131 FERC ¶ 61,032
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Jon Wellinghoff, Chairman;
Marc Spitzer, Philip D. Moeller,
and John R. Norris.
New York Independent System Operator, Inc.Docket No. EL10-33-000
ORDER GRANTING PETITION FOR DECLARATORY ORDER
(Issued April 15, 2010)
1. On January 8, 2010, the New York Independent System Operator, Inc. (NYISO)
submitted a petition for a declaratory order (petition) seeking a ruling from the
Commission concerning whether the New York Power Authority’s (NYPA) ownership of
certain Grandfathered Transmission Congestion Contracts (Grandfathered TCCs)
terminated when the original generating unit at the Charles Poletti Power Plant in Astoria,
Queens, in New York City ceased to operate on January 31, 2010.1 As discussed below,
the Commission grants NYISO’s petition for a declaratory order and finds that NYPA’s
ownership of the Grandfathered TCCs did not terminate when the original Poletti
generating unit ceased to operate.
I.Background and Details of the Filing
2.On January 8, 2010, NYISO filed a petition for a declaratory order seeking a
ruling by the Commission concerning whether NYPA’s ownership of certain
Grandfathered TCCs pursuant to two grandfathered agreements should continue after the
original generating unit at the Charles Poletti Power Plant ceased to operate on
January 31, 2010. NYISO states that the grandfathered agreements at issue are two firm
1 While the petition is pending, NYISO also requests a temporary waiver of tariff
provisions that govern its tariff’s obligations to offer TCCs at a fixed price at the
expiration of a grandfathered TCC and/or to release, through TCC auctions, the capacity
represented by expired grandfathered TCCs. As discussed below, because we find that
the subject Grandfathered TCCs have not terminated, the request for waiver is dismissed
as moot.
Docket No. EL10-33-000- 2 -
point-to-point transmission service agreements executed on April 23, 1999 between the Transmission business unit of NYPA as “Transmission Provider” and the Marketing and Economic Development business unit of NYPA as “Transmission Customer” (NYPA
Agreements) for a total of 600 MW.2 The first, for 422 MW, provides for service
between a Point of Injection (POI) at NYPA’s Niagara Power Project and a Point of
Withdrawal (POW) at the East Fishkill Substation located on the northern portion of
Consolidated Edison Company’s (Con Edison) system in NYISO’s Zone G. The second, for 178 MW, provides for service between a POI at NYPA’s St. Lawrence - FDR Project and a POW also at the East Fishkill Substation.3
3. NYPA is an instrumentality of the State of New York and thus is generally exempt from jurisdiction under the Federal Power Act. It is a transmission-owning member of
NYISO that sells electricity primarily at wholesale at cost-based rates. NYPA
administers energy-based economic development programs through which it supplies
NYPA-generated hydropower and market-purchased power and other benefits to New
York businesses pursuant to statute for the purpose of mitigating energy costs and
supporting the State’s economic development goals. NYPA supplies electricity and
related energy services to a broad array of energy consumers, including State and local
government entities, community-owned electric systems and rural electric cooperatives, New York businesses and other energy consumers.
4. NYISO states that, at NYISO formation, NYPA received Grandfathered TCCs for
422 MW of transmission service from the Niagara Power Project to Load Zone J and for
178 MW of transmission service from the St. Lawrence Project to Load Zone J pursuant
to the two NYPA Agreements. NYISO states that the holder of the Grandfathered TCCs
receives congestion rents for all congested hours over the path and in the number of
megawatts specified in Attachment L of the NYISO OATT, which lists those
transmission agreements that predate the establishment of NYISO and that were
converted into Grandfathered TCCs.4 NYISO states that the NYISO OATT provides that
the conversion of these agreements into Grandfathered TCCs did not change the terms
2 Contract Nos. 189 and 190 in the NYISO Open Access Transmission Tariff (OATT) Attachment L.
3 NYISO states that a third grandfathered agreement entered into between NYPA and Con Edison in 1989 (1989 Agreement) provides transmission service for these 600 MW between the East Fishkill Substation and Load Zone J (New York City). However, NYISO states that “[t]he termination of this 1989 agreement is not tied to Poletti’s
retirement.” Petition at 5.
4 Petition at 6, n.7.
Docket No. EL10-33-000- 3 -
and conditions of the underlying agreements, and thus the termination clauses found in
the underlying transmission agreements act to terminate the associated Grandfathered
TCCs.
5. NYISO states that NYPA uses the 600 MW of Grandfathered TCCs to serve the Southeast New York (SENY) government loads listed in Appendix A of the petition, including, among other entities, the City of New York, the Metropolitan Transportation Authority, the Port Authority of New York & New Jersey, and the New York City
Housing Authority. NYISO states that NYPA’s total SENY load is about 1800 MW, for which it holds an additional 1200 MW of TCCs, and that NYPA holds power contracts with its SENY load for service through at least 2017.5
6. NYISO states that, in 2000, NYPA and Con Edison agreed to transfer ownership of the 600 MW of Grandfathered TCCs for transmission of Niagara/St. Lawrence energy between East Fishkill and Load Zone J from NYPA to Con Edison (2000 Agreement).6 NYISO states that pursuant to this 2000 Agreement, Con Edison reimburses NYPA for the cost of congestion over several TCC paths, including up to 600 MW of energy
transmitted pursuant to the NYPA Agreements.
7. NYISO states that, upon the expiration of the Grandfathered TCCs listed in
Attachment L, the NYISO tariffs originally required that NYISO immediately release the
associated transmission capacity into the next available auction to support the sale of new
TCCs.7 However, as a result of NYISO’s filings to comply with Order No. 681,8 NYISO
states that it now permits holders of Grandfathered TCCs to convert those rights, upon
their expiration, to Fixed Price TCCs with a duration of up to ten years.9 If the holder
chooses to convert those rights to Fixed Price TCCs, then the associated transmission
capacity is not sold into the auction but is retained as Fixed Price TCCs by the original
holder of the Grandfathered TCCs. If not purchased as Fixed Price TCCs, the capacity is
sold into the next TCC auction.
5 Petition at 8.
6 Petition at 5 (citing Agreement Between Consolidated Edison Company of New York, Inc. and New York Power Authority (May 11, 2000)).
7 Petition at 6.
8 Long-Term Firm Transmission Rights in Organized Electricity Markets, Order No. 681, FERC Stats. & Regs ¶ 31,226, reh’g denied, Order No. 681-A, 117 FERC
¶ 61,201 (2006).
9 NYISO OATT Attachment M, Section 2.A.
Docket No. EL10-33-000- 4 -
8.Both NYPA Agreements contain a termination provision that provides that service
will:
“[T]erminate on the earlier of (1) December 31, 2017; (2) when [NYPA]
no longer has an obligation to serve Southeast New York (SENY)
governmental customers; or (3) when both the Indian Point No. 3 Nuclear
Power Plant10 and the Charles Poletti Power Plant are retired or sold.”11
This language is also reflected in Attachment L of the NYISO OATT, which lists the expiration date of both agreements as December 31, 2017 but states in footnote 7 that “NYPA’s TCCs allocated to their SENY Governmental Load Customers will terminate on the earlier of December 31, 2017 or when NYPA no longer has an obligation to serve any of the SENY Loads or the retirement or sale of both IP#3 and Poletti.”
9. NYISO states that the original generating unit at the Charles Poletti Power Plant,
which is located in Astoria, Queens, New York City, in existence at the time the NYPA
Agreements were executed was a nominal 825 MW NYPA-owned oil and gas generating
unit. NYISO states that, pursuant to a stipulation that NYPA executed in 2002 before the
New York State Board on Electric Generation Siting and the Environment (Siting Board),
NYPA was allowed to construct a new, more efficient 500 MW combined cycle
generating unit essentially at the same physical location (immediately adjacent to the
original unit) if it ceased operation of the original unit by February 1, 2008, which
deadline was later extended to January 31, 2010.12 NYISO states that NYPA began
operating the new 500 MW combined cycle unit in 2005,13 and that the original unit and
the new combined cycle unit are located on the same plot of land and share the same
administration building, site management personnel, and natural gas delivery facilities.14
10 The Indian Point No. 3 Nuclear Power Plant was sold to a subsidiary of the Entergy Corporation in 2000. Entergy Nuclear Indian Point 3, LLC, and Entergy Nuclear FitzPatrick, LLC, 92 FERC ¶ 61,281 (2000).
11 NYISO OATT, Original Sheet No. 133.
12 NYISO states that the stipulation provided for up to a two-year extension if
NYISO certified each year that the original unit was needed to ensure 80 percent of
projected New York City (in-City) demand would be met with in-City resources, with a
hard deadline of January 31, 2010. Petition at 8 (citing Case 99-F-1627 Application by
the New York Power Authority for a Certificate of Environmental Compatibility and
Public Need…, Supplemental Joint Stipulation, September 12, 2002, p.8).
13 Petition at 8.
14 Petition at 10.
Docket No. EL10-33-000- 5 -
Accordingly, the original unit ceased operations on January 31, 2010, as provided in the
stipulation.
A.Petition for Declaratory Order
10.NYISO contends that there is a substantial question whether the closure of the
original Poletti generating unit terminated the NYPA Agreements and NYPA’s
ownership of the Grandfathered TCCs. NYISO therefore requests a ruling by the
Commission as to whether the closure of the original Poletti generating unit constitutes
the “retirement” of the “Charles Poletti Power Plant” within the meaning of the NYPA
Agreements, thereby terminating the NYPA Agreements and NYPA’s ownership of the
Grandfathered TCCs. NYISO states that if the unit’s closure does not constitute
“retirement” of the “Charles Poletti Power Plant,” NYPA will be permitted to retain the
600 MW of Grandfathered TCCs at issue until at least December 31, 2017. By contrast,
NYISO states that if the unit’s closure does constitute “retirement” of the “Charles Poletti
Power Plant,” then NYPA will have to exercise its option to convert the transmission
capacity associated with the agreements into Fixed Price TCCs pursuant to Attachment M
of the NYISO OATT in order to retain them. If NYPA declines to exercise this option,
then NYISO states that it would be obligated by its tariffs to release the transmission
capacity the Grandfathered TCCs represents into the next TCC auction to support new
TCCs.
11. NYISO maintains that it is a not-for-profit independent entity with no direct stake in the outcome of this proceeding. NYISO states that it seeks a Commission resolution of this issue in time to conduct the autumn Centralized TCC auction and, therefore, requests issuance of a declaratory order by June 1, 2010.
12.NYISO asserts that the Commission’s principles of tariff construction are useful in
analyzing the question at hand, quoting:
“[w]hen presented with a dispute concerning the interpretation of a tariff or contract, the Commission looks first to the tariff or contract itself, and only if it cannot discern the meaning of the contract or tariff from the language of the contract or tariff, will it look to extrinsic evidence. Extrinsic
evidence (which may include the parties’ course of performance) is
admissible to ascertain the intent of the parties when the intent has been imperfectly expressed in ambiguous contract language, but is not
admissible either to contradict or alter express terms.”15
15 New York Independent System Operator, Inc. v. Astoria Energy LLC, 118 FERC
¶ 61,216, at P 34 (2007) (citing Nicole Gas Production Ltd., 105 FERC ¶ 61,371 (2003)).
Docket No. EL10-33-000- 6 -
In addition, NYISO states that, according to Commission precedent, tariff language is deemed to be ambiguous when it is “reasonably susceptible to different constructions or interpretations.”16
13. NYISO asserts that the meaning of the termination clause in the NYPA
Agreements cannot be ascertained from the language of the agreements themselves, and
therefore it is necessary to ascertain NYPA’s intention when it entered into the NYPA
Agreements. NYISO acknowledges that ceasing to operate the original Poletti unit could
be interpreted as a retirement of the “plant” within the commonly accepted meaning of
the term “retirement,” assuming that the original Poletti unit constitutes the entirety of the
Poletti plant. NYISO states that this interpretation is reinforced by the fact that the only
generating unit at the Poletti site when the NYPA Agreements were written was the
original Poletti unit. However, NYISO contends that it is also reasonable to adopt the
view that the new combined-cycle unit is so closely related to the original Poletti unit,
both in proximity and purpose, that it is, in effect, an extension of the original power
plant. NYISO asserts that this view is reinforced by the fact that, but for the construction
of the new, 500 MW unit at the Poletti site, NYPA would not close the original Poletti
unit at this time, and the original February 2008 target date for discontinuing the
operation of the original unit followed shortly the expected in-service of the new unit.
Further, NYISO states that both the original and new units are not only located on the
same plot of land, but also share the same administration building, site management
personnel, and natural gas delivery facilities. Therefore, NYISO contends that the plain
language of the NYPA does not yield a clear answer, and it is necessary to ascertain
NYPA’s intention when it entered into the agreements.17
14. Finally, NYISO asserts that the underlying public interest policy that supported the grandfathering of the original transmission agreements - to alleviate congestion costs for certain governmental SENY loads - still exists. NYISO states that NYPA continues to have the obligation to serve those SENY loads, and a determination that these
16 Id. (citing Koch Gateway Pipeline Co. v. Federal Energy Regulatory Commission, 136 F.3d 810, 814 (D.C. Cir. 1998)).
17 NYISO also requests that the Commission grant a limited waiver to the extent necessary to allow NYISO to treat the Grandfathered TCCs as remaining in effect for the purposes of all upcoming TCC auctions while this petition for declaratory order remains pending and until such time as the NYISO is prepared to prospectively implement a
Commission determination that the Grandfathered TCCs should be released, if the
Commission makes such a determination. Given that we grant the petition, and find that the Grandfathered TCCs have not expired, there is no need for a tariff waiver, and the
request is, therefore, dismissed as moot.
Docket No. EL10-33-000- 7 -
Grandfathered TCCs are terminated under Attachment L could significantly increase the
hedging costs associated with that load. Accordingly, NYISO states that it seeks a
declaratory order clarifying the status of NYPA’s Grandfathered TCCs under the
grandfathered agreements once NYPA closes the original Poletti unit in January 2010.
II.Notice and Responsive Pleadings
15.Public notice of the January 8, 2010 filing was issued in the Federal Register on
January 15, 2010, with comments due on or before February 8, 2010. Pursuant to Rule
214 (18 C.F.R. § 385.214 (2009)), all timely filed motions to intervene and any motion to
intervene out-of-time filed before the issuance date of this order are granted. Granting
late intervention at this stage of the proceeding will not disrupt the proceeding or place
additional burdens on existing parties. Motions to intervene were filed by Consolidated
Edison Solutions, Inc.; Dynegy Power Marketing, Inc., Dynegy Northeast Generation,
Inc., and Sithe/Independence Power Partners, L.P. (collectively, Dynegy); JP Morgan
Ventures Energy Corporation; Constellation Energy Commodities Group, Inc. and
Constellation NewEnergy, Inc. (collectively, Constellation); New York Municipal Power
Agency (NYMPA) and Municipal Electric Utilities Association of New York State
(MEUA); New York Association of Public Power; Exelon Corporation; and Mirant
Energy Trading, LLC, Mirant New York, LLC, and Mirant Bowline, LLC (collectively,
Mirant). Motions to intervene and comment were filed by NYPA and the City of New
York (the City); Consolidated Edison Company of New York, Inc. (Con Edison); and
Long Island Power Authority and its operating subsidiary, LIPA (collectively, LIPA).
Protests were filed by Independent Power Producers of New York, Inc. (IPPNY); DC
Energy, LLC (DC Energy); and Shell Energy North America (U.S.), L.P. (Shell Energy).
16. NYPA and the City, NYISO, and DC Energy each filed a motion for leave to answer and an answer. Rule 213(a)(2) of the Commission's Rules of Practice and
Procedure, 18 C.F.R. § 385.213(a)(2) (2009), prohibits an answer to a protest unless otherwise ordered by the decisional authority. We will accept the answers because they have provided information that assisted us in our decision-making process.
A. Comments
17. In their comments, NYPA and the City argue that the Commission should grant
NYISO’s petition because the conditions precedent for releasing the Grandfathered TCCs
as stated in the termination provision have not been met based on the plain meaning of
the tariff language. NYPA and the City assert that there has been no retirement of the
Charles Poletti Power Plant merely because the less efficient generating unit on the
Poletti site was replaced with a new, more efficient generating unit on the same site.
NYPA and the City argue that the old and new units are inextricably linked because the
closure of the former unit was an explicit condition of the Siting Board granting a
certificate for the new unit. NYPA and the City state that the Siting Board’s approval of
the new unit provided for construction of the new combined-cycle unit as a replacement
Docket No. EL10-33-000- 8 -
of the old oil and gas unit in order to realize environmental and air quality benefits,
reliability benefits, and market benefits. NYPA and the City also support their contention that the Charles Poletti Power Plant consists of both the old and new units by pointing to numerous public documents referring to the new unit as the “Poletti Expansion” or
“Poletti Project.” Furthermore, NYPA and the City argue that the physical characteristics of the new unit support the notion that the Poletti facility includes the new unit, since the two units are located on the same plot of land and share the same administration building, site management personnel, and natural gas delivery facilities.
18. In addition, NYPA and the City argue that extrinsic evidence shows that NYPA
intended to hold TCCs on behalf of its SENY customers beyond the unit replacement.
NYPA and the City state that NYPA was the only party to the underlying transmission
agreements, and NYPA never envisioned that replacing the older, inefficient unit with a
more efficient unit would trigger the termination provision, thereby terminating TCCs
vital to the same customers that are paying for the new resource. NYPA and the City
state that the purpose of the termination provision was to avoid a situation where NYPA
was in possession of, and financially responsible for, TCCs even though it no longer
served SENY customers, and NYPA did not intend that the underlying OATT reservation would be terminated by the replacement of the generating unit at the Poletti site while it still serves SENY customers. NYPA and the City assert that NYPA intends to hold the TCCs as long as it continues to serve SENY customers and maintains generation in New York City, as it has done in the past to protect customers from congestion charges to
reflect their historical contribution to the embedded costs of the system. NYPA and the City urge the Commission to avoid any interpretation that would punish NYPA and
SENY customers for the act of replacing the old oil and gas unit with a new, cleaner,
more efficient combined-cycle unit at the same site.
19. NYPA and the City also argue that release of the TCCs would have a detrimental
impact on NYPA’s SENY customers and would create an unjust and unreasonable result.
NYPA and the City state that the economic value of the TCCs to NYPA’s SENY
customers is significant and estimates the net impact of losing the TCCs to be
approximately $40 million for 2010 and potentially more than $300 million through
December 31, 2017. NYPA and the City argue that reading the termination provision in
isolation and out of context could create rate shock for these customers. Should the
Commission find the termination provision ambiguous, NYPA and the City urge the
Commission to allow NYPA’s SENY customers to continue to pay for the embedded cost
of the system and keep the TCCs until they expire on December 31, 2017.
20. In its comments, Con Edison states that NYISO’s interpretation of the NYPA
Agreements appears to be reasonable and addresses the interests of the governmental
customers by allowing governmental customers to transition to future arrangements in an
orderly fashion given the certain termination date of December 31, 2017. Con Edison
Docket No. EL10-33-000- 9 -
asserts that the public interest would be served by the Commission granting the relief requested by NYISO.
21. In its comments, LIPA urges the Commission to find that the decommissioning of the original Poletti unit does not constitute retirement of the Poletti plant, and therefore,
NYPA’s Grandfathered TCCs have not been terminated. LIPA notes that NYISO, Con
Edison, and NYPA acknowledge that the new generating equipment is located on the
Poletti site and serves to replace the original Poletti unit and that the administrative
building, site management personnel, and fuel delivery facilities have not changed. LIPA also asserts that Con Edison and NYPA are uniquely situated to understand and articulate their own intentions in drafting the subject termination provisions, and the Commission
should afford appropriate weight to the apparent agreement of the parties regarding
continuation of the NYPA Agreements.
B.Protests
22.IPPNY and DC Energy argue in their protests that the closure of the Poletti unit
constitutes a retirement of the Poletti unit, considering the plain meaning of the term
“retirement” and NYISO’s and NYPA’s usage of the term in describing the closure of the
Poletti unit in various documents. On this basis, they assert that the NYPA Agreements
and related TCCs terminated. DC Energy further argues that enforcing the plain meaning
of the NYISO OATT is consistent with Commission policy and cites cases designed to
demonstrate that the Commission is reluctant to extend the terms of grandfathered
agreements.18 IPPNY also asserts that NYISO is incorrect in claiming that the public
interest that supported grandfathering of the original transmission agreements was to
alleviate congestion costs for certain SENY customers. It asserts that the Commission
approved the grandfathering not as a way to reduce costs but “as an acceptable method to
recognize long-term firm commitments in existence on the date the ISO commences
operations.”19
23. DC Energy and IPPNY also argue that the closure of the Poletti generating unit
constitutes a retirement because the combined cycle unit and original oil and gas unit
deliver power to different locations and because the combined cycle unit was not
intended to replace Poletti. IPPNY states that Poletti is electrically connected to the
345 kV East 13th Street substation in Manhattan and the combined cycle unit is connected
to the 138 kV Astoria West substation in Queens. Therefore, it asserts, the points of
interconnection for the two projects are at two distinct substations, voltage levels, and
18 Citing Niagara Mohawk Power Corp., 96 FERC ¶ 61,363 (2001); order on clarification, 100 FERC ¶ 61,247 (2002).
19 Protest of IPPNY at 7.
Docket No. EL10-33-000- 10 -
boroughs of New York City, and within separate Consolidated Edison load pockets. In addition, IPPNY states that there is no single connection between the original unit’s
points of interconnection and the combined cycle unit’s points of interconnection.
Finally, in response to NYISO’s statement that it is reasonable to adopt the view that the new unit is an “extension of Poletti,” IPPNY asserts that NYPA did not intend to build the combined cycle unit to replace the original unit; rather, its decision to close the
original Poletti unit was a concession to environmental groups to expedite the permitting process for the new unit, and nowhere in its permit applications or stipulations to the
Siting Board for the new unit did NYPA make any assertion that the new unit was
intended as a replacement for the original Poletti unit.
24. DC Energy also contends that two other issues should be resolved by the
Commission in response to NYISO’s request for a declaratory order: (1) whether NYPA
has the right pursuant to NYISO OATT Attachment M to convert the Grandfathered
TCCs to Fixed Price TCCs; and (2) whether the grandfathered TCCs associated with the
1989 Agreement have also terminated. DC Energy asserts that Attachment M requires an
entity to be a Load-Serving Entity (LSE) in order to have the right to obtain Fixed Price
TCCs, and it is not clear whether NYPA is considered a LSE20 or whether NYPA
properly notified NYISO of a decision to obtain Fixed Price TCCs.21 DC Energy also
asserts that if the NYPA Agreements have terminated, then the 600 MW of downstream
TCCs associated with the 1989 Agreement must terminate as well.22 DC Energy
20 Section 2A.1 of Attachment M states: “Any LSE that had transmission rights
under an [Existing Transmission Agreement (ETA)] in effect on November 19, 1999 that
was listed in Table 1A of Attachment L to this OATT (as it may be amended), but has
since expired, shall have a right to obtain Fixed Price TCCs with the same POI and POW
associated with that ETA. An LSE is defined under section 1.16a of NYISO’s OATT as:
“an entity, including a municipal electric system and an electric cooperative, authorized
or required by law, regulatory authorization or requirement, agreement, or contractual
obligation to supply Energy, Capacity and/or Ancillary Services to retail customers
located within the [New York Control Area (NYCA)] including an entity that takes service directly from the ISO to supply its own load in the NYCA.”
21 Section 2A.1 of Attachment M requires that “an LSE must notify the [NYISO] and the Transmission Owner that was (or is) a party to the ETA, in writing, of its decision to obtain Fixed Price TCCs prior to a deadline to be established by the [NYISO]” and that NYISO set the deadline on a date prior to the beginning of the Centralized TCC Auction for the Capability Period in which the ETA expires or terminates.
22 DC Energy asserts that NYISO OATT Attachment K requires that the
grandfathered customer maintain the entire grandfathered path from the source at the POI to the load at the POW, such that once the NYPA Agreements terminated, the
(continued…)
Docket No. EL10-33-000- 11 -
therefore requests the Commission to direct NYISO to: (1) clarify whether NYPA has
met the Attachment M requirements for converting its Grandfathered TCCs to Fixed
Price TCCs, and if NYISO concludes that NYPA may purchase Fixed Price TCCs, direct
such election to occur prior to March 15, 2010; and (2) clarify whether the 600 MW of
grandfathered TCCs associated with the 1989 Agreement have also terminated by making
a subsequent filing no later than March 15, 2010. DC Energy requests that the
Commission issue an order no later than March 15, 2010 so that any remaining capacity
associated with the Grandfathered TCCs can be available for Round 6 of the ongoing
Spring 2010 Initial TCC Auction.
25. In its protest, Shell Energy states that it agrees with the relief requested by DC Energy in its protest and urges the Commission to declare that the Grandfathered TCCs have terminated.
C. Answers
26. In their answer, NYPA and the City respond to IPPNY’s argument, that the
technical specifications of the interconnection for the combined cycle unit show that the Poletti unit is retired, by arguing that the point of interconnection is irrelevant. NYPA and the City argue that the Grandfathered TCCs at issue have no relation to the Poletti points of interconnection. Finally, NYPA and the City assert that no market participant subsidizes NYPA’s TCCs, contrary to IPPNY’s claim.
27. NYPA and the City also argue that DC Energy and IPPNY confuse the central
issue by citing documents referring to the “retirement” of the original Poletti “unit,” when
no one disputes that the original Poletti unit has ceased operations. NYPA and the City
assert that the critical question, which the documents cited by protestors fail to shed light
on, is whether the Poletti facility in its entirety can be considered retired when a new
combined cycle unit operates there and will continue to operate for years to come to serve
SENY customers who paid for the new unit. NYPA and the City respond to DC
Energy’s discussion of cases involving the extension of grandfathered transmission
agreements by asserting that the discussion is irrelevant because no one has suggested
extending the terms of the NYPA Agreements. NYPA and the City also argue that DC
Energy’s discussion of additional issues, such as whether NYPA qualifies for Fixed Price
TCCs, are irrelevant because they are outside the scope of the petition and therefore this
proceeding.
downstream 600 MW of grandfathered TCCs from East Fishkill to Zone J also
terminated. If these grandfathered TCCs have terminated, DC Energy states that the
capacity associated with these TCCs also should be released into the NYISO TCC
auctions.
Docket No. EL10-33-000- 12 -
28. In its answer, NYISO urges the Commission to decline to address the two
additional issues raised in DC Energy’s protest as outside the scope of the declaratory
order proceeding. NYISO argues that neither issue was presented by NYISO or needs to be addressed in order for the Commission to answer the question presented.
29. In its answer, DC Energy contends that inconsistencies in NYISO’s filings require
making the 1989 Agreement public in order to determine whether the 1989 Agreement
was encompassed by the grandfathering of the NYPA Agreements and whether it is
subject to the termination provision featured in the NYPA Agreements. DC Energy
requests that the Commission require NYISO to make public the 1989 Agreement.
III.Discussion
30.As the parties correctly state, when presented with a dispute concerning the
interpretation of a tariff or contract, the Commission looks first to the language of the
tariff or contract itself and, only if it cannot discern the meaning of the contract or tariff
from the language of the contract or tariff, will it look to extrinsic evidence of intent.23
Extrinsic evidence (which may include the parties’ course of performance) is admissible
to ascertain the intent of the parties when the intent has been imperfectly expressed in
ambiguous contract language, but is not admissible either to contradict or alter express
terms.24 A tariff or contract is ambiguous when it is “reasonably susceptible [to]
25
different constructions or interpretations.”
31. NYISO’s position is that the meaning of the termination clause in the underlying Service Agreements cannot be ascertained from the language of the Agreements
themselves, because the same language, “Charles Poletti Power Plant,” can be given two different interpretations, and that it is therefore necessary to ascertain NYPA’s intention, when it entered into the underlying Service Agreements at issue here, as to the conditions that would effectuate their termination.26
32. In contrast to NYISO, DC Energy and IPPNY argue that the plain meaning of the
word “retirement” renders the termination provision unambiguous. They argue that the
23 New York Independent System Operator, Inc. v. Astoria Energy LLC, 118 FERC
¶ 61,216, at P 34 (2007) (citing Nicole Gas Production Ltd., 105 FERC ¶ 61,371 (2003)).
24 Id.
25 Mississippi River Transmission Corp., 96 FERC ¶ 61,185 (2001) (quoting Lee v. Flintkote Co., 593 F.2d 1275, 1282 (D.C. Cir. 1979)).
26 Petition at 10-11.
Docket No. EL10-33-000- 13 -
closure of the original generating unit constitutes a “retirement” of that unit and that, as a result, the NYPA Agreements terminated on January 31, 2010, upon the retirement of the original Poletti unit. However, protestors focus only on the term “retirement” without
adequately considering NYISO’s assertion that the term “Charles Poletti Power Plant,” to which the term “retirement” relates, is ambiguous. As NYPA and the City observe in
their answer, it is undisputed that, by ceasing operations, the original oil and gas Poletti generating unit was “retired” as scheduled on January 31, 2010.27 The interpretation of the termination provision, rather, turns on what the parties to the agreements meant by the term “Charles Poletti Power Plant,” and, more specifically, whether “retirement” of the “Charles Poletti Power Plant” refers only to the cessation of operations by the original
generating unit or by all generating units on the Poletti site.
33. The Commission agrees with NYISO that the subject termination provision is
ambiguous because the term “Charles Poletti Power Plant” can be given two
interpretations. The Commission looks first to the language of the NYPA Agreements,
confining its analysis to the four corners of each document, and finds that it is reasonable
to interpret the clause “when…the Charles Poletti Power Plant [is] retired” to mean either
(1) when the original Poletti generating unit ceases to operate, or (2) when all generation
at the Poletti site ceases. The NYPA Agreements do not define the term “Charles Poletti
Power Plant” or what it means to be “retired.” There was only one generating unit
operating at the time the NYPA Agreements were executed, so the term “Charles Poletti
Power Plant” could have been intended to refer only to that single generating unit in
existence at the time of the drafting such that cessation of operations at that unit would
cause the termination of the NYPA Agreements. However, a generation "plant" typically
can consist of one or more generation units, some of which may be replaced or modified
over time.28 So the term “Charles Poletti Power Plant” could have been intended to refer
to the Poletti facility site without limitation to just that original unit as long as the facility
at that site is generating power, including any generating units currently operating.
Because the same contract language can be given the foregoing two interpretations, the
Commission finds that the termination provision of the NYPA Agreements is ambiguous.
34. Having found the termination provision is ambiguous, the Commission may
consider extrinsic evidence of the intent of the parties in order to determine the meaning
27 NYPA Answer at 2 and 5.
28 See, e.g., United States Energy Information Administration, Electricity Terms
(Plant: A facility at which are located prime movers, electric generators, and auxiliary
equipment for converting mechanical, chemical, and/or nuclear energy into electric
energy. A plant may contain more than one type of prime mover.)
http://www.eia.doe.gov/cneaf/electricity/page/glossary.html.
Docket No. EL10-33-000- 14 -
of the provision. While NYPA’s statements of intent are not contemporaneous with the
execution of the NYPA Agreements and the contracts are atypical in that the parties are
business units of the same entity (NYPA’s Transmission business unit and its Marketing
and Economic Development business unit), NYPA is the sole party to the contract and
we will give weight to its statements of intent as extrinsic evidence to assist us in our
analysis.
35. NYPA and the City state that NYPA’s intent behind the termination provision was
to avoid a situation where NYPA was in possession of, and financially responsible for,
TCCs even though it no longer served SENY customers. This interpretation is consistent
with and supported by the second triggering event listed in the termination provision,
which provides that service under the agreement shall terminate “when Transmission
Customer no longer has an obligation to serve Southeast New York governmental
customers.” NYPA and the City also state that NYPA did not intend for the NYPA
Agreements to be terminated by the replacement of an older, inefficient generating unit
by a cleaner, more efficient unit, thereby terminating TCCs vital to the same customers
paying for the new resource.
36. NYPA supports its position that it did not intend the NYPA Agreements and
associated Grandfathered TCCs to terminate under these circumstances by pointing to its
practice of holding TCCs to protect its customers from congestion charges. NYPA states
that its practice has been to hold TCCs to protect its customers from congestion charges
and that it intends to hold the TCCs at issue in this case as long as it continues to serve
SENY customers through generation in New York City, or until December 31, 2017.
The 2000 Agreement between NYPA and Con Edison is also persuasive in this regard:
even though NYPA voluntarily relinquished TCCs to Con Edison in that agreement, it
nonetheless ensured that its SENY customers would be protected from congestion costs
(as they would have been if it had continued to hold the TCCs itself) by providing that
Con Edison would reimburse it for actual congestion exposure. NYPA’s statements as to
its consistent practice of using TCCs to protect its SENY customers from congestion
charges and the 2000 Agreement show that NYPA intended the NYPA Agreements to
remain in force, and therefore for it to continue to hold TCCs, for as long as NYPA
continues to serve its SENY customers. Thus, it is not reasonable to believe that NYPA
would have intended the termination provision to take effect in the situation where it
would still continue to be serving SENY customers. Moreover, we agree with NYISO
that the effect on congestion costs of the associated grandfathering of any related TCCs
was a public interest factor supporting grandfathering of the original transmission
agreements and that the public interest of alleviating congestion costs for SENY loads
still exists.
37. In addition, NYPA’s treatment of the new generating unit as a replacement for the
original unit is consistent with its contention that it never intended the Grandfathered
TCCs to terminate merely because the less efficient generating unit on the Poletti site was
Docket No. EL10-33-000- 15 -
replaced with a new, more efficient generating unit on the same site serving the same
customers. NYPA constructed the new unit on the same power plant site as the original
unit, using the same administration building, site management personnel, and natural gas
delivery facilities. As discussed further below, while protestors argue that the old and
new units do not share the same points of interconnection, the Poletti facility continues to
serve SENY customers through the new generating unit. Furthermore, NYPA and the
City state that the closure of the original unit was an explicit condition of the Siting
Board granting a certificate for the new unit, and that the Siting Board granted approval for the new unit as a replacement of the old oil and gas unit in order to realize
environmental and air quality benefits, reliability benefits, and market benefits.
38. IPPNY’s assertion, that NYPA’s decision to close the old unit was not to replace it
but was purely a concession to environmental groups to expedite the permitting process
for the new unit, is irrelevant. The reasons why NYPA made that decision do not inform
whether the retirement of the old unit constituted a retirement of the Poletti “Plant” under
the subject agreement, which is the sole issue in this case. The more germane question is
whether NYPA intended the NYPA Agreements to prematurely terminate (i.e., before
December 31, 2017) when the original unit ceased operations despite the fact that power
needed to supply its SENY customers continued to be supplied from the Poletti site by
the new generating unit. The fact that NYPA continues to serve SENY customers with
its new unit at the same site is consistent with NYPA’s statement that it did not intend the
termination provision to be triggered by the construction of the new unit since the new
unit achieves NYPA’s continued objective to serve SENY customers. Indeed, the
stipulation NYPA entered into in 2000 reflects the importance of continued operation of generation at the Poletti site to serve SENY customers since postponement of retirement of the original Poletti unit until the new 500 MW replacement unit was in service was contingent on NYISO certifying each year that the continued operation of the original unit was needed to ensure that the New York City Installed Capacity (ICAP)
Requirement would be met.29 By replacing 500 MW of the original unit’s 825 MW
capacity,30 the new unit continued the Poletti facility’s role in supplying needed ICAP to help meet the in-City minimum ICAP requirement.31
29 Petition at 8.
30 However, because the original Poletti unit actually was permitted to operate at only a 30 percent capacity factor when it was retired, the new 500 MW Poletti unit,
without such restrictions, actually increased the generation output at the Poletti site. See NYPA Comments at 13.
31 As recounted in a March 16, 2007 letter from NYISO to NYPA, the New York State Siting Board’s October 2, 2002 Order authorizing NYPA to construct and operate
(continued…)
Docket No. EL10-33-000- 16 -
39. The Commission finds that the available extrinsic evidence demonstrates that
NYPA intended for the NYPA Agreements to continue until either NYPA no longer
serves SENY customers or until December 31, 2017. Accordingly, we find that the
construction of a new generating unit on the same site as the original unit did not
terminate the NYPA Agreements. The Commission interprets the clause “when…the Charles Poletti Power Plant [is] retired” to refer to the cessation of all generation on the Poletti site rather than merely the cessation of operations of the original generating unit. As a result, with the construction and operation of the new 500 MW unit at the Poletti facility, the retirement of the original generating unit at that site did not terminate the NYPA Agreements and the associated Grandfathered TCCs.
40. Further, the Commission finds unpersuasive DC Energy’s and IPPNY’s reliance
on various documents in which NYISO and NYPA describe the “retirement” of the
original generating unit to support DC Energy’s and IPPNY’s claim that the NYPA
Agreements terminated when original Poletti unit was retired on January 31, 2010. As
discussed above, it is undisputed, but not dispositive of the issue in the case, that the
original generating unit was retired. As NYPA and the City state in their answer, the
critical question is whether the Poletti Power “Plant” in its entirety can be considered
retired when a new combined cycle unit operates there and will continue to operate for
years to come to serve SENY customers. Indeed, these various documents do not even
consistently or specifically refer to the closure of the Poletti “Power Plant” or “plant” by
January 31, 2010. For example, these documents also variously refer to the retirement or
closure of: the “825 (Nominal) MW Generator Unit at the Charles A. Poletti Site,”32
“NYPA’s Poletti generating unit,”33 the “Poletti Project,” or simply “Poletti,”34 and the
the new 500 MW unit required NYPA to seek a determination from NYISO whether
closure of the Existing Poletti Facility as of February 1, 2008, will cause “the aggregate
in-City electrical generating capacity (exclusive of the Existing Poletti Facility) . . . to be
less than 80% of the total in-city projected peak demand . . . for the summer of 2008.” In
that March 16, 2007 letter, NYISO stated that closure of the original (“Existing”) Poletti
unit on February 1, 2008, would cause that aggregate in-City capacity to fall below the
80 percent requirement for the summer of 2009. See Answer of DC Energy, Attachment F.
32 Answer of DC Energy, Attachment A.
33 Answer of DC Energy, Attachment B.
34 Answer of DC Energy, Attachment D.
Docket No. EL10-33-000- 17 -
“existing Charles Poletti generating facility” or the “old 825 MW Charles Poletti generating facility.”35
41. We also find unsupported DC Energy’s cursory dismissal of the fact that the new unit is located at the same site and uses the same administrative buildings and personnel as “irrelevant.”36 It is undisputed that, after the original unit ceased operations, and the new unit continued to operate at that same site, the Poletti site property remained in
NYPA’s ownership, and the Poletti site’s administrative buildings and ancillary and gas delivery facilities and personnel remained the same -- all components of what may
commonly be referred to as a generating “plant” -- such that it is reasonable to find that the Poletti “Plant” remains in service.
42. Protestors also argue that the new combined cycle unit cannot be considered to be
an extension of or the same as the original “Poletti Power Plant” for purposes of the
termination provision because the new combined cycle unit and original unit do not have
the same points of interconnection and serve different customers. The new 500 MW
replacement unit or its related interconnection need not be exactly the “same” as the
original unit for purposes of applying the termination provision; the only issue is whether
the Poletti “Power Plant” remains in service. Moreover, as NYPA and the City state in
their answer, NYPA could have changed the point of interconnection for the old Poletti
unit at any time while it was in operation without triggering the termination provision, so
the new point of interconnection for the replacement unit is not determinative.
Additionally, there is no evidence showing that merely changing the point of
interconnection of the Poletti facility such that different specific customers are served is
relevant to whether the NYPA Agreements terminate as long as NYPA continues serving
the SENY load. The NYPA Agreements do not contain any provisions that preclude a
change in the specific SENY customers being served by the Poletti Plant, as all
references to NYPA customers are expressed broadly as “SENY customers.”37 Whether
power is being delivered to customers in Manhattan or Astoria, “SENY customers” are
still being served by NYPA’s Poletti generating facilities. Therefore, the Commission
rejects protestors’ contentions.
35 Answer of DC Energy, Attachment G.
36 Answer of DC Energy at 12.
37 It would not make sense to have the termination of the NYPA Agreements turn on whether the identical SENY customers are being served by the Poletti facility because that would place the power to terminate the NYPA Agreements in the hands of individual customers who may decide to terminate or alter their own respective contractual
arrangements with NYPA.
Docket No. EL10-33-000- 18 -
43. Finally, DC Energy’s argument that Commission precedent demonstrates
reluctance to extend the terms of grandfathered agreements is irrelevant. As NYPA and the City respond in their answer, in this case no party has suggested extending the terms of the NYPA Agreements. Here, the question is solely whether the NYPA Agreements have terminated.
44. Given that we find that the NYPA Agreements have not terminated, we do not
find it necessary to address DC Energy’s arguments regarding NYPA’s ability to obtain
Fixed Price TCCs and the possible termination of TCCs associated with the 1989
Agreement. As previously noted, given our findings herein, there is no need for any tariff
waiver, and therefore the request for a temporary waiver is dismissed as moot.
The Commission orders:
NYISO’s petition for declaratory order is hereby granted, as discussed in the body of this order.
By the Commission. ( S E A L )
Kimberly D. Bose,
Secretary.
