132 FERC ¶ 61,271
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Jon Wellinghoff, Chairman;
Marc Spitzer, Philip D. Moeller,
John R. Norris, and Cheryl A. LaFleur.
New York Independent System Operator, Inc.Docket Nos. ER10-1977-000
ER10-1977-001
ER10-1977-002
ORDER ACCEPTING AND SUSPENDING TARIFF REVISIONS
SUBJECT TO CONDITIONS
(Issued September 29, 2010)
1. On July 26, 2010, as corrected on July 30, 2010 and on August 10, 2010, NYISO
submitted, pursuant to section 205 of the Federal Power Act, proposed revisions to its
Open Access Transmission Tariff (OATT) and its Market Administration and Control
Area Services Tariff (Services Tariff) to allow generators to increase the price of energy
already scheduled day-ahead for re-evaluation in the real-time market. NYISO requests
that its proposed tariff revisions be made effective September 30, 2010. In this order, the
Commission accepts and suspends NYISO’s proposed revisions for a nominal period, to
become effective September 30, 2010, subject to refund and the conditions of this order.
I.Background
2.NYISO states that market participants submit generator offers in the day-ahead
market based on their expected marginal costs of operation; however, the costs associated
with running at the day-ahead committed level may increase following the close of the
day-ahead market due to such reasons as the need to switch to an alternate fuel due to
fuel curtailment. NYISO states that, currently, generators are not permitted to increase
their energy offer on capacity that received a day-ahead market schedule and no other
NYISO mechanism exists for generators to manage or hedge these increases in costs.
Thus, according to NYISO, generators must either run to their day-ahead schedule at
their increased cost, or take a derate,1 which will impact the generator’s future unforced
capacity calculation and may compromise real-time reliability. The instant filing
1 A “derate” is a reduction in the rated capacity attributed to a generating unit.
Docket No. ER10-1977-000, et al.- 2 -
proposes to allow generators to increase their real-time market offers for day-ahead
committed incremental energy and it proposes mitigation and penalties for misuse of the functionality.
3. NYISO has submitted filings concurrently in three dockets that are associated with
successful deployment of the Reference Level Software (RLS) project. The RLS project
allows NYISO to incorporate more accurate cost information into generator reference
levels.2 NYISO states that the revisions proposed in the instant docket are dependent
upon the suite of RLS and market software improvements that support the tariff revisions
proposed in the Docket No. ER10-2062-000 filing, since generators’ reference levels may
need to be updated when they experience cost increases which they want to incorporate
into their real-time offers.
II.NYISO’s Proposed Tariff Revisions to Increase Bid-Price of Incremental
Energy
4. In the instant filing, NYISO proposes tariff revisions to specify that generators
may increase the bid-price, or the mitigated bid-price, as applicable, of day-ahead
scheduled incremental energy unless otherwise prohibited from doing so by other
provisions of the tariff.3 NYISO adds that such bid increases allow the real-time
commitment and dispatch software to dispatch such a generator below its day-ahead
schedule if other facilities are available at a bid-cost less than the generator’s increased
2 In Docket Nos. ER10-1866-000, et al., NYISO addresses the impact of the new
software on generators that start late in the dispatch day and that need to run on the
following dispatch day to complete their minimum run time (Late Day Start generators).
In Docket No. ER10-2062-000, NYISO proposes to amend its market mitigation
measures to implement the RLS in calculating reference levels for purposes of mitigation
and penalties. The filing in the instant docket, ER10-1977-000, et al., contains certain
tariff revisions proposed in the other two foregoing dockets, which will be addressed in
those dockets.
3 NYISO also proposes, for clarity purposes, to add the term “Real-Time
Scheduling Window” to refer to the period of time within which NYISO accepts offers
and bids to sell and purchase energy and ancillary services in the real-time market and for external transactions at the proxy generator buses associated with the Cross-Sound
scheduled line, the Neptune scheduled line or the Linden Variable Frequency
Transformer scheduled line.
Docket No. ER10-1977-000, et al.- 3 -
real-time bid. 4 According to NYISO, this feature will improve the ability of generators to manage the risk of real-time cost increases after submission of their day-ahead offers but before the real-time dispatch hour.
5. NYISO also states that those generators able to update their real-time offers in the
event of real-time cost increases may lower their risk premium in their day-ahead market
offers, appropriately benefiting loads by moving the risk for real-time cost increases from
day-ahead load to real-time load. NYISO argues that this functionality also improves
real-time market efficiency by making up-to-date cost information available to the real-
time market software, thereby allowing in-day energy production costs to be more
accurately reflected in real-time Locational Based Marginal Prices (LBMP).
6. NYISO clarifies that generators will not be allowed to increase their minimum generation cost or minimum generation levels. According to NYISO, this ensures that NYISO’s Security Constrained Unit Commitment (“SCUC”)-scheduled day-ahead units will be online and available to provide energy above their minimum generation levels if the need for such dispatch materializes.5 In addition, NYISO clarifies that units will remain unable to increase their start-up costs since the SCUC software reflected this cost in the generator’s day-ahead market schedule and settlement.
7. NYISO states that, pursuant to the proposed tariff amendments related to the RLS project, market participants will be able to submit fuel type and fuel cost information with their updated real-time offers. RLS will use the market participant-submitted fuel data to adjust, subject to RLS rules, reference levels. For other cost increases, market participants will continue to contact Market Mitigation and Analysis (via the RLS
application) with reference level adjustment requests.
8. NYISO also proposes to amend section 4.1.8 of its Services Tariff, entitled
“Commitment for Reliability,” to limit recovery of start-up and minimum generation
costs not recovered in the dispatch day. Previously, generators required to operate in
response to specific reliability-based requests from NYISO could recover start-up and
4 NYISO states that a generator dispatched lower than its day-ahead market
schedule will face balancing market obligations but these obligations are likely to be less than the cost of operating to its day-ahead market schedule at its higher costs. NYISO also states that generators economically dispatched above their minimum generation
levels will not be additionally compensated, for Energy previously scheduled Day-Ahead, at real-time LBMPs or otherwise.
5 NYISO states that generators economically dispatched above their minimum
generation levels will not be additionally compensated, for energy previously scheduled day-ahead, at real-time LBMPs or otherwise.
Docket No. ER10-1977-000, et al.- 4 -
minimum generation costs not recovered in the dispatch day. Because these generators will now have the ability to include increased incremental energy costs in the units’ realtime bid, NYISO proposes to limit application of this section to costs that were neither bid nor known prior to the close of the real-time scheduling window.
9. NYISO proposes a new section 5.2.2 that provides that this new functionality
could be suspended market-wide if the use of this bidding opportunity creates a market
aberration that impairs the functioning of the ISO-administered markets or substantially
impairs the reliability of the electric system. NYISO states that the functionality allowing
generators to increase bids on day-ahead scheduled energy in real-time is very new to this
market design and NYISO believes that it is necessary, and prudent, to be able to
discontinue this functionality if a reliability or market problem arises. Should such a
suspension occur, NYISO proposes to notify the Commission and market participants on
the same time frame and with as much detail as it currently uses to report a suspension of
the submission of virtual transactions,6 i.e., NYISO proposes to report as soon as
practicable the reasons for the suspension, the actions necessary to restore the
functionality and the time required to restore the functionality.
10. NYISO also proposes to exclude from eligibility for Day-Ahead Margin
Assurance Payments (DAMAP), calculated pursuant to the Services Tariff Attachment J,
those hours for which generators have increased their real-time bids on day-ahead
scheduled energy.7 NYISO states that in these cases, the reduced real-time dispatch is
the result of the generator’s increased real-time bid and a DAMAP is not warranted.
11. NYISO proposes new mitigation provisions intended to prevent unjustified
interactions between a market party’s virtual bidding and the submission of real-time incremental energy bids for capacity that was scheduled day-ahead. NYISO states that, as a general matter, its proposal allows it to revoke the ability for any market party to increase hourly real-time bid(s) on day-ahead scheduled capacity for a generator if
NYISO makes the following determination:
1. A market party has submitted an increased energy offer for the generator for
an hour that exceeds the unit’s justifiable real-time reference level by the
lower of $100/MWH, $300, or the in-city threshold for an in-city generator
when an interface or facility into the area where the generator is located is
constrained;
6 A virtual market transaction is one that is a financial-only transaction that is not intended to affect real-time physical consumption of energy.
7 DAMAP payments reimburse a generator for lost day-ahead margin when the
NYISO has scheduled a generator in such a way that reduces its day-ahead margin.
Docket No. ER10-1977-000, et al.- 5 -
2.The market party also has a scheduled virtual load transaction for the same
hour;
3.A virtual market penalty8 calculated for the market party (whether or not
imposed) would not be zero; and
4. The market party has not been able to demonstrate that its increased real-time
bid was consistent with competitive behavior.
12. NYISO also states that its proposal allows that, should it revoke the opportunity
for any market party to use the increased real-time bid functionality when bidding a
particular generator, NYISO has the ability to impose a penalty on the market party that
used the increased real-time bid functionality in conjunction with the scheduling of
virtual load. NYISO states that the penalty will recover the difference between real-time
LBMPs and day-ahead LBMPs at the locations where the market party scheduled virtual
load.9
13. NYISO states that, consistent with the market mitigation measures, the mitigation
of the authority to use the increased real-time bid functionality on a particular generator
will be an ongoing mitigation measure that can be imposed for up to six months. NYISO
further states that the application of the virtual market penalty would be a one-time
penalty (although potentially a multi-hour penalty) related to the circumstances pursuant
to which the increased real-time bid functionality on that generator was revoked. NYISO
avers that the proposed mitigation measure and associated penalty should deter market
participants from unjustifiably increasing their real-time bids to manipulate the settlement
of virtual load transactions.
14. NYISO states that it proposes to amend Attachment H to add a virtual market
penalty which could be imposed on a market party if such market party used the
increased real-time bid functionality for a generator and NYISO has, as a result of the
8 NYISO states that the virtual market penalty is calculated by multiplying the virtual load MW by the amount by which the integrated real-time LBMP exceeds the day-ahead LBMP applicable to the virtual load MW. Virtual load MW are defined by NYISO as the scheduled MW of virtual load bid by the market party for the same hour in which the market party submitted the incremental energy real-time bid.
9 NYISO adds that, although it does not propose to add a “penalty multiplier,” losses on scheduled virtual load transactions in an hour will not offset profits on
scheduled virtual load transactions in the same hour for purposes of calculating the
proposed penalty.
Docket No. ER10-1977-000, et al.- 6 -
market party’s actions and pursuant to Attachment H, revoked the opportunity for the market party to use the increased real-time bid functionality for that generator.
15. NYISO proposes a new section10 that describes its monitoring and mitigation
implementation approach for those market parties that use the increased real-time bid
functionality and have also scheduled a virtual load bid(s) for the same hour(s). NYISO
states that the parameters in this section provide for NYISO to ask the market party to
demonstrate that its real-time bid was consistent with competitive behavior. If the market party is unable to demonstrate to the satisfaction of the NYISO that its real-time bid was consistent with competitive behavior, NYISO states that it shall revoke the use, by any
market party, of the increased real-time bid functionality on that generator, pursuant to
section 23.4.7.3, and impose a penalty.
16. On July 30, 2010, in its second filing in this docket, NYISO submitted proposed
revisions to correct several inadvertent errors in its July 26, 2010 filing. The revisions
allow generators or demand side resources that are selected to provide Operating
Reserves in the Day-Ahead Market to increase their real-time Incremental Energy Bids so
long as they are not otherwise prohibited from doing so by other tariff provisions.
17. NYISO also indicates that the July 26, 2010 filing omitted changes to two inputs to the formula for determining Real-Time Bid Production Cost Guarantee for generators in Real Time Dispatch intervals other than supplemental event intervals; the Services Tariff should have been modified to reflect that such inputs may include costs authorized for recovery under section 4.1.8 of the Services Tariff.
18. Additionally, NYISO proposes corrections to several typographical errors in proposed revisions to the Services Tariff, Attachment C of the Services Tariff, and Attachment H of the Services Tariff.
19.NYISO states that, although no changes were proposed in its third filing in this
docket on August 10, 2010, it made the supplemental filing to reflect changes to section
18 of the Services Tariff submitted in Docket No. ER10-1866-001, which was submitted
concurrently on August 10, 2010.
III.Notice of Filing and Responsive Pleadings
20.Notice of NYISO’s July 26, 2010 was published in the Federal Register, 75 Fed.
Reg. 45,617 (2010), with comments due on August 16, 2010. NYISO made two
additional filings with respect to this docket on July 30, 2010, and August 10, 2010, with
10 Section 23.4.7.2
Docket No. ER10-1977-000, et al.- 7 -
comments for both due on August 20, 2010. The New York Transmission Owners11 and Dynegy Power Marketing, Inc. filed motions to intervene. No protests or adverse
comments were received.
IV. Commission Determination
I.Procedural Matters
21.Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure,
18 C.F.R. § 385.214 (2010), the notice of intervention and the timely, unopposed motions
to intervene serve to make the entities that filed them parties to this proceeding.
II.Substantive Matters
22.We accept NYISO’s filing, suspend it, and permit it to become effective
September 30, 2010, as proposed, subject to refund and to the conditions of this order as
discussed below. The proposed revisions will increase the ability of generators to
manage the risk of real-time cost increases and will permit bids to more accurately reflect
in-day energy production costs, thus improving market efficiency and benefitting
ratepayers. However, we find that the tariff revisions identified below contain provisions
that lack specificity in their application or leave assessment of penalties up to NYISO’s
discretion, and, therefore, we direct NYISO to refile to modify these provisions as
discussed below. We also condition acceptance of the tariff filing in this docket on the
outcome of the proceedings in Docket Nos. ER 10-2062-000 and ER10-1866-000, et al.
23. Proposed section 23.4.7.2 provides that, if certain conditions described in that
section are shown to be met, NYISO “shall” impose mitigation set forth in section
23.4.7.3 by revoking the Market Party’s opportunity to increase its bid in the Real-Time
Market12 and “may” impose penalties in accordance with section 23.4.3.3.4.13 As
discussed below, we find that these provisions are unjust and unreasonable and should be
revised.
11 In this proceeding, New York Transmission Owners consists of Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New York, Inc., Long Island Power Authority, New York Power Authority, New York State Electric & Gas Corporation, Niagara Mohawk Power Corporation, Orange and Rockland Utilities, Inc., and Rochester Gas and Electric Corporation.
12 Proposed section 23.4.7.3.1.
13 Proposed section 23.4.7.3.2.
Docket No. ER10-1977-000, et al.- 8 -
24. As described earlier herein, proposed section 23.4.7.2 provides that the mitigation
provisions of proposed section 23.4.7.3 will apply if certain criteria are met, including
that “the market party is unable to show to the satisfaction of the ISO (with review and
comment by the Market Monitoring Unit) that the submitted real-time Incremental
Energy Bid(s) were consistent with competitive behavior.” The provision does not
indicate what information or criteria NYISO will rely upon to determine whether a
market party’s behavior is “consistent with competitive behavior.” Accordingly, we find
proposed section 23.4.7.2 to be unjust and unreasonable. To apply this provision, NYISO
must file within 45 days of this order to provide in its tariff the criteria or information that
it will use to make such a mitigation determination. The criteria or information types
listed need not be exhaustive or exclusive, but must provide market parties notice of the
types of criteria or information upon which NYISO will rely. Further, section 23.4.7.3.2
should be deleted as it is repetitive of the language in 23.4.7.2.
25. Section 30.4.6.2.7 also relies upon an assessment of competitive behavior that uses the language “to the satisfaction of the ISO” as mitigation criteria. For the same reasons expressed above regarding sections 23.4.7.2 and 23.4.7.3, section 30.4.6.2.7 is not just and reasonable. Within 45 days of the order, NYISO must file to include the criteria or information that it will use to make the mitigation determination.
26. In addition, proposed sections 23.4.7.2, 23.4.7.3, and 23.4.3.3.4 are inconsistent
with both Commission policy14 and the Commission’s recent NYISO orders15 to the
extent that they grant NYISO the unlimited discretion to choose to impose or not impose
a penalty when the conditions of section 23.4.7.2 have been met and it has revoked a
market participant’s right to submit increased bids in the real-time market. These
proposed sections provide that a virtual market penalty “may” be imposed in the event of
a revocation. The Commission has made clear that in order for an ISO to impose a
penalty, the penalty may only be applied to “objectively identifiable behavior.”16 More
specifically, the Commission previously rejected NYISO’s proposed use of the
discretionary term “may” in implementing penalties for certain violations.17
Accordingly, we find proposed sections 23.4.7.2, 23.4.7.3, and 23.4.3.3.4 to be unjust and
unreasonable in the foregoing respect. To impose a penalty under these provisions,
14 Market Monitoring Units in Regional Transmission Organizations and Independent System Operators, 111 FERC ¶61,267, at P 5 (2005).
15 New York Indep. Sys. Operator, Inc., 129 FERC ¶ 61,164, at P 98 (2010); and New York Indep. Sys. Operator, Inc., 131 FERC ¶ 61,225, at P 17-26 (2010).
16 New York Indep. Sys. Operator, Inc., 129 FERC ¶ 61,164 at P 98.
17 New York Indep. Sys. Operator, Inc., 131 FERC ¶ 61,225 at P 19.
Docket No. ER10-1977-000, et al.- 9 -
NYISO must file within 45 days of this order to amend these provisions by specifying the
objective criteria under which NYISO would or would not impose the penalty even
though the conditions for imposing a penalty in the first place have been met, i.e., the
conditions set forth in section 23.4.7.2 to revoke the market party’s right to increase bids
in the real-time market have been met and that right has been revoked. NYISO must also
clarify whether the virtual market penalty will be a “traffic ticket” offense, which is
exempt from referral to the Commission provided it meets certain specific criteria18 or
will be referred for the Commission’s review and approval. If NYISO clarifies that it
wants the penalty to be a “traffic ticket,” it must file to add to the tariff the conditions for
imposing the penalty that meet the criteria set forth in footnote 19 supra and to change
“may be imposed” to “shall be imposed.” On the other hand, if NYISO chooses not to
provide the “traffic ticket” type criteria, then it must file to revise the tariff to provide that
it will refer the alleged tariff violation to the Commission (OE Staff).
27. Further, several of NYISO’s tariff sections submitted to the Commission’s eTariff
program in this docket contain implementation priority designations that duplicate those
contained in NYISO’s related filings in Docket Nos. ER10-1866-000, et al., and/or
ER10-2062-000. Because the eTariff program will use the tariff record with the highest
Record Effective Priority Order19 to supersede any other tariff records with the same
18 The Commission identified so-called “traffic ticket” offenses, which are exempt from referral to the Commission, as those which meet the following criteria:
(i) the activity must be expressly set forth in the tariff,
(ii) the activity must involve objectively identifiable behavior, and
(iii) the activity does not subject the actor to sanctions or consequences other than those expressly approved by the Commission and set forth in the tariff, with the right of appeal to the Commission.
The Commission stated that examples of such activities would include late
payments, failure to notify NYISO of an outage, failure to respond to an operational
directive, and the like. New York Indep. Sys. Operator, Inc., 129 FERC ¶ 61,164 at P 98. See also New York Indep. Sys. Operator, Inc., 131 FERC ¶ 61,225 at P 19. If, in its
compliance filing, NYISO clarifies that the virtual market penalty should be treated as a “traffic ticket” penalty, in addition to filing the foregoing revisions, NYISO should also file in the compliance filing above to revise section 4.5.3.2 to include a reference to this provision in the list of its “traffic ticket” penalties.
19 The eTariff documentation (available at http://www.ferc.gov/docs-
filing/etariff/implementation-guide.pdf, see pages 10-11, 22) refers to Record Effective
Priority Order identifiers, which are the means that the eTariff program uses to determine the implementation order of tariff sections or sheets that have been submitted to the
eTariff program.
Docket No. ER10-1977-000, et al.- 10 -
effective date, the implementation priority designation must be unique across tariff
records with the same tariff record identifier and proposed effective date. At such time
that NYISO files revisions in response to this order, NYISO shall refile unique,
chronologically correct implementation priority designations for all those tariff sections
that had the same proposed effective date and implementation priority designations that
were duplicative of those filed in Docket Nos. ER10-1866-000, et al., and/or ER10-2062-
000.
28. Based upon a review of the filing, the Commission finds that the proposed tariff
sections identified above have not been shown to be just and reasonable, and may be
unjust, unreasonable, unduly discriminatory, or otherwise unlawful. Accordingly, the
Commission shall accept such tariff sections for filing and suspend them for a nominal
period to become effective September 30, 2010, subject to the conditions set forth in this
order.
The Commission orders:
(A) NYISO’s proposed tariff sections are accepted and suspended for a nominal period to become effective September 30, 2010, subject to refund and the conditions of this order, as discussed in the body of this order.
(B) NYISO is directed to file the tariff revisions, as discussed in the body of this order, within 45 days of the date of this order.
By the Commission.
( S E A L )
Kimberly D. Bose,
Secretary.
