10 Krey Boulevard Rensselaer, NY 12144

April 10, 2012

Submitted Electronically

Kimberly D. Bose

Secretary

Federal Energy Regulatory Commission 888 First Street, N.E.

Washington, D.C. 20426

Re: New York Independent System Operator, Inc. Submission of Presentation and
Talking Points for Requested Technical Conference;

Docket No. ER08-1281-010

Dear Ms. Bose:

Consistent with the representations in its April 3, 2012 Motion for Leave to Respond and Response, the New York Independent System Operator, Inc. (“NYISO”) submits the attached presentations for discussion at the Technical Conference that the NYISO has asked the Commission to schedule in the above Docket.

The NYISO submits the following documents:

1.this transmittal letter;

2.The NYISO’s technical conference presentation (“Attachment I”);

3.Dr. David Patton’s technical conference talking points, presented on behalf of

Potomac Economics, the NYISO’s external Market Monitoring Unit (“Attachment II”); and

4.PJM Interconnection, LLC’s technical conference talking points (“Attachment

III”).

As the NYISO explained in its March 30, 2012 Request to Convene On-the-Record Technical Conference (“Request”), the NYISO seeks an opportunity to discuss the attached presentations with Commission Staff and to obtain Commission Staff guidance regarding the NYISO’s compliance proposal.

Kimberly D. Bose, Secretary April 10, 2012

Page 2

The NYISO respectfully requests that the Commission (i) convene the technical

conference that the NYISO’s Request asked the Commission to convene, and (ii) grant the NYISO an extension of time to permit the NYISO to submit its compliance filing 30 days after the requested technical conference is held.

Respectfully submitted,

/s/ Alex M. Schnell

Robert E. Fernandez, General Counsel Alex M. Schnell

New York Independent System Operator, Inc.

CERTIFICATE OF SERVICE

I hereby certify that I have this day served the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding in accordance with the requirements of Rule 2010 of the Commission Rules of Practice and Procedure, 18 C.F.R. § 385.2010.

Dated at Rensselaer, New York this 10th day of April, 2012.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Boulevard

Rensselaer, NY 12144
Tel: (518) 356-6207
Fax: (518) 356-7678

E-mail: jzimberlin@nyiso.com

ATTACHMENT I

Interface Pricing

Presentation For Technical Conference

Presented by: Robert Pike,

Director of Market Design

New York Independent System Operator, Inc.

Conceptual Agreement

 The goal of ISO/RTO interface pricing is to set
prices and determine schedules in a manner
that is consistent with how power actually
flows.

 Use network impedance based distribution factors

 Incorporate system topology changes (outages)

 Use tag-based source/sink identification

 Different market designs require different
implementations to achieve this common
goal.

Non-Conforming Mode

 NYISO’s Tariff revisions will propose to
implement non-conforming mode

 NYISO is discussing the appropriate method of
reflecting the operation of the Ontario/Michigan
PARs with PJM and MISO

• If the Ontario/Michigan PARs successfully conform actual power flows to schedules, the non-conforming mode will not accurately reflect expected or actual power flows

• NYISO may propose to use a “sliding scale” approach,

rather than the binary conforming/non-conforming modes

Non-Conforming Mode

 How it works

 Does not directly use actual telemetered flows in
the determination of prices

• Where necessary to align prices with actual flows, NYISO weights specific line flows in the development of proxy
bus prices

• NYISO and PJM both use expected power flows in their pricing

 NYISO uses the source/sink from the NERC tag to
define the source/sink area of a transactions and to
represent the distribution of power flows

Path Validation

 Validates that the bidding/scheduling entity has

represented the transaction to the NYISO in the

manner that is consistent with both the NERC e-Tag
information, and how the power will actually flow

 Tag tells NYISO where the power is flowing from/to, just as it
does for PJM.

 Tag information that exactly matches the NERC e-Tag must
be provided to the NYISO at the time a bid is submitted,
including the source and sink balancing authorities

 Based upon the source/sink balancing authorities provided

NYISO validates that the bidder has presented the transaction
in a manner consistent with how the power will actually flow

Benefits of Path Validation

 Operational Benefits

 Enhances regional reliability by promoting

consistency in expectation of flows, alignment of
contract and physical paths, and discourages
unnecessary loop flow

 Facilitates accurate NERC directed interregional
coordination and checkout

• If NYISO, IESO, MISO and PJM all agree that 70-80% of

power circuitously scheduled from New York to serve

load in PJM flows over the direct interties between the two
Balancing Authorities, it would not make sense for NYISO
to coordinate its review of the reliability impacts of such a
circuitously scheduled NYISO to PJM transaction with
IESO

Benefits of Path Validation

 Market Benefits

 Improves consistency between the scheduling
path and actual flows

 Facilitates NYISO’s economic evaluation of

transaction schedules by permitting consistent
evaluation and pricing of ramp, ATC/TTC and
congestion

• NYISO’s economic evaluation of ATC, ramp limitations and congestion are performed simultaneously

• PJM separates into scheduling path reservations

(ATC/ramp) and expected power flows (congestion)

Benefits of Path Validation, Cont.

 Facilitates NYISO’s economic evaluation of

transaction schedules by permitting consistent
evaluation and pricing of ramp, ATC/TTC and
congestion (cont.)

• To facilitate simultaneous evaluation of ramp, ATC/TTC
and congestion, NYISO requires that the scheduling path be consistent with expected power flows, as defined by
the NERC tag

• The resulting LBMPs reflect the transactions that have been awarded and how the power is expected to flow

The New York Independent System
Operator (NYISO) is a not-for-profit
corporation responsible for operating the state’s bulk electricity

grid, administering New York’s competitive wholesale electricity markets, conducting comprehensive long-term planning for the state’s
electric power system, and

advancing the technological

infrastructure of the electric system
serving the Empire State.

www.nyiso.com

ATTACHMENT II

Interface Pricing

Talking Points for Technical Conference

Presented by: Dr. David Patton,
President

Potomac Economics, Ltd.

External Market Monitoring Unit for the

New York Independent System Operator, Inc.

TALKING POINTS FOR TECHNICAL CONFERENCE ON NYISO PROXY BUS PRICING

David B. Patton, Ph.D.

NYISO Market Monitoring Unit
April 10, 2012

Proxy Bus Pricing in the NYISO market design

• NYISO’s market design is unique in that it utilizes an economic evaluation to schedule

transactions, which includes allocating ramp and pricing congestion at its external interfaces.

•However, this uniqueness is beneficial and should not interfere with the external interface

pricing (“proxy bus pricing”).

Economic Principles Governing Proxy Bus Pricing

•Proxy bus pricing will affect how market participants schedule imports, exports, and wheels.

•To facilitate efficient scheduling, proxy bus pricing should be consistent with the expected

flows that will result from the schedule.

Practical Issues that Affect External Pricing and Scheduling Rules

• The source and sink of the power are important determinants of how the power will flow, but

there are substantial uncertainties caused by the following two factors.

- The source and sink are defined on a control area basis (because the marginal injection or
withdrawal may produce a very different flow effect than the control area average); and

- Transactions may be linked to other transactions that affect the ultimate source or sink (a
recognized issue).

- Nonetheless, proxy bus pricing based on the scheduled source/sink is consistent with the
economic principle.

•However, even though the pricing may be based on the scheduled source/sink, the scheduled

path cannot reasonably be ignored for two reasons.

- First, the RTOs must still manage external interface and ramp capability, which is affected
by the path over which the transaction is scheduled.

- Second, Phase Angle Regulators (“PARS”) can cause the expected power flows associated
with two transactions with identical sources and sinks, but different paths, to be very
different.

- Hence, the NYISO’s path validation is reasonable and does not conflict with source/sink
proxy bus pricing. Removing it would not provide any economic benefit.

• Because PARs affect the power flows throughout the eastern interconnect, the proxy bus

pricing regime should reflect these effects to be consistent with the economic principle described above.

- For example, when the OH/MI PARs are operational and significantly affecting the flows
around Lake Erie, those effects should be reflected in NYISO’s proxy bus prices.

- Likewise, because the scheduled path for a transaction may alter the PAR settings, NYISO
should consider how to incorporate the path information in its proxy bus pricing rather than
relying solely on the source and sink for the transaction.

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ATTACHMENT III

Interface Pricing

Talking Points for Technical Conference

Presented by: PJM Interconnection, LLC

PJM’s Technical Conference Talking Points

• Role of NERC e‐Tag in PJM’s external transaction evaluation process
o Modeling of injections and withdrawals in market software

 Day‐Ahead

 Real‐Time

• Proxy Buses

o Detailed explanation of how PJM calculates interface prices

o How PJM selects and uses proxy buses to price interchange
transactions to/from external balancing authorities

o How the proxy bus prices reflect the value of the energy associated
with interchange transactions to the PJM market