties Rehearing Request at 23.
28 NY Parties Rehearing Request at 24-25.
29 APPA Rehearing Request at 10; NY Parties Rehearing Request at 25-26.
30 APPA Rehearing Request at 6-7; NY Parties Rehearing Request at 26-27.
According to NYPA’s 2012 Annual Report, NYPA’s “mission is to provide clean,
economical and reliable energy consistent with its commitment to safety, while
promoting energy efficiency and innovation, for the benefit of its customers and all New Yorkers.” NYISO’s Market Monitoring Unit (MMU) June 1, 2016 Comments at 5 n.11 (quoting NYPA’s 2012 Annual Report).
31 APPA Rehearing Request at 7; NY Parties Rehearing Request at 27.
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applied to public power entities.32 APPA points out that NYPA’s mission, as described
in a recent document33 and on NYPA’s website34 more accurately represents NYPA’s
mission to provide power to its specifically defined set of customers, while recognizing
that those customers provide broader benefits to the State overall.35 APPA explains that
NYPA provides benefits to New Yorkers outside of its customer base only as a side-
effect of serving public and non-profit customers, some of whom provide service to the
entire State.36
b.Commission Determination
We disagree with APPA and NY Parties that the Commission’s determination, in
the February 2020 Order, to exclude public power entities from the self-supply
exemption is arbitrary and capricious and inconsistent with the directives in the
Complaint Order. In the Complaint Order, the Commission expressed “concerns
regarding the state’s ability to artificially suppress prices by channeling uneconomic
entry through an exempted load serving entity” and directed NYISO to “consider the
impacts of state decisions to subsidize resources that are owned or contracted for by a
self-supplied load serving entity.”37 The Commission also directed NYISO to propose
net-short and net-long thresholds “tight enough to prevent a load serving entity from
being able to deliberately overpay for a resource in an attempt to manipulate ICAP
market prices in a way that benefits the load serving entity’s other purchases from the
32 APPA Rehearing Request at 6-7.
33 Id. at 7 (noting that NYPA’s mission is “to power the economic growth and
competitiveness of New York State by providing customers with low-cost, clean, reliable
power and the innovative energy infrastructure and services they value.” (citing New
York Power Authority, 2020-2023 Approved Budget and Financial Plan, at 1) (Dec. 11,
2019)).
34 Id. (noting that NYPA “sells electricity to a wide variety of public, non-profit
and business customers, all of whom have something in common: they provide jobs,
education, health care, and important services to the citizens of New York.” (citing N.Y.
Power Auth., NYPA Customers, https://nypa.gov/power/customers/nypa-customers)).
35 Id.
36 Id.
37 February 2020 Order, 170 FERC ¶ 61,121 at P 66 (citing Complaint Order, 153 FERC ¶ 61,022 at P 61).
Docket Nos. ER16-1404-001 and ER16-1404-002- 9 -
ICAP market.”38 In the February 2020 Order, the Commission found that NYISO had
failed to comply with these directives because NYISO’s proposal to allow certain
instrumentalities of the State to be eligible for the self-supply exemption did not account
for the State’s ability to suppress ICAP market prices through self-supplied load serving
entities.39
Additionally, we are not persuaded by APPA and NY Parties’ arguments that
NYISO’s net-long threshold fully accounts for the State’s ability to suppress ICAP
market prices. We also disagree that the Commission ignored evidence regarding
NYISO’s net-long threshold. The objective of the net-short and net-long thresholds is to
“prevent a load serving entity from being able to deliberately overpay for a resource in an
attempt to manipulate ICAP market prices in a way that benefits the load serving entity’s
other purchases from the ICAP market.”40 As the Commission previously explained, the
“[n]et-short and net-long thresholds will avoid exempting from NYISO’s buyer-side
market power mitigation rules self-supply resources that ‘buy’ substantially more
capacity in NYISO’s ICAP markets than they clear or sell (i.e., that are significantly ‘net-
short’) or that, conversely, clear or sell substantially more capacity than they ‘buy’ (i.e.,
that are significantly ‘net-long’).” 41 Further, net-short and net-long thresholds protect
against the exercise of market power only to the extent that both thresholds are
meaningfully limiting. We acknowledge the self-supply exemption’s net-long threshold
and the limit on eligibility that requires load serving entities to have a history of self-
supplying their ICAP requirements. However, without the net-short threshold, we find
that there would not be sufficient protections in place to ensure that a load serving entity
seeking to use the self-supply exemption does not have the incentive and ability to
artificially suppress ICAP market prices. As the Commission noted in the February 2020
Order, the net-short threshold is premised on the assumption that a load serving entity’s
incentive is to minimize the costs of serving its specific set of customers, and that this
assumption does not hold true for certain State entities, such as NYPA.42 The
Commission also found that “[t]he incentive of certain instrumentalities of the State to act
on behalf of the whole state is critical in considering whether NYISO’s [proposed net-
38 Complaint Order, 153 FERC ¶ 61,022 at P 62.
39 February 2020 Order, 170 FERC ¶ 61,121 at P 67.
40 Complaint Order, 153 FERC ¶ 61,022 at P 62
41 Id.
42 Id. P 67. The net-short threshold assesses whether a load serving entity seeking to use the self-supply exemption would face costs for new entry that are greater than the cost saving that it and its affiliates might receive from any capacity price reduction due to that entry. April 2016 Compliance Filing at 26.
Docket Nos. ER16-1404-001 and ER16-1404-002- 10 -
short and net-long] thresholds will achieve their intended purpose,” and that “these
entities’ ‘other purchases from the ICAP market’ must be considered substantially greater than those purchases made to serve only the entity’s specific set of customers.”
Therefore, the net-long threshold alone is insufficient to address state entities having the incentive and ability to artificially suppress ICAP market prices.
While APPA and NY Parties take issue with the Commission’s use of language in
NYPA’s general mission statement to demonstrate that NYPA acts on behalf of more
than its own specific set of customers, they have not shown sufficient evidence to the
contrary. As APPA points out, NYPA’s 2020-2023 Budget and Financial Plan describes
NYPA’s mission as “to power the economic growth and competitiveness of New York
State by providing customers with low-cost, clean, reliable power and the innovative
energy infrastructure and services they value.”43 APPA adds that NYPA’s website
describes NYPA’s customers as “non-profit and business customers, all of whom have
something in common: they provide jobs, education, health care, and important services
to the citizens of New York.”44 We find that APPA’s description of NYPA’s mission
statement and the website description of NYPA’s customers supports the conclusion that
NYPA’s main focus is the welfare of New York State as a whole. Consistent with the
February 2020 Order, we continue to find that public power entities, like NYPA, act on
behalf of more than their own specific set of customers (i.e., the whole state) and, as a
result, they have the incentive and ability to artificially suppress ICAP market prices.
2.Renewable Resources Exemption MW Cap
a.Requests for Rehearing
NY Parties argue that the February 2020 Order errs in limiting the renewable
resources exemption more stringently than was required by the Complaint Order, which
is contrary to what is required for the Commission to consider in a compliance
proceeding.45 According to NY Parties, NYISO’s April 2016 Compliance Filing
complied with the Complaint Order’s directives to exempt from NYISO’s buyer-side
market power mitigation rules renewable resources that have “limited or no incentive and
ability to exercise buyer-side market power to artificially suppress ICAP market prices”
and to limit the total amount of otherwise eligible renewable resources that could claim
43 See supra note 29.
44 See supra note 30.
45 NY Parties Rehearing Request at 4 (citing Kern River Gas Transmission Co., 133 FERC ¶ 61,162, at P 87 (2010)).
Docket Nos. ER16-1404-001 and ER16-1404-002- 11 -
the exemption.46 NY Parties state that NYISO, in order to strike a balance between the
potential risk of ICAP market suppression and not to impede the entry of renewable
resources unlikely to be used for artificial price suppression, proposed to cap the
exemption at 1,000 MW per Class Year. In performing that balance, NY Parties assert,
NYISO examined historical conditions within the mitigated capacity zones and whether
entry at those levels would be likely to yield artificial price suppression in those zones.
Therefore, NY Parties argue that the Commission should have accepted the proposed
1,000 MW cap, and the Commission’s rejection of the proposed cap is arbitrary and
capricious.47
NY Parties also argue that the February 2020 Order errs in reframing the purpose
of the renewable resources exemption MW cap and “shrinking the exemption granted in
the Complaint Order.”48 NY Parties argue that the Commission, in the Complaint Order,
correctly exempted resources whose characteristics make them ineffective tools for
exercising buyer-side market power, and capped the exemption to “further limit” the
potential for “artificial price suppression.”49 However, NY Parties assert, the February
2020 Order reflects a different view, one aimed at limiting renewable resources’ effect on
NYISO ICAP prices regardless of whether the effect is artificial or natural.50 NY Parties
contend that a more restrictive MW cap amounts to a price support aimed at maintaining
high prices despite increase supply of renewable resources. Therefore, NY Parties assert
that the February 2020 Order suggests that the renewable exemption is just and
reasonable only if limited so that it will not “significantly impact market prices.”51
Similarly, NY Parties argue that such a limitation to cut back on the renewable exemption
wrongly interferes with New York’s authority to promote renewable generation by
undermining New York’s determination to rely increasingly on renewable generation
resources and impermissibly interfering with states’ authority to determine the mix of
generation sources.52 NY Parties argue that, if New York State decides to introduce
additional renewable resources into its market, knowing that adding supply in a market
46 NY Parties Rehearing Request at 4-5.
47 Id. at 9.
48 Id.
49 Id. at 6. (citing Complaint Order, 153 FERC ¶ 61,022 at P 51).
50 Id. at 9-10.
51 Id. at 9.
52 Id. at 10-11.
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lowers prices, the price drop cannot be said to be artificial or unjust and unreasonable.53 NY Parties add that the impact that state generation choices may have on the wholesale market is the “product of the ‘congressionally designed interplay between state and federal regulation’ and the natural result of a system in which regulatory authority is divided between federal and state government.”54
NY Parties also argue that decreasing the renewable resources exemption will
result in unjust and unreasonable wholesale rates.55 NY Parties posit that if the
Commission does not allow NYISO to accept low-cost offers for ICAP at auction, then
NYISO will be required to buy expensive fossil-fueled capacity instead.56 NY Parties
argue that this goes against the Commission’s charge to afford consumers “a complete,
permanent, and effective bond of protection from excessive rates and charges.”57
b.Commission Determination
We disagree with NY Parties’ request for rehearing on this issue. We find that the
Commission properly considered whether NYISO’s 2016 Compliance Filing complied
with the directives contained in the Complaint Order. In the Complaint Order, the
Commission found that it was “unjust, unreasonable, or unduly discriminatory or
preferential to apply NYISO’s buyer-side market power mitigation rules to certain
narrowly defined renewable and self-supply resources that have limited or no incentive
and ability to exercise buyer-side market power to artificially suppress ICAP market
prices,”58 and, to further limit any risk of price suppression, the Commission required
NYISO to “limit the total amount of these renewable resources—in the form of a
megawatt cap—that may receive the renewable resources exemption required herein.”59
The Commission also directed NYISO to “work with its stakeholders to develop a
proposed cap on the total amount of renewable resources eligible for the exemption based
53 Id. at 16.
54 Id. at 17 (citing Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1300 (2016)).
55 Id. at 18.
56 Id. at 18-19.
57 Id. at 19 (citing Atl. Ref. Co. v. Pub. Serv. Comm’n of N.Y., 360 U.S. 378, 388 (1959)).
58 Complaint Order, 153 FERC ¶ 61,022 at P 2.
59 Id. P 47.
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on NYISO’s mitigated capacity zones.”60 Based on these requirements, the Commission
appropriately denied NYISO’s proposed MW cap.61 NYISO proposed a broad MW cap
based on historical entry of all resource types across the entire NYCA, which is
inconsistent with the Complaint Order’s specific directive to propose a MW cap that is
narrowly tailored to the mitigated capacity zones. Although NY Parties contend that the
1,000 MW cap represents a reasonable balance between mitigating the potential risk of
ICAP market suppression and impeding the entry of renewable resources, NYISO’s
proposal was not narrowly tailored to the mitigated capacity zones per the compliance
directive. Therefore, we continue to reach the same result as the February 2020 Order
and find that NYISO’s April 2016 filing did not fully comply with the directives of the
Complaint Order.
We also are not persuaded by NY Parties’ argument that the February 2020 Order
erroneously reframes the purpose of the renewable resources exemption MW cap. NY
Parties argue that the Commission adopted a more restrictive MW cap in the February
2020 Order, resulting in a limited renewable resources exemption, which would maintain
high prices despite an increasing supply of renewable resources. They argue that the
Commission’s actions wrongly interfere with New York State’s authority to promote
renewable generation. We disagree. First, we disagree with the assertion that the
February 2020 Order results in a more restrictive exemption cap than the cap that was
contemplated in the Complaint Order. At issue in the February 2020 Order was whether
NYISO’s April 2016 Compliance Filing met the directives contained in the Complaint
Order. Finding that NYISO’s proposed 1,000 MW cap did not comply with this
directive, the Commission denied NYISO’s proposal and required NYISO to propose a
MW cap that was (1) narrowly tailored to the mitigated capacity zones and not based on
the entire NYCA; and (2) based on UCAP rather than ICAP. The requirement in the
February 2020 Order was neither contingent on a specific resource mix, nor did it require
that NYISO propose a more restrictive cap than was required by the Complaint Order.62
The underlying purpose of the MW cap remains unchanged and is appropriately focused
on mitigating the suppression of ICAP market prices caused by out-of-market actions.
We further disagree that the February 2020 Order interferes with New York State’s authority to determine the mix of generation resources in NYCA. The
60 Id. P 51.
61 February 2020 Order, 170 FERC ¶ 61,121 at P 28.
62 We note that this is illustrated by the fact that NYISO’s most recent compliance filing in this proceeding (April 2020 Compliance Filing), which is discussed in more detail below, does not reflect a cap that is necessarily more restrictive than the cap
proposed in NYISO’s April 2016 Compliance Filing.
Docket Nos. ER16-1404-001 and ER16-1404-002- 14 -
Commission does not improperly intrude on the states’ authority to determine its energy
resource mix and the development of new generation merely by implementing wholesale
rules affecting matters within the states’ jurisdiction.63 We recognize that the FPA
reserves to the state decisions concerning generation; but the FPA provides the
Commission with the jurisdiction and authority to regulate rates for wholesale sales by
those generation resources and we are obligated to ensure that such rates are just and
reasonable and not unduly discriminatory. Indeed, the Commission noted, in the
February 2020 Order, “it is the MW cap limitation that will make [NYISO’s] tariff
revision just and reasonable.”64 We find that the Commission did not take any action in
the February 2020 Order to divest the New York State of its jurisdiction over generation
facilities or to promote renewable generation. We also find that the Commission did not
require NYISO to purchase capacity from a specific fuel source type, as NY Parties
assert. Therefore, we find that it was within the Commission’s jurisdiction to require
NYISO to implement a cap meeting the requirements established in the February 2020
Order.
III. NYISO’s April 2020 Compliance Filing
On April 7, 2020, NYISO submitted proposed revisions to its Services Tariff to
address the Commission’s directives in the February 2020 Order related to NYISO’s
renewable resources exemption. Specifically, NYISO proposes to calculate a MW cap
for each mitigated capacity zone based on a formula, referred to herein as the Renewable
Exemption Limit, rather than a static cap. NYISO states that using a formula to calculate
63 See, e.g., FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 776 (2016)
(“When FERC sets a wholesale rate, when it changes wholesale market rules, when it
allocates electricity as between wholesale purchasers—in short, when it takes virtually
any action respecting wholesale transactions—it has some effect . . . on retail rates. That
is of no legal consequence.”); ISO New England, Inc., 135 FERC ¶ 61,029, at P 170
(2011), reh’g denied, 138 FERC ¶ 61,027 (2012), aff’d sub nom. New Eng. Power
Generators Ass’n v. FERC, 757 F.3d 283, 295 (D.C. Cir. 2014)(finding that load serving
entities are “free to shape their portfolios as they choose . . . ‘provided these new
resources clear the auction,’” and approving the Commission’s discretion to determine
that “encouraging renewable energies was less important than allowing [] out-of-market
entrants to depress capacity prices.”); Conn. Dept. of Pub. Util. Control v. FERC,
569 F.3d 477, 481 (D.C. Cir. 2009) (finding that the Commission’s Installed Capacity
Requirement affects capacity prices but not necessarily new capacity construction and,
therefore, the Commission does not engage in impermissible regulation of generation
facilities when it sets the price of capacity to incentivize procurement of resources
adequate to meet forecasted peak load).
64 February 2020 Order, 170 FERC ¶ 61,121 at P 67.
Docket Nos. ER16-1404-001 and ER16-1404-002- 15 -
the Renewable Exemption Limit, as opposed to a static MW cap, will allow for a
“dynamic limit that reflects the market conditions occurring in each mitigated capacity zone at the time NYISO applies the Renewable Exemption Limit.”65 NYISO further states that the proposed Renewable Exemption Limit is narrowly tailored to the mitigated capacity zones because it: (1) accounts for each of the factors relevant to determining the capacity price impacts of renewable resource entry, such as retirements and load changes, as those factors vary over time; and (2) ensures that the renewable resources exemption will not significantly reduce capacity market prices.66
NYISO elaborates that under its proposed formula, the Renewable Exemption
Limit for each mitigated capacity zone will be equal to the greater of: (a) the UCAP MW
associated with NYISO’s calculation of the Minimum Renewable Exemption Limit that
would reduce the market price forecast for the mitigated capacity zone by no more than
$0.50/kW-month; or (b) the sum of: (1) the UCAP MW associated with the Change in
Forecasted Peak Load; (2) the UCAP MW value identified by NYISO associated with the
Incremental Regulatory Retirements; (3) the Unforced Capacity Reliability Margin67
Impact of the Qualified Renewable Exemption Applicants in the Class Year Study,
Additional System Deliverability Upgrade (SDU) Study, or Expedited Deliverability Study; and (4) the UCAP MW in the Renewable Exemption Bank for each Mitigated Capacity Zone.68
NYISO states that it is also proposing to modify the procedures that govern the
revocation provision to comply with the Commission’s February 2020 Order.
Specifically, these modifications would provide an opportunity for an exemption holder
to explain to NYISO why revocation may be inappropriate before NYISO revokes a
renewable resources exemption.69 NYISO also proposes ministerial and clarifying
65 April 2020 Compliance Filing at 5.
66 Id. at 7.
67 NYISO proposes to define Unforced Capacity Reserve Margin, referred to
herein as URM, as “the megawatt value calculated by the ISO when converting the
(a) the Installed capacity Reserve Margin (IRM) for the NYCA or (b) the Locational
Minimum Installed Capacity Requirement (LCR) for a given Locality within the NYCA into UCAP terms using ICAP to UCAP conversion factors consistent with the
corresponding resource adequacy study.” Proposed Services Tariff § 23.2.1.
68 April 2020 Compliance Filing at 6-7.
69 Id. at 19.
Docket Nos. ER16-1404-001 and ER16-1404-002- 16 -
revisions to relevant Services Tariff language to account for changes occurring in the time between the April 2016 and April 2020 compliance filings.70
A. Notice of Filing and Responsive Pleadings
Notice of the Compliance Filing was published in the Federal Register, 85 Fed.
Reg. 20,685 (April 14, 2020), with interventions and protests due on or before April 28,
2020. Public Citizen, Inc., American Wind Energy Association, Equinor Wind, Solar
Energy Industries Association, Natural Resources Defense Council, the City of New
York, the MMU, Helix Ravenswood, LLC (Ravenswood), Indicated New York
Transmission Owners (Indicated NYTOs), and NYSERDA filed motions to intervene.
The New York Commission filed a notice of intervention, and together with NYSERDA,
and the City of New York (collectively, New York Entities) filed comments. The MMU
and Clean Energy Advocates71 filed comments. Ravenswood filed a limited protest.
Indicated NYTOs72 and Independent Power Producers of New York (IPPNY) filed
protests.
On May 13, NYISO, IPPNY, and Equinor Wind filed answers.
B.Procedural Matters
Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure,73 the notice of intervention and timely, unopposed motions to intervene serve to make the entities that filed them parties to this proceeding.
Rule 213(a)(2) of the Commission’s Rules of Practice and Procedure74 prohibits
an answer to a protest or an answer unless otherwise ordered by the decisional authority.
70 Id. at 1-2.
71 Clean Energy Advocates include: the American Wind Energy Association, the Alliance for Clean Energy New York, the Natural Resources Defense Council,
Sustainable FERC Project, and the Solar Council.
72 Indicated NYTOs include: Central Hudson Gas & Electric Corporation,
Consolidated Edison Company of New York, Inc., 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.
73 18 C.F.R. § 385.214 (2019).
74 18 C.F.R. § 385.213(a)(2).
Docket Nos. ER16-1404-001 and ER16-1404-002- 17 -
We accept NYISO’s, IPPNY’s, and Equinor Wind’s answers because they have provided information that assisted us in our decision-making process.
C.Substantive Matters
We accept, subject to condition, NYISO’s April 2020 Compliance Filing to
implement its renewable resources exemption, with the conditionally accepted Services Tariff revisions to be effective for the Class Year 2019. We direct NYISO to submit a further compliance filing within 45 days of the date of this order, as discussed below.
Unless otherwise discussed below, we accept NYISO’s filing as in compliance with the February 2020 Order.
1.Incremental Regulatory Retirement
a.Incremental Regulatory Retirement Definition
i.April 2020 Compliance Filing
NYISO states that the Renewable Exemption Limit formula would account for
“Incremental Regulatory Retirements,” which is intended to reflect incremental
retirements attributable to “direct” regulatory action that has taken place since the prior
study period. NYISO states that the core concern associated with State policies that
result in new entry of renewable energy resources is that they result in an out-of-market
supply increase that can depress capacity prices. NYISO explains that its proposal for
Incremental Regulatory Retirements recognizes that when the State takes out-of-market
actions that reduce supply, these actions offset the effects of the renewable resource
policies that increase supply.75 According to NYISO, it is the net effect of State policy
on supply in the capacity market that matters, which is the principle underlying the
Competitive Auctions with Sponsored Policy Resources (CASPR) construct that the
Commission accepted in ISO-NE.76 NYISO contends that it is important that
Incremental Regulatory Retirements only include retirements that are substantially
caused by changes in regulatory policies or regulations, so NYISO does not propose to
include any market exit that is a result of changes in market conditions or fluctuations
that render a resource uneconomic. NYISO further elaborates that it proposes to have the
Incremental Regulatory Retirements component only comprise those retirements where a
75 April 2020 Compliance Filing at 8.
76 Id. (citing ISO New England, Inc., 162 FERC ¶ 61,205 (2018)).
Docket Nos. ER16-1404-001 and ER16-1404-002- 18 -
public policy decision or action external to the market contributes materially to the retirement.77
Proposed section 23.4.5.7.13.5.3 of NYISO’s Services Tariff states that Incremental Regulatory Retirements:
[S]hall include the incrementally new MW of Retirements
forecasted in accordance with . . . the Services Tariff that
have retired, or are planning to permanently cease operation,
in order to comply with or in response to new or amended
regulations or statutes, or other regulatory or related action,
including but not limited to those that impact (i) Generator
emissions, (ii) inability to renew or modify the necessary
operating permits, (iii) availability of fuel supply,
(iv) assessment of property taxes, and (v) compensation or
other incentive outside of the ISO markets received by a
Generator that is contingent upon its permanently ceasing
operation. In order for the ISO to identify UCAP MW of
Incremental Regulatory Retirements such regulatory action
must be a significant factor in the retirement of the Generator
(i.e., a factor that contributes materially to the retirement).78
ii.Protests and Comments
NY Entities, Clean Energy Advocates, and Indicated NYTOs principally argue
that the Commission should direct NYISO to modify the UCAP MW value associated
with the Incremental Regulatory Retirements to consider all incremental retirements.79
Indicated NYTOs contend that limiting Incremental Regulatory Retirements to “those
incremental retirements resulting from new or amended regulations or statutes, or other
regulatory or related action,” is ambiguous and unworkable.80 Indicated NYTOs add that
the renewable resources exemption should allow Exempt Renewable Technology
resources to offset all incremental retirements, as opposed to the subset of retirements
77 Id. at 8-9.
78 See Proposed Services Tariff § 23.4.5.7.13.5.3.
79 NY Entities Protest at 5; Clean Energy Advocates Protest at 6; Indicated NYTOs Protest at 9-10.
80 Indicated NYTOs Protest at 9.
Docket Nos. ER16-1404-001 and ER16-1404-002- 19 -
flagged by NYISO.81 NY Entities note that nearly all retirement decisions are essentially economic, and that setting a discretionary standard for NYISO to distinguish between the reasons for a retirement would add unnecessary uncertainty and risk for preferential
treatment to the process.82
If, however, the Commission decides to accept NYISO’s proposal to only use
Incremental Regulatory Retirements in its proposed Renewable Exemption Limit,
Indicated NYTOs and Clean Energy Advocates request a series of clarifications and
modifications to NYISO’s proposed definition and use of Incremental Regulatory
Retirements. Indicated NYTOs first ask that the Commission direct NYISO to amend
“new or amended regulations or statutes” to “any regulations or statutes.”83 Indicated
NYTOs explain that a key event for the purpose of the renewable resources exemption is
not when a regulation or statute is amended, but when a retirement occurs and how much
UCAP was provided by retiring resources.84 To illustrate their point, Indicated NYTOs
provide the example of Indian Point Units 2 and 3.85 Indicated NYTOs point out that,
while the agreement to retire the units was reached in 2017, the actual retirement of the
units will not take place until 2020 and 2021.86 According to Indicated NYTOs, it would
run contrary to the purpose of incorporating the impact of retirements on the supply of
UCAP in the Renewable Exemption Limit if the retirements are disregarded on the basis
that the antecedent regulation is not new enough or not amended.87 However, Indicated
NYTOs stress that if the Commission accepts NYISO’s proposed use of “new or
amended,” the Commission should direct NYISO to revise the meaning of new or
amended and clarify: (1) that the permitted offset of such incremental retirements would
apply regardless of when the antecedent law or regulation contributing to retirement was
enacted, promulgated or became effective, or whether it was considered in a prior Class
81 Id. at 10.
82 NY Entities Protest at 7.
83 Indicated NTYOs Protest at 10.
84 Id. at 10-11.
85 Id. at 11.
86 Id.
87 Id.
Docket Nos. ER16-1404-001 and ER16-1404-002- 20 -
Year Study; (2) whether NYISO can include retirements attributable to the Peaker Rule in the Formula.88
Clean Energy Advocates argue that NYISO should specify a broader definition of “direct” regulatory action. Specifically, Clean Energy Advocates state that NYISO
should broaden the “regulations or statutes” as used in the definition of Incremental
Regulatory Retirement.89 In support of their argument, Clean Energy Advocates explain that “much of the electric industry restructuring that has occurred in New York took place through orders of the New York Public Service Commission, and not through regulations or statutes.”90 Noting this, Clean Energy Advocates suggest that NYISO should adopt
language similar to that used in NYISO’s transmittal letter accompanying its compliance filing. In the transmittal letter, NYISO refers to “a public policy decision or action
external to the market,” and to “a new regulatory action.”91
NY Entities and Clean Energy Advocates specify that Incremental Regulatory
Retirements should include seasonally deactivated resources.92 According to NY
Entities, NYISO’s intention to capture market exit that is the result of new regulatory
action is “unworkable and invites manipulation and gaming.”93 Clean Energy Advocates
contend that, although the plants are not technically retired, the effect of unavailable units
on summer capacity prices are the same as if they were retired.94 Clean Energy
Advocates add that NYISO’s proposed treatment risks incenting the exercise of market
power by incumbent generation owners with multiple generation resources who can keep
otherwise uneconomic plants open during the winter because the summer capacity price
increase would boost summer capacity revenues for the owner’s portfolio.95 NY Entities
argue that owners with existing units that would be negatively impacted by a larger
renewable resources exemption may try to avoid categorizing themselves as retired to
88 Id. at 12.
89 Clean Energy Advocates Protest at 8.
90 Id.
91 Id. (citing April 2020 Compliance Filing at 8-9).
92 NY Entities Protest at 5.
93 Id. at 6.
94 Clean Energy Advocates Protest at 7.
95 Id.
Docket Nos. ER16-1404-001 and ER16-1404-002- 21 -
avoid being included in NYISO’s calculation of the Minimum Renewable Exemption Limit.96
Indicated NYTOs disagree with NYISO’s proposal to only include generators that
have retired or are planning to permanently cease operation when accounting for
reductions in UCAP supply that may be covered by resources receiving the renewable
resources exemption.97 Indicated NYTOs explain that rather than electing to retire
permanently and completely as an immediate response to such regulations, a generator
might decide to enter an ICAP Ineligible Forced Outage and not fully retire until later,
when the regulation may be deemed by NYISO or the MMU as no longer new, or an
incumbent generator could adopt operational limits that amount to a seasonal derating or
a partial deactivation.98 Indicated NYTOs claim that it would be unreasonable to exclude
the reductions in the supply of UCAP associated with the resources that may not operate
in the summer for purposes of calculating the Renewable Exemption Limit applicable to
the summer capability period.99 Further, Indicated NYTOs’ allege that the Renewable
Exemption Limitation should be based upon the reduction in the supply of UCAP, rather
than the retirement of specific generators because the focus should be on the withdrawal
of supply.100
Ravenswood contends that NYISO should specify that generators that are out of service at the time of retirement are expressly excluded from the Incremental Regulatory Retirement component of the Renewable Exemption Limit. Specifically, Ravenswood states that the Commission should direct NYISO to revise its proposal to state that units retiring after being either mothballed or placed into an Ineligible ICAP Forced Outage status will be excluded from Incremental Regulatory Retirements.101
IPPNY cites NYISO’s proposed Services Tariff section 23.4.5.7.13.5.3, and
argues that NYISO’s proposed language is silent as to whether NYISO will ensure that
Incremental Regulatory Retirements exclude a generation owner’s economic decisions.102
96 NY Entities Protest at 7.
97 Indicated NYTOs Protest at 12.
98 Id. at 12-13.
99 Id. at 13.
100 Id.
101 Ravenswood Protest at 19. 102 IPPNY Protest at 7.
Docket Nos. ER16-1404-001 and ER16-1404-002- 22 -
IPPNY proposes that NYISO revise the relevant portion of section 23.4.5.7.13.5.3 to
explicitly state: “Incremental Regulatory Retirements shall not encompass market exit that is a result of changes in market conditions or fluctuations that render a resource
uneconomic.”103
IPPNY and Ravenswood add that the Commission should direct NYISO to
propose tariff language requiring NYISO to perform an economic analysis of retiring
generators—to be provided to the MMU as a part of NYISO’s proposed consultation
process with the MMU—before deciding whether a retirement qualifies as an
Incremental Regulatory Retirement.104 IPPNY further asks that the Commission require
NYISO to clarify that regulatory changes that are applicable to all business in New York
State are part of the normal costs of doing business. According to IPPNY, any retirement
caused by an increase in operating costs related to this kind of regulatory change should
not be classified as an Incremental Regulatory Retirement.105 Ravenswood asks that the
Commission direct NYISO to either explain why retirements resulting from the
“assessment of property taxes” should qualify as Incremental Regulatory Retirements, or
eliminate this aspect of the definition.106 IPPNY also argues that the Commission should
direct NYISO to clarify that Incremental Regulatory Retirements do not include proposed
retirements that trigger a reliability need if a renewable resource is selected to meet the
reliability need.107 IPPNY states that any other approach would inappropriately increase
the number of renewable MWs exempted.108
iii.Answers
NYISO states that the principle underlying its proposed treatment of retirements is
that buyer-side market power mitigation rules should protect the market from State
actions that create an “artificial supply-demand disequilibrium.”109 IPPNY states that the
proposal to calculate the Renewable Exemption Limit based on all retirements is
specious, and contends that, if implemented, would allow excessive quantities of
103 Id. at 8.
104 IPPNY Protest at 8; Ravenswood Protest at 20. 105 IPPNY Protest at 8.
106 Ravenswood Protest at 20.
107 IPPNY Protest at 12.
108 Id.
109 NYISO Answer at 5.
Docket Nos. ER16-1404-001 and ER16-1404-002- 23 -
subsidized resources to enter the capacity market as price takers, thereby holding market prices at low levels indefinitely.110 IPPNY warns that expanding Incremental Regulatory Retirements to include all retirements would result in “large quantities of subsidized
resources” overwhelming “the supply-demand balance in the capacity market,” resulting “in substantial artificial capacity surpluses that may not be absorbed for several years.”111 NYISO explains that “[u]ltimately, it is the net effect of State policy on supply in the
capacity market that matters . . . ,” and points out that if a generator is uneconomic and
unable to recover its costs sufficiently via the markets, regardless of State action, its exit is expected and should not count as an offset to non-market based entry.112 NYISO adds that only State actions that reduce surplus supply truly ameliorate the price suppressive
concerns associated with State-subsidized entry.113
Equinor Wind agrees with protesting parties that NYISO’s proposal should be
modified to ensure that all retirements are considered when calculating the Renewable
Exemption Limit.114 Equinor Wind states that it is important to ensure that the
application of mitigation is based on transparent and objective criteria. Equinor Wind,
however, contends that NYISO’s proposal for limiting the inclusion of retirements in its
proposed Renewable Exemption Limit is dependent on NYISO’s and the MMU’s
determinations.115 Equinor Wind expresses concerns about gaming, and contends that
NYISO’s proposal would effectively encourage generator owners to take steps to avoid
having their retirement count toward the Renewable Exemption Limit in order to
artificially increase prices to benefit other resources in their portfolio.116
IPPNY states that it disagrees with Indicated NYTO’s proposal to add the retired
unit Indian Point Unit 2’s capacity to the Renewable Exemption Limit because this
capacity was included in NYISO’s 2017 Class Year.117 IPPNY adds that NYISO’s
proposed tariff clearly excludes the Indian Point Units 2 and 3 retirements from being
110 IPPNY Answer at 3.
111 Id. at 7.
112 NYISO Answer at 5. 113 Id. at 6.
114 Equinor Wind Answer at 3. 115 Id. at 17.
116 Id. at 18
117 IPPNY Answer at 9.
Docket Nos. ER16-1404-001 and ER16-1404-002- 24 -
considered Incremental Regulatory Retirements because the Renewable Exemption Bank
will not include retirements that were addressed in prior Class Years.118 IPPNY argues
that including Indian Point Units 2 and 3 could cause the G-J capacity market to move
almost 1,000 MW beyond the zero crossing point of the G-J ICAP Demand Curve.119
NYISO argues that it is reasonable to exclude seasonally deactivated resources
from the Renewable Exemption Limit because these resources will provide capacity for a
portion of the year.120 NYISO notes that to the extent these units are truly uneconomic,
they will exit the market permanently and will eventually be included in the extent they
qualify as Incremental Regulatory Retirements.121 According to IPPNY, protesting
parties requesting the inclusion of units that do not operate in the summer fail to
recognize that NYISO is expected to reflect the reduced summer average UCAP ratings
of suppliers engaging in seasonal shutdowns in its Part A and Part B mitigation
exemption tests.122 IPPNY contends that deeming suppliers that choose to cease
operating during the summer months to be Incremental Regulatory Retirements would
impermissibly suppress capacity prices during the months in which the supplier
operates.123 NYISO states that until these units permanently retire, they will be removed
from the forecast used to evaluate the Part A and Part B mitigation exemption tests.124
NYISO states that taking a seasonal outage is a legitimate regulatory compliance plan
and states that the near-term risk posed by gaming stratagems related to these units
appears to be low. NYISO explains that, to date, it is not aware of any instances in which
a market participant has engaged in gaming associated with taking otherwise permissible
seasonal outages.125
NYISO explains that existing processes already require NYISO to evaluate units
that are mothballed or placed in an Ineligible ICAP Forced Outage status and evaluate if
they would become economic during the forecast period, in which case they would be
118 Id.
119 Id. at 7-8.
120 NYISO Answer at 7.
121 Id.
122 IPPNY Answer at 11-12. 123 Id. at 3-4.
124 NYISO Answer at 7. 125 Id. at 8.
Docket Nos. ER16-1404-001 and ER16-1404-002- 25 -
counted as existing units for buyer-side market power mitigation purposes.126 However, NYISO further explains that if these units are forecasted to be uneconomic to return, or to continue operation, they would be included as a retirement under the buyer-side market
power mitigation rules, and if the criteria for Incremental Regulatory Retirements are
met, they would, and should, be included as Incremental Regulatory Retirements.127
NYISO also states that NYISO will adjust the Renewable Exemption Bank to account for prior forecasts of retirements that did not materialize.128 According to NYISO, this
approach, combined with the Short-Term Reliability Process will ensure that Incremental Regulatory Retirements do not include resource retirements that are retained under a
reliability-must-run (RMR) agreement.129
NYISO states that it is already clear from the plain language included in the April
2020 Compliance Filing that purely market-based economic retirements will be excluded
from the definition of Incremental Regulatory Retirements.130 Therefore, NYISO argues,
there is no need to add IPPNY’s suggested language to the language proposed in its
compliance filing. NYISO also argues that the Commission should reject IPPNY’s
suggestion that the Commission require NYISO to perform an economic analysis of
retiring generators before determining whether the retirement qualifies as an Incremental
Regulatory Retirement.131 NYISO explains that its proposal works in conjunction with
existing tariff mechanisms to establish what subset of retirements would be included as
Incremental Regulatory Retirements and notes that the provisions already provide for the
economic evaluation IPPNY seeks.132 NYISO points out, for example, that section
23.4.5.6.1 of its Services Tariff empowers NYISO to conduct a physical withholding
review whenever a market participant seeks to remove capacity from a mitigated capacity
126 Id. at 13.
127 Id.
128 Id.
129 Id. at 13-14.
130 Id. at 8.
131 Id.
132 Id. at 9-10.
Docket Nos. ER16-1404-001 and ER16-1404-002- 26 -
zone.133 NYISO adds that its recently adopted short-term reliability process requires
resources to submit all relevant economic data for NYISO’s use during review.134
NYISO continues that Incremental Regulatory Retirements will not include units that are either found be needed for reliability or that are operating under an RMR
agreement.135 NYISO explains that Services Tariff sections 23.4.5.7.15.6 and
23.4.5.7.15.7 specify that various resources needed for reliability will be “Excluded
Units” for buyer-side market power mitigation forecast purposes.136 NYISO adds that
when proposed generator retirements require a temporary RMR agreement, they are not
included in the buyer-side market power mitigation forecast. Therefore, NYISO states,
these retirements will not be counted in the determination of Incremental Regulatory
Retirements.137
Indicated NYTOs reiterate that all anticipated retirements and long-term
deactivations should be considered in the Renewable Exemption Limit. However, if the
Commission accepts NYISO’s proposal, Indicated NYTOs contend that the Incremental
Regulatory Retirement definition should be clarified.138 Indicated NYTOs further
reiterate that retirement decisions are complex and can have various interwoven
assumptions and considerations unique to the owner(s) that involve the application of
considered business judgment rather than textbook economics.139 Indicated NYTOs also
respond to IPPNY’s statements regarding Part A exemptions and claim that it is not
sufficient to reflect seasonal UCAP withdrawals only in examination of Part A
exemptions because Part A exemptions are only available when the ICAP market is
tight.140
Additionally, Indicated NYTOs reiterate concerns regarding the likelihood of
gaming if the UCAP MWs withheld from the ICAP market due to regulatory compliance
133 Id. at 9.
134 Id. at 9-10.
135 Id. at 10.
136 Id.
137 Id.
138 Indicated NYTOs Answer at 4-8. 139 Id. at 4-5.
140 Id. at 9.
Docket Nos. ER16-1404-001 and ER16-1404-002- 27 -
are not included in the Renewable Exemption Limit.141 Indicated NYTOs also contend
that no such gaming could have been observed because the opportunity for gaming would arise only if the Commission were to accept NYISO’s proposed Incremental Regulatory Retirement component. Indicated NYTOs further contend that while generation
retirements are examined by NYISO for potential exercise of market power, there is no
mechanism under the Services Tariff for NYISO to identify attempts to exercise market power by not retiring a unit.142
iv.Commission Determination
We find that the Incremental Regulatory Retirement component of the Renewable
Exemption Limit, as proposed in NYISO’s April 2020 Compliance Filing, complies with
the February 2020 Order. We first find that, as required by the February 2020 Order, the
proposed Incremental Regulatory Retirement component is both expressed in UCAP and
is narrowly tailored to the mitigated capacity zones. We also agree with NYISO that the
proposed definition of Incremental Regulatory Retirement appropriately recognizes that
out-of-market actions that reduce the supply of renewable resources in the capacity
market offset the effects of renewable resource policies that increase supply of renewable resources in the capacity markets. Therefore, we find that the Incremental Regulatory
Retirements component of NYISO’s proposed Renewable Exemption Limit is mindful of the relationship between: (1) the size of the MW cap; and (2) the limit the MW cap
imposes on the renewable resources exemption’s impact to market prices, as required by the February 2020 Order.
We find that NYISO’s proposal to limit the Incremental Regulatory Retirement component of the Renewable Exemption Limit to those units that NYISO determines
qualify under its proposed definition of Incremental Regulatory Retirements complies
with the requirements of the February 2020 Order. We disagree with protesters that
NYISO should revise its proposal to include all retirements, as opposed to Incremental Regulatory Retirements, in the Renewable Exemption Limit. We find that the inclusion of all retirements would result in a MW cap that fails to represent the offsetting effect of out-of-market subsidies impacting entry. This result would be inconsistent with the
requirements of the February 2020 Order.
We also find that NYISO’s decision to exclude seasonally deactivated resources
from its proposed definition of Incremental Regulatory Retirements component complies
with the directives of the February 2020 Order. We therefore disagree with protesters
that the Incremental Regulatory Retirement component should include seasonally
deactivated resources. We agree with NYISO that those resources should not qualify as
141 Id. at 8-9.
142 Id. at 9.
Docket Nos. ER16-1404-001 and ER16-1404-002- 28 -
Incremental Regulatory Retirements because those resources are not retired and therefore
retain the ability to participate in any of NYISO’s monthly auctions, even if they choose
not to participate during certain months. Further, we agree with NYISO that taking a
seasonal outage can be the result of a legitimate regulatory compliance plan. NYISO
states that, should a unit choose to retire, NYISO would determine, in consultation with
the MMU, whether the unit should be counted as an Incremental Regulatory
Requirement. Therefore, we see no reason to delay the implementation of NYISO’s
Renewable Exemption Limit, as proposed, because of potential gaming-related concerns.
Additionally, we disagree with Ravenswood that NYISO’s proposed Incremental
Regulatory Retirement component needs to be revised to clarify that units that are
mothballed or placed into an Ineligible ICAP Forced Outage status will be excluded. We
find that NYISO has provided sufficient clarification on this point. As NYISO explains,
the existing Tariff already requires NYISO to evaluate units in a mothballed or Ineligible
ICAP Forced Outage status. Specifically, NYISO evaluates whether units would become
economic during the forecast period. If so, such units would be counted as existing units
for buyer-side market power mitigation purposes and thus excluded from the Incremental
Regulatory Retirements. NYISO also evaluates whether units are forecasted to be
uneconomic to return, or to continue operation. If so, such units would be included as a
retirement under the buyer-side market power mitigation rules, and, if the units’
retirement meets the criteria for Incremental Regulatory Retirements, then they would,
and we agree should, be included as Incremental Regulatory Retirements. We also
disagree with Indicated NYTOs that NYISO should take into account the reduction in
supply of UCAP, rather than whether a given generation unit is being permanently and
formally retired. We find that NYISO’s proposal properly limits its calculation of
retirements included in the Renewable Exemption Limit to those units meeting the
proposed definition of Incremental Regulatory Retirements of “hav[ing] retired, or are
planning to permanently cease operation.”143
We further find that NYISO’s proposal to limit the UCAP MW of Incremental
Regulatory Retirements to those retirements for which “regulatory action [is] a
significant factor in the retirement of the Generator (i.e., a factor that contributes
materially to the retirement)” complies with the requirements of the February 2020
Order.144 We therefore find that it is not necessary for NYISO to revise its proposal to
include a broader definition of “direct” regulatory action. We find, contrary to Clean
Energy Advocates’ arguments, that NYISO’s proposed tariff language is sufficiently
broad so as to include a public policy decision or action external to the market and a new
143 Proposed Services Tariff § 23.4.5.13.5.3.
144 Id.
Docket Nos. ER16-1404-001 and ER16-1404-002- 29 -
regulatory action, as described in NYISO’s April 2020 Compliance Filing.145 We
similarly deny as unnecessary IPPNY’s request to direct NYISO to revise the relevant
portion of section 23.4.5.7.13.5.3 of its Services Tariff to explicitly state that Incremental
Regulatory Retirements shall not encompass market-based economic retirements. We
agree with NYISO that the plain language of NYISO’s proposal Incremental Regulatory
Retirements clearly includes “ . . . incrementally new MW of Retirements forecasted in
accordance with . . . the Services Tariff that have retired, or are planning to permanently
cease operation, in order to comply with or in response to new or amended regulations or
statutes, or other regulatory or related action.”146 Therefore, we find that the addition of
IPPNY’s requested language is unnecessary to comply with the February 2020 Order.
We also find that NYISO’s proposal complies with the requirements of the
February 2020 Order absent a mandatory economic analysis of retiring generators before
determining whether a retirement qualifies as an Incremental Regulatory Retirement. As
NYISO points out, existing provisions in NYISO’s tariff already provide mechanisms
that will enable NYISO to determine which retirements should be considered Incremental
Regulatory Retirements. We therefore decline to require NYISO to perform an economic
analysis as IPPNY and Ravenswood request.147 Moreover, we find that directing NYISO
to perform an economic analysis would impose a burden on NYISO to create and
perform an economic analysis that may unnecessarily replicate existing tariff
requirements and cause a delay in NYISO’s determination of the Renewable Exemption
Limit and/or the Class Year process.
We also deny IPPNY’s and Ravenswood’s requests to clarify that Incremental
Regulatory Retirements do not include proposed retirements that trigger a reliability need if a renewable resource is selected to meet the reliability need. We find that NYISO’s
proposal complies with the February 2020 Order’s directives and that NYISO has
provided sufficient justification to explain that renewable resources selected to meet the reliability need will not be included in the definition of Incremental Regulatory
Retirements. We agree with NYISO that its proposal is appropriately structured to work with NYISO’s existing tariff mechanisms to ensure that Incremental Regulatory
Retirements will not include units that are either found to be needed for reliability or that are operating under an RMR Agreement.
We also find that NYISO’s proposal complies with the requirements of the
February 2020 Order absent any modification regarding the regulations and statutes
145 April 2020 Compliance Filing at 8-9.
146 Proposed Services Tariff § 23.4.5.13.5.3.
147 We add that IPPNY and Ravenswood do not describe the economic analysis they seek in any detail.
Docket Nos. ER16-1404-001 and ER16-1404-002- 30 -
NYISO considers in determining whether a retirement qualifies as an Incremental
Regulatory Retirement. Ravenswood and IPPNY raise additional concerns regarding the inclusion of certain regulations and statutes in NYISO’s consideration of whether a
retirement qualifies as an Incremental Regulatory Retirement (i.e., the assessment of a
unit’s property taxes and statewide regulatory changes leading to increased generator
costs). We find that, to the extent changes in property tax rates and other statewide
regulatory changes directly affect a generator’s retirement decisions, they appropriately
qualify under NYISO’s definition of Incremental Regulatory Retirement. We agree with NYISO that its proposed definition of Incremental Regulatory Retirement will allow for predictable and transparent implementation by NYISO. We find NYISO’s proposed
formula for calculating a Renewable Exemption Limit, including its definition of
Incremental Regulatory Retirements, complies with the February 2020 Order’s directives and enables NYISO to capably assess retirements.
We find that NYISO’s proposal to limit the Incremental Regulatory Retirements
component of the Renewable Exemption Limit to retirements that are significantly
attributable to new or amended statutes or regulations complies with the directives
contained in the February 2020 Order. We disagree with protesters’ arguments that the
Incremental Regulatory Retirements component should instead capture all retirements
significantly attributable to regulations and statutes, regardless of the timing of such
retirements in relation to the passage of the relevant regulation or statute. Rather, we find
that NYISO’s proposal strikes an appropriate balance between specifying the retirements
eligible for NYISO’s consideration and the burden placed on NYISO to determine which
retirements should qualify as Incremental Regulatory Retirements. Absent NYISO’s
proposed “new or amended” time parameter, we find that the burden on NYISO to
determine whether a specific regulation or statute contributed materially to a particular
retirement decision would be unreasonably high. Moreover, we note that NYISO’s
proposal properly enables NYISO to use its discretion as tariff administrator and
determine which retirements should be considered Incremental Regulatory Retirements.
Therefore, we find that NYISO’s requirement to consider only retirements caused by
“new or amended” regulations and statutes is appropriate because it provides specific
time parameters (i.e., since the prior study period) under which NYISO must analyze the
effect of regulations and statutes without creating an undue burden on NYISO in
administering its tariff.
b.Commission and MMU Involvement
i.April 2020 Compliance Filing
NYISO states that, in order to determine which resources qualify as Incremental
Regulatory Retirements, it must weigh the significance of policy and non-policy factors
Docket Nos. ER16-1404-001 and ER16-1404-002- 31 -
in retirement decisions.148 NYISO recognizes that this determination may significantly
increase or decrease the Renewable Exemption Limit. In order to ensure that the
Incremental Regulatory Retirements component is not construed too broadly, NYISO
proposes that it be required to consult with the MMU when determining what retirements
qualify as Incremental Regulatory Retirements.149 NYISO’s states that the MMU will
also be prescribed reporting and posting obligations, which will provide for greater
transparency to stakeholders. NYISO contends that this is consistent with other
provisions that require NYISO to consider the MMU’s input and authorize the MMU to
report on any concerns that it may have with NYISO’s conclusions.150 In the event that
the MMU does not endorse NYISO’s determinations, NYISO proposes to submit the
decision for Commission review and determination.151 NYISO proposed tariff language
specifies that:
The ISO filing with FERC will describe the ISO’s opinion
and recommendation and include the Market Monitoring
Unit’s written opinion and recommendation. The ISO will
request FERC to act on this filing within 60 days and will
begin the Initial Decision Period of the Class Year Study,
Additional SDU Study, or submit the Class Year Study or
Additional SDU Study to the Operating Committee for
approval, until FERC acts on the ISO’s filing. Once FERC
acts on the ISO’s filing, the ISO will calculate the Renewable
148 April 2020 Compliance Filing at 9.
149 Id.
150 See NYISO, Services Tariff, Attach. H, § 23.4.5.4.3 (requiring NYISO to
consult with the MMU on projections of ICAP Spot Auction clearing prices in
connection with calculation of physical withholding penalties); Id. § 23.4.5.6.1 (requiring
NYISO to provide the results of audit of market participant decisions to remove or derate
installed capacity from a mitigated capacity zone the MMU for review and comment); Id.
§ 23.4.5.7.2.5 (requiring NYISO to consult with the MMU on price projections and cost
calculations regarding application of certain buyer-side market power mitigation
exemptions); Id. § 23.4.5.7.3.8.2 (requiring the NYISO to consult with the MMU
regarding inputs and methodology used to project net energy and ancillary services
revenues for unforced capacity deliverability rights); Id. § 23.4.5.7.8 (requiring NYISO to
consult with the MMU prior to determining whether an existing or proposed generator
has commenced construction).
151 April 2020 Compliance Filing at 15.
Docket Nos. ER16-1404-001 and ER16-1404-002- 32 -
Exemption Limit using the UCAP MW of Incremental
Regulatory Retirements consistent with the FERC decision.152
ii.Protests and Comments
NY Entities, Clean Energy Advocates, and Indicated NYTOs argue that NYISO’s
proposal, if implemented as drafted, would inappropriately put NYISO in the position of
making policy determinations as to which retirements are regulatory and which are not.153
Indicated NYTOs point out that if NYISO and the MMU are not able to agree on whether
a retirement qualifies as an Incremental Regulatory Retirement, the Commission will
need to make a decision within 60 days to avoid delaying the Class Year.154 Indicated
NYTOs urge that the Commission should “not accept the invitation to referee
disagreements between NYISO and the MMU.”155 Indicated NYTOs also contend that
NYISO’s proposed process improperly grants the MMU equal status to implement
NYISO’s Services Tariff, which exceeds the scope of the MMU’s mandate.156 Indicated
NYTOs explain that Order No. 719 establishes a limited advisory role for market
monitors and that the adjudicatory authority granted to the MMU under NYISO’s
proposal cannot be construed as falling within any of these functions.157 According to
Indicated NYTOs, the role NYISO’s proposal contemplates for the MMU also conflicts
with the buyer-side market power mitigation related authority delegated to the MMU.158
Moreover, Indicated NYTOs add that the proposed MMU role also does not comport
152 Id. See also Proposed Services Tariff § 23.4.5.7.13.5.3.
153 NY Entities Protest at 7; Clean Energy Advocates Protest at 6; Indicated NYTOs Protest at 17.
154 Indicated NYTOs Protest at 18. 155 Id. at 19.
156 Id.
157 Id. at 20 (citing Wholesale Competition in Regions with Organized Elec. Mkts., Order No. 719, 125 FERC ¶ 61,071, at PP 354, 357 (2008) (“Order No. 719”), as
amended, 126 FERC ¶ 61,261, order on reh’g, Order No. 719-A, 128 FERC ¶ 61,059
(2009) (“Order No. 719-A”), reh’g denied, Order No. 719-B, 129 FERC ¶ 61,252 (2009) (“Order No. 719-B”)).
158 Id. at 20-21 (citing NYISO, Services Tariff, Attach. H, §§ 23.4.5.7.6.8,
23.4.5.7.9.4.2 & 23.4.5.7.10, Attach. O, § 30.4.4).
Docket Nos. ER16-1404-001 and ER16-1404-002- 33 -
with the limited role the Commission has permitted for market monitors in the mitigation process.159
Ravenswood supports NYISO’s proposed review requirements for determining whether a retirement should be considered an Incremental Regulatory Retirement.160 However, Ravenswood argues that NYISO’s proposal does not provide a clear basis on which NYISO, the MMU, or potentially the Commission would determine whether a retirement should be considered an Incremental Regulatory Retirement.161
iii.Answers
NYISO agrees that its proposal for the Commission to resolve disagreements
between the MMU and NYISO over retirement determinations is a new procedural
feature in its tariff.162 NYISO, however, disagrees that the compliance filing’s proposed
process for determining whether a given retirement is an Incremental Regulatory
Retirement is problematic.163 In support of its proposal, NYISO reasserts that other
existing provisions in NYISO’s buyer-side market power mitigation rules and parts of
NYISO’s Services Tariff require NYISO to make substantive determinations based on
NYISO’s independent expertise and judgment.164 NYISO adds that the Commission has
authorized and, on occasion directed, other ISOs/RTOs to make comparable decisions
and argues that these provisions have been found to be consistent with Commission
precedent that ensures ISOs/RTOs do not exercise unfettered discretion.165 NYISO also
contends that its proposal is the same kind of consultation that is provided for in other
provisions of NYISO’s buyer-side market power mitigation rules and other parts of
NYISO’s tariffs.166 NYISO likens the proposed relationship between NYISO and the
MMU in this context to other buyer-side market power mitigation rule provisions
159 Id. at 20 (citing Order No. 719, 125 FERC ¶ 61,071 at P 128). 160 Ravenswood Protest at 19.
161 Id.
162 NYISO Answer at 16. 163 Id. at 14.
164 Id.
165 Id. at 14-15.
166 Id. at 16.
Docket Nos. ER16-1404-001 and ER16-1404-002- 34 -
requiring the MMU to post a report on its views.167 IPPNY asserts that NYISO is
capable of tracking regulatory actions that force retirement or cause significantly
increased costs that result in retirement.168 IPPNY also claims that NYISO can “easily perform” an economic test to determine the Incremental Regulatory Retirement results from a direct regulatory action and not other factors.169
NYISO also disagrees that the proposed role for the MMU regarding Incremental Regulatory Retirement determinations would be inappropriate or inconsistent with
Commission policy under Order No. 719.170 NYISO argues that its proposal does not
grant the MMU adjudicatory authority or a veto over Incremental Regulatory Retirement determinations. Rather, according to NYISO, the proposal gives the MMU an advisory role that is “functionally no different from the other advisory roles played by the MMU
under the NYISO tariffs.”171
NYISO argues that there is no ambiguity surrounding what form NYISO’s filing
to the Commission would take because any NYISO-MMU conflict brought to the
Commission would be a “live controversy with tangible real-world implications.”172
NYISO adds that its proposal does not require the Commission to act within a certain
167 Id.
168 IPPNY Answer at 12. 169 Id. at 13.
170 Id. at 18.
171 NYISO Answer at 18. See NYISO, Services Tariff, Attach. H, § 23.4.5.4.3
(0.0.0) (requiring NYISO to consult with the MMU on projections of ICAP Spot Auction clearing prices in connection with calculation of physical withholding penalties); Id.
§ 23.4.5.6.1 (requiring NYISO to provide the results of audit of market participant
decisions to remove or derate installed capacity from a mitigated capacity zone to the
MMU for review and comment); Id. § 23.4.5.7.2.5 (requiring NYISO to consult with the MMU on price projections and cost calculations regarding application of certain buyer-
side market power mitigation exemptions); Id. § 23.4.5.7.3.8.2 (requiring the NYISO to consult with the MMU regarding inputs and methodology used to project net energy and ancillary services revenues for unforced capacity deliverability rights); Id. § 23.4.5.7.8
(requiring NYISO to consult with the MMU prior to determining whether an existing or proposed generator has commenced construction).
172 NYISO Answer at 17.
Docket Nos. ER16-1404-001 and ER16-1404-002- 35 -
timeframe.173 NYISO also argues that the proposal would not deprive any third party of its ability to raise concerns at the Commission about Incremental Regulatory Retirement decisions. Implicating a third-party’s option to file a complaint, NYISO explains that the Commission has previously acted on complaints regarding NYISO’s application of its buyer-side market power mitigation rules.174
Indicated NYTOs assert that they do not seek to challenge the well-established
functions under which the MMU reports on a particular issue or consults with NYISO,
except for NYISO’s proposal that it must refer any determination with which the MMU
disagrees to the Commission. Indicated NYTOs argue that this not only impermissibly
expands the authority of the MMU, but it also asks the Commission to serve as referee in
fact-intensive, project-specific dispute involving the impacts of State policy and
regulations on a timeline that is, by any measure, unworkable.175 Indicated NYTOs argue
that this will result in undue delay and litigation and that the role of the MMU should be
limited to the consultative and reporting responsibilities that are already well
established.176
iv.Commission Determination
We accept, subject to condition, NYISO’s proposed role for the MMU in
determining which retirements qualify as Incremental Regulatory Retirements as
compliant with the February 2020 Order. Specifically, we require NYISO to modify its proposal to remove the Commission’s role as arbiter in the event of a disagreement
between NYISO and the MMU. We direct that NYISO’s tariff instead provide that, in
the event of a disagreement between NYISO and the MMU, NYISO’s decision shall
control. Thus, absent a section 206 complaint, the Commission will not have a
prescribed role in such determinations. We find that NYISO’s proposal invites delay to a time-sensitive process. In particular, we find that, if the Commission fails to act on a
disagreement within 60 days, suspending the Class Year process could result in
unacceptable delays to an already complex process that NYISO is working to streamline and for which developers need greater certainty. Additionally, we note that, under
NYISO’s proposal, it is unclear what standard of review the Commission would use in
resolving a disagreement between the MMU and NYISO.
173 Id.
174 Id. at 17-18.
175 Indicated NYTOs Answer at 10-11. 176 Id. at 11.
Docket Nos. ER16-1404-001 and ER16-1404-002- 36 -
We further find that it is appropriate for NYISO, as the market and tariff
administrator, to make the final determination regarding which retirements qualify as
Incremental Regulatory Retirements. Moreover, we find that allowing NYISO to
determine which retirements qualify as Incremental Regulatory Retirements is consistent
with NYISO and the MMU’s existing arrangement, as enumerated under numerous other
parts of NYISO’s tariffs, including provisions of the buyer-side market power mitigation
rules. We clarify that, while we are directing NYISO to revise its tariff to remove the
proposed role for the Commission, we accept NYISO’s proposed reporting and posting
obligations for the MMU, which we agree will provide transparency to market
participants into the decision-making process.
2.Unforced Capacity Reserve Margin Impact
a.April 2020 Compliance Filing
NYISO states that the Unforced Capacity Reserve Margin (URM) Impact in
subpart (b) of the formula for calculating the Renewable Exemption Limit is intended to capture the change in the URM in a mitigated capacity zone that reflects how URM
market requirements are expected to increase in response to renewable resource entry.177 NYISO states that it will perform an analysis to determine the expected increased impact to URM market requirements as a result of the entry of the renewable projects in the
Class Year Study, Additional SDU Study, and Expedited Deliverability Study. NYISO explains that the consideration of increased URM Impacts recognizes that URM market requirements are expected to increase in response to renewable resource entry and, when implemented as proposed, will not lead to price suppression.178
177 NYISO provides the following example: The New York State Reliability
Council (NYSRC) recently performed an analysis of the expected change to Installed
Reserve Margin (IRM) and URM requirements using a NYCA resource mix containing
additional quantities of on-shore wind, off-shore wind, and solar PV renewable resources.
The additional renewable resources that connected into Zone J were 2,000 MW of off-
shore wind. The UCAP rating of the additional off-shore wind resources was
approximately 590 MW under the NYISO’s current market rules. The results of the
NYSRC’s analysis show that the Zone J UCAP requirement (i.e., URM as defined in this
filing) increased by approximately 350 MW. Thus, the effect on the Zone J capacity
supply due to the off-shore wind would be the UCAP supply added (+590 MW) less the
increase in URM demand requirements (-350 MW), for a net increase in supply (relative
to requirements) of +240 MW. NYISO explains that its proposed URM Impact value
captures exactly this phenomenon. April 2020 Compliance Filing at 9.
178 April 2020 Compliance Filing at 9.
Docket Nos. ER16-1404-001 and ER16-1404-002- 37 -
NYISO adds that it will calculate the URM Impact of the Qualified Renewable
Exemption Applicants separately for each mitigated capacity zone and technology type.
NYISO elaborates that when there are no Qualified Renewable Exemption Applicants
participating in the study the URM Impact of Qualified Renewable Exemption
Applicants will be zero, otherwise NYISO will calculate the URM Impacts using the
inputs and methods used to determine the most recently approved Installed Capacity
requirements for the Localities (i.e., NYISO Locational Minimum Installed Capacity
Requirements Study), to the extent practicable. NYISO further elaborates that each
mitigated capacity zone’s URM Impact will reflect the sum of the changes in URM
caused by each Qualified Renewable Exemption Applicant in the study, prorated for any
Qualified Renewable Exemption Applicants that drop out of the study.179
b.Protests and Comments
IPPNY, Ravenswood, and Indicated NYTOs argue that the URM Impact
component of NYISO’s proposed Renewable Exemption Limit is flawed.180
Ravenswood explains that NYISO is currently working on an initiative to tailor NYISO’s
existing UCAP methodology that, once implemented, will better align the UCAP value
assigned to intermittent resources that would be eligible for the renewable resources
exemption.181 According to Ravenswood, NYISO’s proposed URM Impact component
will fail to limit the risk that the renewable resources exemption will adversely impact
competitive market signals required by new and existing resources.182 IPPNY,
Ravenswood, and Indicated NYTOs note that NYISO’s proposed URM Impact
component accounts for the fact that NYISO’s UCAP rating methodology overstates the
UCAP rating for intermittent renewable resources.183 IPPNY argues that, rather than
embedding a URM Impact value into the Renewable Exemption Limit, NYISO should
update its UCAP rating methodology and harmonize the proposed methodology with the
reliability value of renewables.184 IPPNY requests that the Commission direct NYISO to
revise its proposed tariff to clarify that the renewable resources exemption will reflect
179 Id. at 16.
180 IPPNY Protest at 8; Ravenswood Protest at 21; Indicated NYTOs Protest at 23. 181 Ravenswood Protest at 23.
182 Id. at 21.
183 IPPNY Protest at 9; Ravenswood Protest at 21. 184 IPPNY Protest at 9.
Docket Nos. ER16-1404-001 and ER16-1404-002- 38 -
NYISO’s forthcoming update to the UCAP rating methodology.185 Alternately,
Ravenswood asks that the Commission direct NYISO to eliminate the URM Impact
component and instead direct NYISO to continue with its efforts to develop UCAP rating methodology changes and assist the NYSRC in developing modeling modifications to account for these resources.186
IPPNY points out that NYISO’s proposal is silent as to whether or how a
renewable resources exemption would be modified to reflect NYISO’s updated
renewable UCAP rating and states that if the Commission accepts NYISO’s proposed
URM Impact component, it should order NYISO to modify its proposed tariff language
to clarify that the URM Impact component will not inappropriately inflate the Renewable
Exemption Limit.187 Specifically, IPPNY states that NYISO should designate a
renewable resources exemption for a renewable facility as a percentage of that facility’s
nameplate rating, rather than defining the exemption in terms of an inflated UCAP
value.188 IPPNY points out that, given NYISO’s plan to revise its UCAP rating
methodology every four years, the renewable resources exemption should be tailored to
ensure that any update to the methodology does not increase the renewable resources
exemptions granted prior to the update.189 IPPNY adds that the increase in the
Renewable Exemption Limit that results from the URM Impact component should not be
available to all renewable resources equally, neither in the granting of an exemption nor
in the calculation of the Renewable Exemption Bank.190 Consequently, according to
IPPNY, the URM Impact component should be calculated for a specific resource that
receives a Renewable Exemption.191
Indicated NYTOs agree with NYISO that adding intermittent resources increases
the amount of UCAP needed for procurement in the capacity market, and that the
calculation of the Renewable Exemption Limit should reflect this impact.192 However,
185 Id. at 8-9.
186 Ravenswood Protest at 25
187 IPPNY Protest at 10.
188 Id.
189 Id.
190 Id.
191 Id.
192 Indicated NYTOs Protest at 22.
Docket Nos. ER16-1404-001 and ER16-1404-002- 39 -
Indicated NYTOs argue that NYISO’s compliance filing does not fully account for the
impact of intermittent resources on URM requirements. Indicated NYTOs contend that,
as a result, the incremental impact of new intermittent generation resources on the URM
Impact will be under-recognized.193 Indicated NYTOs ask that the Commission direct
NYISO to use the URM Impact associated with all wholly or partially intermittent
resources when accounting for the impact of intermittent resources on URM
requirements.194
c.Answers
NYISO states that there is no need to clarify that the URM Impact component will
account for the most up-to-date NYISO processes because the proposed URM Impact
tariff provisions will already incorporate any future changes to NYISO’s UCAP rating
methodology.195 NYISO further states that the URM Impact component should not be
removed for the Renewable Exemption Limit.196 NYISO explains that modifying
existing NYISO procedures so that they can be incorporated into the Renewable
Exemption Limit in the manner requested by Ravenswood is beyond the scope of this
proceeding.197 NYISO adds that the URM Impact is narrowly tailored and is
appropriately limited to Qualified Renewable Exemption Applicants.198
NYISO asserts that its proposal, including its URM Impact component, strikes an appropriate balance between allowing the renewable resources exemption to cause price increases or price decreases. NYISO further asserts that its proposal, including the URM Impact component, limits the risk of significant price impacts that would result in prices outside the zone of reasonableness under the just and reasonable standard.199
NYISO disagrees with Indicated NYTO’s claims that the Renewable Exemption
Limit fails to account for the impact of increases in UCAP requirements and argues that
193 Id.
194 Id.
195 NYISO Answer at 19.
196 Id.
197 Id. at 20.
198 Id.
199 Id. at 21.
Docket Nos. ER16-1404-001 and ER16-1404-002- 40 -
Indicated NYTOs have overstated the potential impact of their concern.200 NYISO
explains that calculating the URM Impact of Qualified Renewable Exemption Applicants
using the reliability modeling used to establish the minimum ICAP requirements is a
readily implementable, predictable, and transparent approach to further tailoring the
Renewable Exemption Limit to the market dynamics in the mitigated capacity zones.201
Equinor Wind argues that any concerns regarding the methodologies used to
calculate the UCAP and reliability value of a resource are beyond the scope of this
proceeding.202 Notwithstanding that comment, Equinor Wind explains that any changes to NYISO’s UCAP methodology that are ultimately adopted can be taken into account when calculating the URM adjustment for each Class Year.203
d.Commission Determination
We find that the Renewable Exemption Limit, with the URM Impact component,
complies with the February 2020 Order. We disagree with protesters that NYISO’s
proposed Renewable Exemption Limit is flawed and find that the URM Impact
component, as proposed, appropriately recognizes that URM market requirements are
expected to increase in response to renewable resource entry. Furthermore, we find that
NYISO’s proposed URM Impact component of the Renewable Exemption Limit
complies with the February 2020 Order because it is expressed in UCAP and is narrowly
tailored to the mitigated capacity zones. As NYISO points out, the URM Impact
component strikes an appropriate balance between allowing the renewable resources
exemption to cause price increases or price decreases. Therefore, we find that this
component of NYISO’s proposal is mindful of the relationship between: (1) the size of
the MW cap; and (2) the limit the MW cap imposes on the renewable resources
exemption’s impact to market prices, consistent with the directives in the February 2020
Order.
Additionally, we agree with NYISO and Equinor Wind that any forthcoming
changes to NYISO’s UCAP rating methodology are outside the scope of this proceeding,
which is limited to considering whether NYISO has complied with the directives in the
February 2020 Order. In the February 2020 Order, the Commission did not require
NYISO to make tariff revisions related to, or otherwise address issues related to NYISO’s
UCAP rating methodology. Moreover, as various parties note, NYISO’s proposed URM
200 Id. at 21-22.
201 Id. at 22.
202 Equinor Wind Answer at 13. 203 Id. at 15.
Docket Nos. ER16-1404-001 and ER16-1404-002- 41 -
Impact tariff provisions will already incorporate future changes to the NYISO’s UCAP
rating methodology.
3.Renewable Exemption Bank
a.April 2020 Compliance Filing
NYISO explains that the Renewable Exemption Bank is the mechanism through
which UCAP MWs not used in prior interconnection studies are “carried over” into
subsequent studies. NYISO states that this factor ensures that any UCAP MWs derived
from the other three factors—Change in Forecasted Peak Load, Incremental Regulatory
Retirements, and the URM Impact—remain available to Qualified Renewable Exemption
Applicants in future buyer-side market power mitigation determinations, thereby keeping
supply and demand in the capacity market in balance even where entry and exit are
lumpy over time.204 Specifically, NYISO explains that it will calculate the Renewable
Exemption Bank for Zone J by subtracting the UCAP equivalent MW associated with the
exempted Capacity Resource Interconnection Service (CRIS) MW received by Qualified
Renewable Exemption Applicants in the current study in Zone J from the summation of
the Change in Forecasted Peak Load, Incremental Regulatory Retirements, and the URM
Impact. NYISO further explains that it calculates the Renewable Exemption Bank for the
G-J Locality in the same manner, using the data relevant to the G-J Locality, but subtracts
the UCAP equivalent MW associated with the exempted CRIS MW received by
Qualified Renewable Exemption Applicants in the current study in both Zone J and the
G-J Locality as well as any positive UCAP MW remaining in the Renewable Exemption
Bank for Zone J. NYISO states that this requirement will avoid double counting
“carryover” capacity from one study to the next. Moreover, NYISO explains that
because Zone J is wholly nested within the G-J Locality, the Zone J bank must be
deducted from the G-J Locality calculation.205
NYISO elaborates that because many of the terms in the formula for the
Renewable Exemption Limit are also used in Part A of the mitigation exemption test,
NYISO will avoid future price suppression by preventing eligible MWs from receiving
different exemptions using the same criteria (i.e. the UCAP equivalent MWs found
exempt under the Part A test will be deducted from the relevant Renewable Exemption
Bank). As a result, NYISO states that the Renewable Exemption Bank can be positive or
negative, and adds that it will true-up the Renewable Exemption Bank for previous
204 April 2020 Compliance Filing at 10.
205 Id. at 17.
Docket Nos. ER16-1404-001 and ER16-1404-002- 42 -
forecasts that did not materialize.206 NYISO also confirms that the Renewable Exemption Bank will be calculated for each mitigated capacity zone.207
b.Protest and Comments
IPPNY argues that the Commission should direct NYISO to include any
renewable resource that was granted a renewable resources exemption in a previously
completed Interconnection study in the buyer-side market power mitigation forecast for
each set of decision round determinations for the Interconnection Studies if NYISO has
determined that five percent or more of the renewable resource’s respective total project
costs have been spent. IPPNY contends that such language would be consistent with
tariff language approved by stakeholders at the April 15, 2020, Management Committee
meeting as part of the NYISO’s proposed revisions to the Part A test.208
NY Entities argue that NYISO’s filing proposes an unreasonably restrictive
definition of Incremental Regulatory Retirement because it excludes retiring resources
that were not removed from the supply mix under Part A of NYISO’s buyer-side market power mitigation exemption test.209 NY Entities explain that excluding values that were not included in the complete prior buyer-side market power mitigation analysis will
understate the Incremental Regulatory Retirements and may result in a smaller exemption than appropriate.210 For these reasons, NY Entities argue that NYISO should be directed to include retiring resources in the definition of Incremental Regulatory Retirement
unless it was previously retired in both Part A and Part B buyer-side market power
mitigation tests for the prior Class Year.211
206 April 2020 Compliance Filing at 10.
207 Id. at 16. See also Proposed Services Tariff § 23.4.5.7.13.5.5.
208 IPPNY Protest at 13. Such language would be consistent with tariff language
approved by stakeholders at the April 15, 2020, Management Committee meeting as part
of the NYISO’s proposed revisions to Part A of NYISO’s buyer-side market power
mitigation exemption test, which is currently pending at the Commission (Docket No.
ER20-1718-000).
209 NY Entities Protest at 8.
210 Id.
211 Id.
Docket Nos. ER16-1404-001 and ER16-1404-002- 43 -
c.Answer
NYISO states that all determinations under the buyer-side market power
mitigation rules, including exemption determinations, are performed in parallel through
NYISO’s interconnection process as part of the processing of each Class Year.212
NYISO explains that the Class Year process culminates with the execution of an
Interconnection Agreement among the generator, the Connecting Transmission Owner,
and NYISO. At this point, NYISO states that the generator owner has demonstrated a
substantial financial and technical commitment to the construction and operation of the
project. NYISO asserts that the Interconnection Agreement includes project milestones
leading up to completion of engineering, procurement and construction activities required
for the project to go into service. NYISO explains that delays in meeting milestones that
impact the project’s projected in-service date are subject to provisions of the
Interconnection Procedures that limit permissible extensions of projected in-service dates.
Thus, NYISO further explains, the risk of delay, or of untimely market entry, is already
addressed by existing processes.213
d.Commission Determination
We find that the Renewable Exemption Bank component of NYISO’s proposed
Renewable Exemption Limit complies with the Commission’s February 2020 Order
because it is expressed in UCAP and it is calculated for each mitigated capacity zone.
Contrary to NY Entities’ arguments, we find that NYISO’s proposed Renewable
Exemption Bank will not unreasonably limit the amount of renewable resources
exemptions available because NYISO’s proposed language will prevent eligible MWs
from receiving different exemptions using the same criteria and that no clarifications or
modifications are needed. Moreover, NYISO’s proposal ensures that any UCAP derived
from Changes in Forecasted Peak Load, Incremental Regulatory Retirements, or the
URM Impact remain available in future buyer-side market power mitigation
determinations. We also find that IPPNY’s concerns are addressed by NYISO’s proposal
to true-up the Renewable Exemption Bank for previous forecasts that did not materialize
as well as NYISO’s explanation that risk of delay, or of untimely market entry, is already
addressed by existing tariff provisions.
212 NYISO Answer at 25.
213 Id. at 25-26.
Docket Nos. ER16-1404-001 and ER16-1404-002- 44 -
4.Pro Rata Allocation
a.April 2020 Compliance Filing
NYISO proposes to convert the CRIS MW requested for each Qualified
Renewable Exemption Applicant in a Class Year Study, Additional SDU Study or
Expedited Deliverability Study to a UCAP MW equivalent value in accordance with
applicable UCAP Deration Factor and in accordance with NYISO Procedures. NYISO
explains that the UCAP Deration Factor will be based on the specific type of Exempt
Renewable Technology being proposed by the Qualified Renewable Exemption
Applicant. NYISO further explains that it will award renewable resources exemptions to
Qualified Renewable Exemption Applicants in each mitigated capacity zone up to, but
not to exceed, the UCAP MW value calculated in the applicable Class Year Study,
Additional SDU Study or Expedited Deliverability Study to be the Renewable Exemption
Megawatt Limit for the mitigated capacity zone. NYISO elaborates that if the UCAP
MW equivalent value of the total requested CRIS MW received from Qualified
Renewable Exemption Applicants in a given study exceeds the applicable UCAP MW
Renewable Exemption Megawatt Limit calculated by NYISO then NYISO would award
renewable resources exemptions on a pro rata basis using the UCAP MW equivalent
value it calculated for the requested CRIS MW of each Qualified Renewable Exemption
Applicant that remains in the relevant study.214
b.Protests and Comments
IPPNY asserts that while not readily apparent in NYISO’s April 2020 Compliance
Filing, NYISO advised market participants during the stakeholder process that it will
address pro rata allocation of the Renewable Exemption Limit sequentially. IPPNY
explains that the Renewable Exemption Limit for Zone J will be applied on a pro rata
basis to renewable resources in Zone J and then, resources in Zone J can be awarded
renewable resources exemptions made available by the Renewable Exemption Limit
calculated for the G-J Locality after the Renewable Exemption Limit for Zone J has been
exhausted.215
IPPNY and Ravenswood argue that the Commission should direct NYISO to
modify its proposed tariff language to prohibit NYISO from applying the Renewable
Exemption Limit for the G-J Locality to renewable resources in the Zone J.216 Instead,
IPPNY and Ravenswood ask that the Commission require NYISO to modify its proposed
214 April 2020 Compliance Filing at 18.
215 IPPNY Protest at 14.
216 Indicated NYTOs Protest at 22; Ravenswood Protest at 13-14.
Docket Nos. ER16-1404-001 and ER16-1404-002- 45 -
tariff language to state the amount of renewable resources exemptions awarded to Zone J
must be limited to the calculation of the Zone J Renewable Exemption Limit.217 IPPNY
contends that if NYISO is permitted to implement the Renewable Exemption Limit
beyond this limit, NYISO would violate the February 2020 Order’s directive that the
renewable resources exemption cap must be narrowly tailored to the mitigated capacity
zones, and not based on the entire NYCA.218 Moreover, IPPNY states that implementing
the Renewable Exemption Limit as proposed would fail to limit “the risk that the
renewable resources exemption will significantly impact market prices,” and therefore
cannot be just and reasonable.219 Ravenswood adds that this would result in a market
price reduction that would not meet the Commission’s requirements in the February 2020
Order to craft the renewable resources exemption by mitigated capacity zone and to
establish a MW cap that limits the risk that the renewable resources exemption will
significantly impact market clearing prices.220
c.Answers
NYISO disagrees that the proposed relationship between the Renewable
Exemption Limit calculations in Zone J and the G-J Locality is problematic or that it
violates the February 2020 order.221 NYISO states that Zone J has been treated as
“nested” within the G-J Locality for all market design purposes since the latter mitigated capacity zone was established.222 NYISO adds that the proposed method is consistent with how the unit specific economic evaluation happens under the buyer-side market power mitigation rules today.223 Specifically, NYISO explains under Part B of the
mitigation exemption test, in times when the G-J Locality is expected to set the clearing price for Zone J, ICAP prices for Zone J would be set from the G-J Locality requirements for that time period. NYISO argues that a Zone J resource passing the Part B test under this scenario is similar to what IPPNY and Ravenswood protest here.
217 IPPNY Protest at 16; Ravenswood Protest at 17.
218 IPPNY Protest at 14.
219 Id. (citing February 2020 Order, 170 FERC ¶ 61,121 at P 48). 220 Ravenswood Protest at 15-16.
221 NYISO Answer at 23.
222 Id.
223 Id.
Docket Nos. ER16-1404-001 and ER16-1404-002- 46 -
Equinor Wind contends that the ability of Zone J resources to benefit from the
renewable resources exemption in Zones G-I will be more limited than Ravenswood
suggests.224 Equinor Wind also argues that NYISO’s proposal properly accounts for the
fact that Zone J resource are located within, effectively deliverable to, and necessarily
play a role in meeting the reliability requirements of the G-J Locality.225 Equinor Wind
states that this “inherent” relationship between Zone J and the G-J Locality means that
preventing resources in Zone J from being eligible for a renewable resources exemption
in the G-J Locality could prevent resources capable of meeting reliability needs in the G-J
Locality from clearing the market.226 Indicated NYTOs agree with NYISO and Equinor
Wind’s comments regarding NYISO’s proposal with respect to the nesting relationship
between Zone J and the G-J Locality.227
d.Commission Determination
We find that NYISO’s proposed pro rata allocation methodology complies with the February 2020 Order’s directives because it appropriately recognizes the nested structure of NYISO’s mitigated capacity zones. As the Commission explained when establishing the G-J Locality:
“… although Zone J would be a part of the new capacity
zone, Zone J would also continue to be a separate capacity
zone with its own Locational Capacity Requirement and its
own ICAP Demand Curve. Therefore, Zones G, H, and I, by
themselves, would not have a separate Locational Capacity
Requirement or ICAP Demand Curve. Rather, Zones G, H, I,
and J together would have an aggregate Locational Capacity
Requirement and ICAP Demand Curve. This means that
capacity located anywhere within the G-J new capacity zone
could be used to meet the Locational Capacity Requirement
of the new capacity zone.”228
Contrary to protesters’ assertions, we find that this element of NYISO’s proposal
complies with the Commission’s directive to narrowly tailor the renewable resources
224 Equinor Wind Answer at 9.
225 Id. at 11.
226 Id.
227 Indicated NYTOs Answer at 13.
228 N.Y. Indep. Sys. Operator, Inc., 144 FERC ¶ 61,126, at P 53 (2013).
Docket Nos. ER16-1404-001 and ER16-1404-002- 47 -
exemption to the mitigated capacity zones. Specifically, we find that it is appropriate for a resource in Zone J to be awarded a renewable resources exemption under the
Renewable Exemption Limit calculated for the G-J Locality after the Renewable
Exemption Limit for Zone J has been exhausted. We also find that NYISO’s proposed
pro rata allocation methodology aligns with the mechanics of the Renewable Exemption Bank. As discussed above, the Renewable Exemption Bank, is designed to consider the
“nesting” of Zone J within the G-J Locality and provides for the subtraction of the Zone J Renewable Exemption Bank from the G-J Locality Renewable Exemption Bank. This
design avoids double counting by ensuring that the Zone J MW awarded a renewable
resources exemption are removed from both the Renewable Exemption Bank for Zone J
and for the G-J Locality. Additionally, the MW that are “carried-over” to the following
study period in the Renewable Exemption Bank for Zone J are subtracted from the
Renewable Exemption Bank for the G-J Locality.229
5.Minimum Renewable Exemption Limit
a.April 2020 Compliance Filing
Subpart (a) of NYISO’s proposed formula for the Renewable Exemption Limit
establishes the Minimum Renewable Exemption Limit, which is designed to ensure that
the renewable resources exemption does not have more than a de minimis effect on the
market price forecasts in a single mitigated capacity zone. NYISO proposes a de minimis
threshold of $0.50/kW-month and explains that the value is the same value used in
physical withholding thresholds under NYISO’s supplier-side capacity market power
mitigation rules.230 NYISO explains that having a minimum threshold is appropriate
considering that buyer-side mitigation evaluations are typically performed years before a
resource actually enters the market, and are based on a forecast of market conditions.
NYISO further explains that this threshold, which is approximately four percent of the
levelized net cost of new entry for the current demand curve unit for New York City, has
been used to avoid excessive mitigation of conduct that would have a de minimis impact
on market outcomes. Thus, NYISO concludes that this threshold strikes a reasonable
balance between preventing price suppression and excessive mitigation that unnecessarily
limits legitimate public policy objectives.231
229 See supra note 70.
230 April 2020 Compliance Filing at 7. See also NYISO, Services Tariff, Attach
H. § 23.4.5.6.3 (1.0.0).
231 April 2020 Compliance Filing at 7-8.
Docket Nos. ER16-1404-001 and ER16-1404-002- 48 -
b.Protests and Comments
NY Entities, Clean Energy Advocates, and Indicated NYTOs propose changes to
the $0.50/kW-month value assigned to NYISO’s proposed Minimum Renewable
Exemption Limit. NY Entities argue that NYISO should revise the Minimum
Renewables Exemption Limit to be “the greater of $0.50/kW-month or $0.50/kW plus the
price impact of the sum of (i) load forecast, (ii) UCAP Incremental Retirements,
(iii) URM Impact, and (iv) the UCAP MW in the Renewable Exemption Bank for each
mitigated capacity zone.”232 Clean Energy Advocates and Indicated NYTOs contend that
NYISO’s proposed Renewables Exemption Limit is not consistent with the
Commission’s allowance for some de minimis price impact and recommend that NYISO
should instead propose an overall renewable resources exemption cap number.233 Clean
Energy Advocates and Indicated NYTOs argue that NYISO’s proposed $0.50/kW-month
value is too low and recommend that NYISO use $2.00/kW-month or $1.50/kw-month
value, respectively, for assessing price impacts from the renewable resources
exemption.234 According to Clean Energy Advocates, this would strike a better balance
between moderating effects on capacity prices and accommodating state policies without
resulting in improper price impacts.235 Indicated NYTOs argue that, unless NYISO
implements this change, the quantity of available renewable resources exemptions would
preclude a possible decrease in the price of UCAP, but would make substantial price
increase possible.236
c.Answers
IPPNY argues that any proposal to increase the Minimum Renewable Exemption
Limit beyond $0.50/kW-month or to combine it with the level produced under the
Renewable Exemption Limit would result in unreasonable market price suppression and
should be rejected.237 IPPNY contends that this would violate the Commission’s
directive that the MW cap must limit the risk that renewable resources exemptions
232 NY Entities Protest at 8.
233 Clean Energy Advocates Protest at 9.
234 Id. at 10; Indicated NYTOs Protest at 26. 235 Clean Energy Advocates Protest at 10. 236 Indicated NYTOs Protest at 26.
237 IPPNY Answer at 14.
Docket Nos. ER16-1404-001 and ER16-1404-002- 49 -
significantly impact market prices.238 IPPNY adds that NYISO’s proposed $0.50/kW-
month threshold is appropriate because a larger amount would result in the “uneconomic entry of subsidized resources [that] would suppress prices well into the future.”239 In
response to IPPNY’s statements, Indicated NYTOs argue that the assumption that any
new resource receiving a renewable resources exemption is uneconomic and subsidized is unsubstantiated and is not correct.240
d.Commission Determination
We find that NYISO’s Minimum Renewable Exemption Limit complies with the
Commission’s February 2020 Order because it is expressed in UCAP and it is calculated
for each mitigated capacity zone. We disagree with protesters that NYISO’s proposed
Minimum Renewable Exemption Limit should be greater than $0.50/kW-month. We
agree with NYISO that it is appropriate to mirror the same value in the Renewable
Exemption Limit that is used in physical withholding thresholds under NYISO’s
supplier-side capacity market power mitigation rules to help ensure that the renewable
resources exemption does not have more than a de minimis effect on the market price
forecasts in a single mitigated capacity zone. Thus, we find that NYISO’s proposed
Minimum Renewable Exemption Limit complies with the February 2020 Order’s
directive to be mindful of the relationship between: (1) the size of the MW cap; and
(2) the limit the MW cap imposes on the renewable resources exemption’s impact to market prices.
6.Revocation
a.April 2020 Compliance Filing
NYISO proposes language to comply with the February 2020 Order’s directive to
provide an opportunity for renewable resources exemption holders to explain to NYISO,
before the revocation of their exemption, why the revocation may be inappropriate.241
238 Id. at 15.
239 Id. at 11.
240 Indicated NYTOs Answer at 11.
241 As explained in the February 2020 Order, NYISO’s revocation provisions
ensure that, under the circumstances that NYISO outlines, resources lose their exemption
if they no longer qualify (or if they should never have qualified in the first place) for
renewable resources exemption. February 2020 Order, 170 FERC ¶ 61,121 at P 141.
Docket Nos. ER16-1404-001 and ER16-1404-002- 50 -
NYISO explains that its proposed language builds on NYISO’s previous compliance proposal and adds further procedural details.242
Specifically, NYISO proposes language providing that, when a renewable
resources exemption holder timely notifies NYISO that changed circumstances could
mean that it is no longer eligible for a renewable resources exemption: (1) NYISO is
required to respond by providing written notice of its intent to revoke an exemption and
set forth its reasons within 10 business days of receiving notice from an exemption
holder; (2) the exemption holder would have 20 business days to schedule a meeting with
NYISO in order to make a final attempt to demonstrate why the exemption should not be
revoked; and (3) NYISO would be obliged to determine within 10 business days of the
meeting whether the revocation of the renewable resources exemption should be finalized
and to post a revocation determination on its website. In the same vein, NYISO proposes
to require that when a renewable resources exemption holder does not timely notify
NYISO, but NYISO has identified a development that could invalidate a renewable
resources exemption: (1) NYISO’s notice must be in writing and must provide the
exemption holder with an opportunity to submit documentation to NYISO and meet with
NYISO to attempt to rebut NYISO’s findings within 30 days; and (2) NYISO would be
obliged to determine within 10 business days of the meeting whether the revocation of
the Renewable Exemption should be finalized and post a revocation determination on its
website.243
b.Protests and Comments
IPPNY alleges that NYISO’s proposal allows for the possibility that NYISO could
award two different renewable resources exemptions using the same amount of MWs in
the Renewable Exemption Bank if the generator to which those MWs are first granted
does not use them in a timely manner, i.e., double-count exemptions by permitting the
resource first given the awarded MWs to retain its exemption and subsequently using the
same MWs to provide an exemption to a second project. IPPNY thus requests that the
Commission direct NYISO to clarify in the Tariff that any renewable resource that has
been granted a renewable resources exemption will be assumed to be proceeding when
NYISO evaluates other projects for a renewable resources exemption until the resource
either forfeits its renewable resources exemption or NYISO revokes the exemption.244
242 April 2020 Compliance Filing at 18-19.
243 Id. at 19.
244 IPPNY Protest at 13.
Docket Nos. ER16-1404-001 and ER16-1404-002- 51 -
c.Answers
NYISO asserts that adding new exemption revocation rules is outside of the scope of this proceeding.245 NYISO adds that it already has rules in place to prevent
duplicative exemption awards.246
d.Determination
We find that NYISO’s revisions to the renewable resources exemption revocation
provision comply with the February 2020 Order because, as required, they provide an
opportunity for a renewable resources exemption holder to explain to NYISO, before the
revocation of its exemption, why revocation may be inappropriate. Further, we agree
with NYISO that the consideration of additional revocation provisions, such as those
described by IPPNY, are beyond the scope of this proceeding, which is limited to the
consideration of whether NYISO has complied with the directives in the February 2020
Order.
Additionally, as discussed above, we find that the Renewable Exemption Bank
component of NYISO’s proposed Renewable Exemption Limit complies with the
Commission’s February 2020 Order absent any modifications. We agree with NYISO
that its proposed Renewable Exemption Bank has rules in place to prevent duplicative
exemption awards. Therefore, we disagree with IPPNY that additional clarity on this
matter is necessary.
The Commission orders:
(A) In response to APPA’s and NY Parties’ requests for rehearing, the February
2020 Order is hereby modified and the result sustained, as discussed in the body of the
order.
(B) NYISO’s April 2020 Compliance Filing is hereby conditionally accepted, effective for the Class Year 2019, subject to a further compliance filing, as discussed in the body of this order.
245 NYISO Answer at 25.
246 Id.
Docket Nos. ER16-1404-001 and ER16-1404-002- 52 -
(C) NYISO is hereby directed to submit a further compliance filing, within
45 days of the date of this order, as discussed in the body of this order.
By the Commission. Commissioner Glick is dissenting with a separate statement
attached.
Commissioner Danly is concurring with a separate statement attached.
( S E A L )
Nathaniel J. Davis, Sr.,
Deputy Secretary.
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
New York Independent System Operator, Inc.Docket Nos. ER16-1404-001
ER16-1404-002
(Issued July 17, 2020)
GLICK, Commissioner, dissenting:
I dissent from today’s order because it perverts buyer-side market power
mitigation into a series of unnecessary and unreasoned obstacles to New York’s efforts to shape the resource mix. Buyer-side market power mitigation should be all about and only about buyers with market power. Applying buyer-side market power mitigation to entities that are not buyers or buyers that lack market power is nonsensical. Moreover, even when applied to buyers who may have market power, mitigation must reasonably address their potential to exercise that market power.
In this order, the Commission continues to apply buyer-side market power
mitigation where it does not belong. In addition, the Commission also adopts a series of unreasoned and over-the-top restrictions on public power entities under the guise of mitigating market power. The sum total effect of these changes is to frustrate New
York’s efforts to achieve its environmental goals while at the same time increasing costs to consumers. That is not just and reasonable.
I.Buyer-Side Market Power Mitigation Should be Limited to Buyers with
Market Power
When first introduced, buyer-side market power mitigation rules were (as their
name would suggest) aimed squarely at mitigating the exercise of buyer-side market
power—i.e., the ability of a large buyer of capacity to exercise its monopsony power to
lower the capacity market clearing price. To the extent that the Commission required
buyer-side mitigation of capacity market offers, it limited the mitigation to only resources
that could be used effectively for the purpose of depressing capacity market prices or to
resources with both the incentive and ability to depress capacity market clearing prices.1
1 See, e.g., PJM Interconnection, L.L.C., 117 FERC ¶ 61,331, at PP 34, 103-04
(2006) (discussing the buyer-side market power mitigation provisions imposed as part of
the settlement that created the Reliability Pricing Model); see also Richard B. Miller,
Neil H. Butterklee & Margaret Comes, “Buyer-Side” Mitigation in Organized Capacity
Markets: Time for a Change?, 33 Energy L.J. 449, 460-61 (2012) (Time for a Change?)
Docket Nos. ER16-1404-001 and ER16-1404-002- 2 -
In short, buyer-side market power mitigation was all about and only about the exercise of buyer-side market power.2
The Commission has abandoned that narrow focus. It no longer requires a
resource to be a buyer, much less a buyer with market power, before subjecting that
resource to buyer-side market power mitigation. Buyer-side market power rules—often referred to as minimum offer price rules or MOPRs—that were once intended only as a means of preventing the exercise of market power have evolved into a scheme for
propping up prices, freezing in place the current resource mix, and blocking states’
exercise of their authority over resource decisionmaking.3 The result is an ever-
expanding system of administrative pricing that is, ironically enough, justified on the basis that it promotes competition.4 But, in reality, the Commission is not promoting anything remotely resembling actual competition.5
(discussing the Commission’s early approach to buyer-side market power mitigation).
2 See, e.g., PJM Interconnection, L.L.C., 117 FERC ¶ 61,331 at P 104 (“The
Commission finds the Minimum Offer Price Rule a reasonable method of assuring that
net buyers do not exercise monopsony power by seeking to lower prices through self
supply.”); N.Y. Indep. Sys. Operator, Inc., 122 FERC ¶ 61,211, at P 106 (2008)
(explaining that buyer-side market power “mitigation is aimed at preventing uneconomic entry by net buyers of capacity, the only market participants with an incentive to sell their capacity for less than its cost.”).
3 See Calpine Corp. v. PJM Interconnection L.L.C., 169 FERC ¶ 61,239, r’hg
denied, 171 FERC ¶ 61,035 (2020) (Calpine v. PJM) (Glick, Comm’r, dissenting at P 4); see also Miller, Butterklee & Comes, Time for a Change?, 33 Energy L.J. at 461
(“[B]uyer mitigation has effectively become new entrant mitigation under which all new entrants are subject to mitigation unless otherwise exempted because they have somehow demonstrated that their new facility is not ‘uneconomic.’”).
4 See, e.g., Calpine v. PJM, 169 FERC ¶ 61,239 at P 38 (discussing the
Commission’s finding on the need to maintain the “integrity of competition”); id. P 17
n.38 (“This Commission determined many years ago that the best way to ensure the most cost-effective mix of resources is selected to serve the system’s capacity needs was to rely on competition.”); ISO New England Inc., 162 FERC ¶ 61,205, at P 24 (2018)
(asserting that states’ exercise of their authority over generation facilities “raises a
potential conflict with . . . competitive wholesale electric markets”).
5 See Calpine Corp. v. PJM Interconnection, 171 FERC ¶ 61,035 (2020) (Calpine
v. PJM Rehearing) (Glick, Comm’r, dissenting at P 3) (explaining that the Commission’s
[PJM MOPR orders] “turned the ‘market’ into a system of bureaucratic pricing so
pervasive that it would have made the Kremlin economists in the old Soviet Union
Docket Nos. ER16-1404-001 and ER16-1404-002- 3 -
The basic premise of market competition is that sellers should compete to offer the
best terms, including price, to provide a particular product or service. And the purpose of
capacity markets is to provide the “missing money” that resources need to remain viable,
but are unable to earn by providing energy and ancillary services due to various
limitations in the markets for those services.6 That means that capacity market
competition should follow a single ‘first principle’: Enabling resources to vie with each
other to require as little missing money as possible in order to cover their going forward
costs, receive a capacity commitment, and help to ensure resource adequacy. For the
market to be truly competitive, resources must have the flexibility to reflect their own
expertise, experience, technology, risk tolerance and whatever else might provide them
with a competitive advantage in the quest to provide capacity at the lowest possible cost.
True competition can produce enormous benefits for consumers by shifting risk to
investors, facilitating the entry of relatively efficient resources (and the retirement of
inefficient ones), and spurring the development and deployment of new technologies and
business models—all while procuring the lowest-cost set of resources needed to keep the
lights on.
blush”). It is also worth noting that this Commission’s infatuation with mitigation only
goes one way. It is interested in mitigation only when it raises prices. While the
Commission has devoted untold resources to pursuing illusory concerns about
monopsony power, it has so far refused to take a hard look at seller-side market power.
One example is the Chairman’s premature termination of the enforcement process
regarding the nearly 1,000 percent year-over-year increase in prices in MISO Zone 4 and
the Commission’s failure to provide any justification for its finding that such a rate is just
and reasonable. See Pub. Citizen, Inc. v. Midcontinent Indep. Sys. Operator, Inc., 168
FERC ¶ 61,042 (2019) (Glick, Comm’r, dissenting at PP 4-5). Another example is the
Commission’s failure over the course of the last year to take any action on the complaints
regarding PJM’s Market Seller Offer Cap. Those complaints allege that PJM’s current
rules allow for the exercise of market power, which increase the total cost of capacity by
more than a billion dollars. See PJM Independent Market Monitor Complaint, Docket
No. EL19-47-000 at 11-12 (Feb. 21, 2019). That complaint has now sat before the
Commission for more than 15 months, and it has been more than a year since the last
substantive filing was made in that docket.
6 See, e.g., James F. Wilson, “Missing Money” Revisited: Evolution of PJM’s
RPM Capacity Construct 1 (2016), https://www.publicpower.org/system/
files/documents/markets-rpm_missing_money_revisited_wilson.pdf (discussing the
concept of missing money and the origin of capacity markets in the eastern RTOs); Roy
J. Shanker Comments, Docket No. RM01-12-000 (Jan. 10, 2003) (discussing the idea of missing money).
Docket Nos. ER16-1404-001 and ER16-1404-002- 4 -
Instead of promoting true competition, the Commission’s approach to buyer-side
market power has degenerated into a scheme for propping up prices, protecting
incumbent generators, and impeding state clean energy policies.7 Although the specifics
of the mitigation regimes vary among the eastern RTOs, they all generally force new
entrants to bid at or above an administratively determined estimate8 of what a new
resource “should” cost, while existing resources are permitted to bid at a lower level.9 In
practice, those administrative pricing regimes create a systemic bias in favor of existing
resources and curtail resources’ incentive and ability to compete across all possible
dimensions. Moreover, because potential new entrants to the capacity markets tend to be
disproportionately made up of new technologies and resources needed to satisfy state or
federal public policies, the Commission’s use of MOPRs also has the unmistakable effect
(and, recently, the intent10) of slowing the transition to a cleaner, more advanced resource
mix.
7 Calpine v. PJM, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at P 4).
8 In previous orders, the Commission has made much out of so-called unit-specific
exemptions, which permit a resource to bid below a default offer floor if it can convince
the relevant market monitor that its estimated net going-forward costs are below that
floor. If the resource succeeds in that endeavor, the market monitor permits the resource
to bid at a lower, but still administratively determined, level. That is still administrative
pricing. See Calpine v. PJM Rehearing, 171 FERC ¶ 61,035 (Glick, Comm’r dissenting
at P 86).
9 In ISO New England and NYISO, existing resources are exempt from mitigation.
N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,119, at P 38
(2020) (NYPSC v. NYISO) (“NYISO’s buyer-side market power mitigation measures are
applied to all new entrants in the mitigated capacity zones[.]”); ISO New England Inc.,
162 FERC ¶ 61,205 at P 3 (“ISO-NE utilizes a minimum offer price rule, or MOPR, that
requires new capacity resources to offer their capacity at prices that are at or above a
price floor set for each type of resource[.]”). The Commission’s recent order in PJM
applied the MOPR to existing resources, but makes them subject to a different—and
generally more favorable—pricing regime than new resources. Calpine v. PJM, 169
FERC ¶ 61,239 at P 2 (“[T]he default offer price floor for applicable new resources will
be the Net Cost of New Entry (Net CONE) for their resource class; the default offer price
floor for applicable existing resources will be the Net Avoidable Cost Rate (Net ACR) for
their resource class.” (footnotes omitted)); id. (Glick, Comm’r, dissenting at PP 32-35)
(criticizing the Commission for using different offer floor formulae for existing and new
resources).
10 See Calpine v. PJM, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at P 4).
Docket Nos. ER16-1404-001 and ER16-1404-002- 5 -
That type of quasi-competition does not lead to an efficient market outcome. To achieve an efficient outcome, resources’ capacity market offers must reflect all relevant costs minus all relevant revenues, including costs and revenues that are not derived
directly from Commission-jurisdictional markets.11 If the market ignores some of those costs and revenues, then the set of resources selected will not actually reflect the lowestcost or most efficient means of ensuring resource adequacy. And yet that is where we
find ourselves: All three eastern RTOs now force new resources to compete based on
administratively determined estimates of their costs and revenues rather than their own estimates of what they need to make up the missing money. The result is neither a
competitive market nor an efficient outcome.
We got to this point largely because of the Commission’s misguided belief that it
must “protect” capacity markets from the influence of state public policies.12 However,
as explained below, the Commission’s efforts to prop up prices by mitigating the effects
of state public policies upset the jurisdictional balance that is the heart of the FPA and
interfere with capacity markets’ ability to produce efficient market outcomes.
The FPA is clear. The states, not the Commission, are responsible for shaping the
generation mix. Although the FPA vests the Commission with jurisdiction over
wholesale sales of electricity, as well as practices affecting those wholesale sales,13
11 The periodic demand curve resets that occur in the eastern RTOs illustrate the
variety of factors that go into determining the missing money. For example, the
development of net CONE in NYISO’s most recent demand curve reset addressed factors
ranging from federal, state, and local requirements related to environmental
considerations, regional differences in capital and labor costs, as well differences in
social justice requirements. See NYISO Transmittal, Docket No. ER17-386-000, Ex. D
(Nov. 18, 2016) (Analysis Group, Inc. study addressing demand curve parameters).
Those factors affect not only what resource you build and where you can build it, but also
how you can operate that resource and, therefore, what revenues you can expect to earn
and what costs you can expect to incur. Considering all those factors is necessary to
produce efficient price signals guiding when and where to site new capacity,
notwithstanding the fact that they are not derived from Commission-jurisdictional
markets.
12 See, e.g., NYPSC v. NYISO, 170 FERC ¶ 61,119 at P 37; Calpine v. PJM, 169
FERC ¶ 61,239 at P 5 (explaining that the Commission is applying a MOPR to state-
sponsored resources in order to “protect PJM’s capacity market from the price-
suppressive effects of resources receiving out-of-market support”); ISO New England
Inc., 162 FERC ¶ 61,205 at P 24 (“It is . . . imperative that such a market construct
include rules that appropriately manage the impact of out-of-market state support[.]”).
13 Specifically, the FPA applies to “any rate, charge, or classification, demanded,
Docket Nos. ER16-1404-001 and ER16-1404-002- 6 -
Congress expressly precluded the Commission from regulating “facilities used for the generation of electric energy.”14 Congress instead gave the states exclusive jurisdiction to regulate generation facilitates.15
But while those jurisdictional lines are clearly drawn, the spheres of jurisdiction
themselves are not “hermetically sealed.”16 One sovereign’s exercise of its authority will
inevitably affect matters subject to the other sovereign’s exclusive jurisdiction.17 For
observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission” and “any rule, regulation, practice, or contract
affecting such rate, charge, or classification.” 16 U.S.C. § 824e(a) (2018); see also id. § 824d(a) (similar).
14 See id. § 824(b)(1) (2018); Hughes v. Talen Energy Mktg., LLC, 136 S. Ct.
1288, 1292 (2016) (describing the jurisdictional divide set forth in the FPA); FERC v.
Elec. Power Supply Ass’n, 136 S. Ct. 760, 767 (2016) (EPSA) (explaining that “the [FPA]
also limits FERC’s regulatory reach, and thereby maintains a zone of exclusive state
jurisdiction”); Panhandle E. Pipe Line Co. v. Pub. Serv. Comm’n of Ind., 332 U.S. 507,
517-18 (1947) (recognizing that the analogous provisions of the NGA were “drawn with
meticulous regard for the continued exercise of state power”). Although these cases deal
with the question of preemption, which is, of course, different from the question of
whether a rate is just and reasonable under the FPA, the Supreme Court’s discussion of
the respective roles of the Commission and the states remains instructive when it comes
to evaluating how the application of a MOPR squares with the Commission’s role under
the FPA.
15 16 U.S.C. § 824(b)(1); Hughes, 136 S. Ct. at 1292; see also Pac. Gas & Elec.
Co. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190, 205 (1983)
(recognizing that issues including the “[n]eed for new power facilities, their economic
feasibility, and rates and services, are areas that have been characteristically governed by
the States.”).
16 EPSA, 136 S. Ct. at 776; see Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 1601 (2015) (explaining that the natural gas sector does not adhere to a “Platonic ideal” of the “clear division between areas of state and federal authority” that undergirds both the FPA and the Natural Gas Act).
17 See EPSA, 136 S. Ct. at 776; Oneok, 135 S. Ct. at 1601; Coal. for Competitive
Elec. v. Zibelman, 906 F.3d 41, 57 (2d Cir. 2018) (explaining that the Commission “uses
auctions to set wholesale prices and to promote efficiency with the background
assumption that the FPA establishes a dual regulatory system between the states and
federal government and that the states engage in public policies that affect the wholesale
markets[.]”).
Docket Nos. ER16-1404-001 and ER16-1404-002- 7 -
example, any state regulation that increases or decreases the number of generation
facilities will, through the law of supply and demand, inevitably affect wholesale rates.18 But the existence of such cross-jurisdictional effects is not necessarily a “problem” for the purposes of the FPA. Rather, those cross-jurisdictional effects are the product of the “congressionally designed interplay between state and federal regulation”19 and the
natural result of a system in which regulatory authority over a single industry is divided between federal and state government.20 Maintaining that interplay and permitting each sovereign to carry out its designated role is essential to the cooperative federalism regime that Congress made the foundation of the FPA.
When the Commission tries to prevent a state public policy from having an
inevitable, but indirect effect on a capacity market, it takes on the role that Congress
reserved for the states. That is true even where the Commission claims that its only
“policy” is to block the effects of state public policies, not the state policies themselves.
After all, a federal policy of eliminating the effects of state policies is itself a form of
public policy—just not one that Congress gave the Commission authority to pursue.
Moreover, as former Commission Chairman Norman Bay correctly observed, an
“idealized vision of markets free from the influence of public policies . . . does not exist,
18 Zibelman, 906 F.3d at 57 (explaining how a state’s regulation of generation
facilities can have an “incidental effect” on the wholesale rate through the basic
principles of supply and demand); id. at 53 (“[I]t would be ‘strange indeed’ to hold that
Congress intended to allow the states to regulate production, but only if doing so did not
affect interstate rates.” (quoting Nw. Cent. Pipeline Corp. v. State Corp. Comm’n of
Kansas, 489 U.S. 493, 512-13 (1989) (Northwest Central))); Elec. Power Supply Ass’n v.
Star, 904 F.3d 518, 524 (7th Cir. 2018) (explaining that the subsidy at issue in that
proceeding “can influence the auction price only indirectly, by keeping active a
generation facility that otherwise might close....... A larger supply of electricity means a
lower market-clearing price, holding demand constant. But because states retain
authority over power generation, a state policy that affects price only by increasing the quantity of power available for sale is not preempted by federal law.”).
19 Hughes, 136 S. Ct. at 1300 (Sotomayor, J., concurring) (quoting Northwest Central, 489 U.S. at 518); id. (“recogniz[ing] the importance of protecting the States’ ability to contribute, within their regulatory domain, to the [FPA]’s goal of ensuring a sustainable supply of efficient and price-effective energy.”).
20 Cf. Star, 904 F.3d at 523 (“For decades the Supreme Court has attempted to
confine both the Commission and the states to their proper roles, while acknowledging
that each use of authorized power necessarily affects tasks that have been assigned
elsewhere.”).
Docket Nos. ER16-1404-001 and ER16-1404-002- 8 -
and it is impossible to mitigate our way to its creation.”21 Instead, public policy and
energy markets are inextricably intertwined.22 Nearly every aspect of the electricity
market is affected by at least one—and more often many—federal, state, or local
policies.23 Even if the Commission is successful in ferreting out state efforts to shape the generation mix, the result will not be a “competitive” market. Instead, the market will remain a reflection of public policy, but will ignore the effects of the very policy
decisions that Congress expressly gave the states the authority to make. And while that might further the Commission’s goal of increasing prices and slowing the transition to a cleaner energy mix, it will not establish a market based on anything close to actual
competition, much less one that is insulated from public policy.
And the end result will be profoundly inefficient, no matter how many times my colleagues use the words “market” and “competition.” The resources procured through that market will require considerably more missing money than would the set of
resources procured in the absence of this kind of over-mitigation.24 Moreover, the
mitigation regimes that the Commission has approved will, by design, ignore resources that must be built because they are necessary to satisfy state public policies. As a result, the capacity markets will procure more capacity than the regions actually need and
customers will be left paying twice for capacity. That means customers will be paying for more of the more expensive capacity than they should.
21 N.Y. State Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 158 FERC ¶ 61,137 (2017) (Bay, Chairman, concurring at 2).
22 As the FPA itself recognizes, “the business of transmitting and selling electric
energy for ultimate distribution to the public is affected with a public interest.” 16 U.S.C. § 824 (2018).
23 See Calpine v. PJM, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at PP 27-
28) (discussing the scope of federal and state subsidies affecting the PJM capacity
market); Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236 (2018)
(Glick, Comm’r, dissenting at 6-9) (explaining how “[g]overnment subsidies pervade the energy markets and have for more than a century”); ISO New England Inc., 162 FERC ¶ 61,205 (Glick, Comm’r, dissenting in part and concurring in part at 3) (“Our federal, state, and local governments have long played a pivotal role in shaping all aspects of the energy sector, including electricity generation.”).
24 That is particularly true given that the Commission permits a resource to
increase its estimated costs due to state policy and environmental goals (e.g., the
increased fixed and variable costs associated with selective catalytic reduction, see
NYISO Transmittal, Docket No. ER17-386-000 at 2), but not its revenue derived from
state public efforts that may happen to be aimed at the exact same environmental goals.
Docket Nos. ER16-1404-001 and ER16-1404-002- 9 -
In addition, widespread mitigation undermines a capacity market’s ability to
establish price signals that efficiently guide resource entry and exit. States will continue to exercise their authority over the resource mix no matter how hard the Commission tries to frustrate those efforts, especially given the ever-growing threat posed by climate
change.25 A capacity construct that ignores those states’ public policies will produce
price signals that do not reflect the factors that are actually influencing the development of new resources. Those misleading price signals will encourage the participation of the wrong types of resources or resources that are not needed at all. It is hard for me to see
how a price signal that encourages redundant investment is a “competitive” or desirable outcome, much less a just and reasonable one.
The Commission has suggested that if it succeeds in blocking state policies, then capacity markets will become efficient, little islands unto themselves.26 But a capacity market is a means to an end, not an end in itself. It is a construct that is supposed to
minimize the amount of money that customers spend on capacity in order to meet a target reserve margin.27 A capacity market that does not serve that purpose and is “efficient” only if you disregard the fact that, in the real-world, it produces inefficient results is a
market that we ought to reject out-of-hand.
Instead of interfering with state public policies, the Commission’s buyer-side
market power mitigation regime should be all about—and only about—buyers with
market power. In the event that a resource is not a buyer with market power, its capacity
market offer should not be subject to buyer-side mitigation.28 That result is both more
consistent with the FPA’s federalist foundation and the Commission’s core responsibility
as a regulator of monopoly/monopsony power.29 That approach would also be a great
deal simpler and would get the Commission out of these interminable disputes about who
gets mitigated, when, and to what level. In short, I believe that buyer-side market power
25 See, e.g., Calpine v. PJM, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at
P 55).
26 Calpine v. PJM, 169 FERC ¶ 61,239 at P 5; ISO New England Inc., 162 FERC ¶ 61,205 at P 21.
27 See supra P 5.
28 State polices that exceed the states’ jurisdiction because they set or aim at
wholesale rates would, of course, remain preempted. See, e.g., Hughes, 136 S. Ct. at
1298.
29 Cf. Nat’l Ass’n of Reg. Util. Comm’rs v. FERC, 475 F.3d 1277, 1280 (D.C. Cir. 2007) (noting that “FERC’s authority generally rests on the public interest in constraining exercises of market power”).
Docket Nos. ER16-1404-001 and ER16-1404-002- 10 -
mitigation rules that are not limited only to market participants with actual buyer-side market power are per se unjust and unreasonable and should be abandoned
immediately.30
“Actual” is an important distinction here. The Commission has at times suggested extending buyer-side market power mitigation to resources that receive state subsidies on the basis that the state is like a quasi-buyer that looks out for the interests of all
consumers in the state.31 We should abandon that notion as well. States regulate for a
variety of reasons and acting as if any regulation is an exercise of market power
fundamentally misunderstands the role Congress reserved for the states under the FPA. Philosophical market power—as distinguished from actual market power—should have no place in the Commission’s regulatory regime. In any case, to the extent that a state is directly targeting the wholesale market price, then the law in question is preempted and there is no need to muddle things up with a MOPR.32
Some argue that Commission intervention is necessary to “protect” the market
from states’ exercise of their authority under the FPA. But if we ever reach a point where
the only way to “save” a capacity market is to unmoor it from reality by blocking the
effects of state policies, then it will be past time to find an alternative approach to
ensuring resource adequacy—one whose feasibility does not depend on inefficient real-
30 In dissents from previous Commission orders addressing MOPRs, I have also argued that the Commission’s policy in those particular cases exceeded its jurisdiction because it directly targeted state policies. E.g., Calpine v. PJM Rehearing, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting at PP 5-25). I still believe that to be true. But my point today is a broader one: The Commission should altogether abandon the use of
buyer-side market power mitigation regimes to address something other than actual
buyer-side market, even putting aside whether the Commission’s application of those regimes exceeds its jurisdiction in the first place.
31 See, e.g., NYPSC v. NYISO, 170 FERC ¶ 61,119 at PP 37, 39; see also N.Y. State Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 158 FERC ¶ 61,137 (Bay,
Chairman, concurring at 3) (“The MOPR is not applied to the state, which may not
actually be a buyer and which is acting on behalf of its citizenry, but to the resource,
which is offering to sell capacity to the market and which may be a commercial entity. The theory, in other words, assumes such a congruence of interests between the state and the resource that the resource is mitigated for the conduct of the state.”).
32 See Hughes, 136 S. Ct. at 1298 (“States may not seek to achieve ends, however
legitimate, through regulatory means that intrude on FERC’s authority over interstate
wholesale rates[.]”); see also New England Ratepayers Ass’n, 168 FERC ¶ 61,169, at PP
41-46 (2019) (finding a state policy preempted because it sets a wholesale rate).
Docket Nos. ER16-1404-001 and ER16-1404-002- 11 -
world outcomes or the Commission usurping the role that Congress reserved for the
states.
Indeed, the Commission’s efforts to “save” capacity markets are more likely to
hasten their eventual demise. The more the Commission interferes with state public
policies under the pretext of mitigating buyer-side market power, the more it will force states to choose between their public policy priorities and the benefits of the wholesale markets that the Commission has spent the last two decades fostering. Although that
should be a false choice, the Commission is increasingly making it into a real one. New York provides the perfect example as the Public Service Commission has begun a
proceeding to consider “taking back” from NYISO the responsibility for ensuring
resource adequacy.33 And numerous states are considering leaving the other eastern
RTOs, both of which have capacity rules that hinder states’ exercise of their resource
decisionmaking authority. The Commission’s overreach, affirmed in today’s order, will no doubt create greater momentum in that direction.
As I explained in my dissent from the underlying order, I continue to believe that
the foregoing analysis ought to compel the Commission to get back to the basics on
buyer-side market power mitigation.34 Where entities are not buyers they simply should
not be subject to buyer-side market power mitigation.35 End of discussion. And where
entities are buyers, the Commission should impose buyer-side market power mitigation
measures only when those buyers possess actual market power and, even then, the
mitigation must be reasonably tailored to the potential for the exercise of market power.36
Today’s order is completely at odds with those principles, as it continues to apply
buyer-side market power measures to resources that are not buyers. In addition, the
Commission makes a hash out of the mitigation regimes applied through this order. As
discussed in the following sections, the draconian measures imposed on the New York
Power Authority (NYPA) are illogical and unreasoned, while the further limitations
accepted regarding the already-miserly renewables exemption only add insult to injury.
33 N.Y. Pub. Serv. Comm’n, Case 19-E-0530, Order Instituting Proceeding and
Soliciting Comments (Aug. 8, 2019), http://documents.dps.ny.gov/public/Common/
ViewDoc.aspx?DocRefId=%7b1D25F4BE-9A05-463F-A953-790D36E318BC%7d.
34 N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,121 (2020) (February 2020 Order) (Glick, Comm’r, dissenting at PP 19-20).
35 Id. P 19.
36 Id. P 20.
Docket Nos. ER16-1404-001 and ER16-1404-002- 12 -
II.The Commission’s Treatment of NYPA Is Arbitrary and Capricious
Self-supply entities are, by definition, buyers. As a result, they can have market
power and, where they do, mitigation may be appropriate. But whatever mitigation is
applied in those instances must be just and reasonable and take account of the
circumstances of the mitigated resources. Consistent with that principle, the Commission
previously concluded in this proceeding that “applying NYISO’s buyer-side market
power mitigation rules to certain self-supply resources would be unjust, unreasonable, or
unduly discriminatory or preferential pursuant to section 206 of the FPA, because such
resources, narrowly defined, have limited or no incentive and ability to exercise buyer-
side market power to artificially suppress ICAP market prices.”37 Accordingly, the
Commission directed NYISO to implement a self-supply exemption utilizing appropriate
net-short and net-long thresholds.38 In the resulting compliance order, however, the
Commission effectively excluded public power self-supply entities from that exemption
on the theory that because their mission is to benefit residents of the state as a whole,
there is no way to protect the market from their actions.39
That decision was arbitrary and capricious. As an initial matter, it assumes, based on a website alone, that NYPA would disadvantage its own customers for the benefit of
other residents of the state that it does not serve.40 As the NY Entities point out, NYPA’s mission statement does not demonstrate an “intent to achieve the agency’s public policy
purposes and goals through any and all means, regardless of rules, norms of ethical
behavior, and integrity.”41 A single hortatory statement of purpose is hardly substantial
evidence suggesting that NYPA will act against its customers for the benefit of other
load-serving entities’ customers.
Once you let go of that borderline offensive idea, the Commission has no support
for its conclusion that the self-supply exemption thresholds are insufficient to adequately
protect against the exercise of market power by NYPA, especially when those thresholds
are combined with the requirement that only entities that operate “under a long-standing
business model to meet more than fifty percent of its Load obligations through its own
37 N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 153 FERC ¶ 61,022, at P 61 (2015).
38 Id. P 62.
39 February 2020 Order, 170 FERC ¶ 61,121 at P 67.
40 Id. P 67 & n.144.
41 NY Entities Rehearing Request at 27.
Docket Nos. ER16-1404-001 and ER16-1404-002- 13 -
generation” qualify for the self-supply exemption.42 Instead of explaining its concern
with the mitigation thresholds, the Commission simply insists that they are insufficient to protect against the exercise of market power.43 It should go without saying that repeating the decision without any reasoning is not reasoned decisionmaking.
In any case, the record suggests that the proposed thresholds for the self-supply
exemption would adequately protect against a state instrumentality, such as NYPA,
exercising market power—indeed that was the very purpose for which they were
designed.44 As noted, the requirement that only entities that operate “under a long-
standing business model to meet more than fifty percent of its Load obligations through
its own generation” qualify for the self-supply exemption prevents states from creating a
new load-serving entity that would uneconomically self-supply its entire capacity
obligation. In addition, the net-long threshold prevents self-supply entities from
purchasing capacity in excess of the amounts required to serve their customers,
preventing the self-supply entity from significantly affecting capacity market prices.45
Consider how those thresholds work in practice: As the NY Entities explain, the net-long
threshold for a load-serving entity with 1,000 MW of load in New York City creates a
self-supply exemption for only an additional 15.6 MW of capacity46—hardly a major
loophole. In the face of such evidence, the Commission’s failure to do more than simply
insist that those thresholds are insufficient is arbitrary and capricious.
III.The Commission’s Treatment of the Renewables Exemption Is Arbitrary and
Capricious
Today’s order also addresses the mechanics of NYISO’s renewable resource
exemption from its buyer-side market power mitigation provisions. Although, as noted, I
would altogether get out of the business of mitigating resources that are not buyers, much
less buyers with market power, a few of the additional flaws in the Commission’s
reasoning deserve further discussion. In particular, I disagree with the Commission’s
rejection of NYISO’s original proposal to establish a 1,000 MW cap on the volume of
intermittent renewable resources in each class year. The crux of the Commission’s
42 N.Y. Indep. Sys. Operator, Inc. Compliance Filing, Docket No. ER16-1404, at
18 (Apr. 13, 2016) (April 2016 Compliance Filing).
43 N.Y. Indep. Sys. Operator, Inc., 172 FERC ¶ 61,058, at P 15 (2020) (Order).
44 N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., Complaint, Docket No. EL15-64-000, Ex. B, Cadwalader Aff. ¶ 43 (May 8, 2015).
45 See APPA Rehearing Request at 9.
46 NY Entities Rehearing Request at 25.
Docket Nos. ER16-1404-001 and ER16-1404-002- 14 -
reasoning is that the proposed cap was not based “on the mitigated capacity zones” but rather on “historical entry of all resource types across the entire New York Control Area.”47 The Commission’s cursory rejection ignored the details of the proposal and supporting material, which explained how the cap was developed with an eye toward both NYISO-wide and the mitigated capacity zones.48
The approved Renewables Exemption Limit is determined in large part by what is
called “Incremental Regulatory Retirements.” This allows the renewables exemption to
offset only retirements that are substantially caused by “new or amended” laws and
regulations or statutes, or other regulatory or related actions that target generator
emissions, operating permits, fuel supply, property taxes or retirement compensation and
other incentives outside of the ISO markets.49 This is a far more fundamentally flawed
approach than the one the Commission previously rejected. Those flaws include an
unreasonably narrow definition of incremental retirements, a failure to recognize
permanent reductions in UCAP that are not directly linked to retirements, and an
unreasonable limitation on connecting retirements to actual legislation or regulatory
action. Let’s take those flaws in turn.
As I understand it, the theory of the cap is to limit renewable resources’ impact on
capacity market clearing prices by ensuring that the MW capacity of new renewables
does not exceed the MW capacity of resources retiring due to state regulation. I fail to
see why, if the Commission were truly concerned with preventing renewables from
suppressing prices, as it claims,50 it would makes sense to limit the MW quantity of new
renewables to the MW quantity of all incremental retiring resources rather than
attempting to limit it to those retirements due to state actions. After all, as Clean Energy
Advocates explain, “[i]f the [MW] value for renewable exemptions is tied to the total
quantity of retiring resources, the net effect of retirements and exempt renewable
generators that enter the market is that suppliers in the market experience no change in
47 Order, 172 FERC ¶ 61,058 at P 20.
48 April 2016 Compliance Filing, Attach. V, Bouchez Aff. ¶ 13 (“allowing this
quantity of ICAP MW to receive a Renewable Exemption in a given Class Year would be reasonable because it would not be likely to result in the artificial suppression of capacity prices in Mitigated Capacity Zones and it would not overly restrict the availability of
Renewable Exemptions”)
49 April 2020 Compliance Filing at 15.
50 February 2020 Order, 170 FERC ¶ 61,121 at P 48 (“a MW cap limits the risk that the renewable resources exemption will significantly impact market prices and it is such limitation that makes this tariff revision just and reasonable”).
Docket Nos. ER16-1404-001 and ER16-1404-002- 15 -
market prices over time.”51 In short, there is no price-based justification for limiting the exemption cap on new renewables to only those retirements caused by state action.
Instead, this unnecessary exercise in parsing out a resource’s motivation for retiring only muddies the analysis and takes the Commission further afield from the buyer-side market power concerns that it purports to be addressing through these proceedings.52
Even if you accept the flawed premise that new renewable supply should not
exceed exiting supply caused by state action, this will not permit even that level of entry. Today’s order approves a cap that accounts only for retirements rather than quantifiable
reductions in UCAP supply, even when those reductions can be tied to “direct” regulatory actions. Whether supply declines due to a retirement, a seasonal retirement, or a
permanent de-rate should be irrelevant for a Commission truly concerned about the
changes that supply can have to the clearing price of the market. A MW reduction is a
MW reduction, regardless of what the resource owner does with the rest of its facility.53
In ignoring every action short of a full retirement, the Commission overlooks what may
be very real and permanent reductions in capacity, such as those caused by resources that, for example, respond to annual emissions limitations by operating only seasonally or
derating their capacity in order to comply with emissions limitations.54 Nothing in
today’s order justifies that arbitrary distinction.
Finally, the Commission adopts NYISO’s proposal that the retirement must be the
result of “new or amended” regulations, statutes, or related actions. Quite honestly, I
have no idea what that means. And the Commission’s only response—that a temporal
limitation is necessary to avoid some unspecified burden on NYISO55—does not shed
any further light on the matter. Such obvious ambiguity is a recipe for endless litigation.
In any case, retirements can often lag significantly behind the motivating regulatory
action. Consider the case of the Indian Point Energy Center which is retiring its two units
in 2020 and 2021, pursuant to an agreement reached in 2017. No one with any
understanding of the circumstances surrounding Indian Point’s retirement would argue
51 Clean Energy Advocates Protest at 6.
52 As the Clean Energy Advocates explain, “[r]etirement decisions are made after accounting for many factors, such as state and federal laws and policies, fuel prices, projected energy demand, competition, [and] revenue needs.” Id.
53 See Clean Energy Advocates Protest at 7.
54 For example, the Indicated NYTOs explain that several generators have adopted plans to materially deactivate during certain months to avoid contributing to ozone
violations. Indicated NYTOs Protest at 13.
55 Order, 172 FERC ¶ 61,058 at P 58.
Docket Nos. ER16-1404-001 and ER16-1404-002- 16 -
that it is a “burden” to understand why the Indian Point units are retiring. I see no
reason—and the Commission presents none—for why, in a situation like that, the time between the agreement to retire and the actual date of retirement should be relevant to whether the capacity counts towards the renewables exemption.
***
We should not lose the forest for the trees. New York City and the down-state
area are about to experience an unprecedented number of retirements, including Indian
Point, which itself represents more than 2,000 MW of capacity. In addition, to meet NOx
limits under the Clean Air Act, the New York State Department of Environmental
Conservation adopted a rule that may lead to the retirement of over 3,000 MW of peaking
units, almost all of which are in New York City and Long Island.56 Meanwhile, New
York State has passed ambitious legislation to address climate change, among other
environmental concerns, by shifting its generation mix to cleaner resources. Today’s
order undermines New York’s ability to achieve those environmental goals by
obstructing the entry of new resources at a time when significant new capacity may be
needed to address the unprecedented retirements in the downstate region. That is not just
and reasonable.
For these reasons, I respectfully dissent.
________________________
Richard Glick
Commissioner
56 Indicated NYTOs Protest at 4.
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
New York Independent System Operator, Inc.Docket Nos. ER16-1404-001
ER16-1404-002
(Issued July 17, 2020)
DANLY, Commissioner, concurring:
I concur in the result of this order, insofar as it correctly finds that New York
Independent System Operator, Inc.’s (NYISO) compliance filing has satisfied the
requirements of the Commission’s February 2020 Order.1 That order required specific narrow adjustments be made to NYISO’s buyer-side market power mitigation rules, and I agree with the Commission that NYISO has made the required adjustments.
I write separately, however, to express my misgivings about the effects of
NYISO’s filing on the operation of its markets. Any regime that implements such
exemptions in its market power rules may not be capable of properly employing market forces to arrive at just and reasonable rates. Markets function when they establish
universal rules applicable to all participants—exemptions, regardless of the policy
objectives they may seek to achieve, impede a market’s ability to set prices that
accurately reflect market forces.
Consequently, I urge the Commission to consider seriously the implications of the
exemptions approved today on the overall effectiveness of NYISO’s buyer-side market
power mitigation rules if the Commission has the opportunity to do so in the future.
For these reasons, I respectfully concur.
________________________
James P. Danly
Commissioner
1 N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,121 (2020) (February 2020
Order).
