10 Krey Boulevard Rensselaer, NY 12144
May 30, 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., Compliance Filing; Docket No.
ER07-521-000, ER12-____-000
Dear Ms. Bose:
In compliance with Paragraph 82 and Ordering Paragraph D of the Federal Energy
Regulatory Commission’s (“Commission’s” or “FERC’s”) April 16, 2008, Order,1
Paragraph 18 and Ordering Paragraph A of the Commission’s July 15, 2010, Order,2 the
New York Independent System Operator, Inc.’s (“NYISO’s”) amended implementation
timetable accepted by the Commission on October 12, 2010,3 and the NYISO’s updated
implementation timetable submitted December 1, 2011,4 the NYISO respectfully submits
amendments to its Market Administration and Control Area Services Tariff (“Services
Tariff”) and its Open Access Transmission Tariff (“OATT”) to implement a new Non-
Historic Fixed Price TCC (“NHFPTCC”) product. As is discussed in detail below, the
NYISO’s proposed tariff revisions and software systems will allow Load Serving Entities
(“LSEs”)5 to purchase NHFPTCCs between any Point of Injection (“POI”) and the Load
Zones in which they serve customers. A final compliance filing, anticipated for the second
half of this year, will propose amendments describing the allocation of revenues received
from the sale of these NHFPTCCs to LSEs.6 Once the NYISO’s proposed tariff
1 New York Independent System Operator, Inc., 123 FERC 61,044 (2008) (“April 2008 Order”)
2 New York Independent System Operator, Inc., 132 FERC ¶ 61,030 (2010) (“July 2010 Order”)
3 Letter Order, Docket ER07-521-010, (Oct. 12, 2010)
4 New York Independent System Operator, Inc., Docket ER07-521-010, letter to Secretary Bose from Mollie Lampi, December 1, 2011 (“Dec. 2011 Implementation Update”). In that filing, which the
Commission has not yet acted upon, the NYISO proposed implementing its Non-Historic FPTCC product concurrently with the Spring 2013 Centralized TCC Auction.
5 Capitalized terms that are not otherwise defined herein shall have the meaning specified in Article 2 of the Services Tariff.
6 The NYISO will propose an allocation of revenue received from the sale of NHFPTCCs that is similar
to the provisions contained in OATT Section 20, describing the allocation of revenue from the sale of TCCs
Honorable Kimberly D. Bose May 30, 2012
Page 2
amendments are accepted and NHFPTCCs are available for purchase, the NYISO will be in full compliance with the Commission’s long-term firm transmission rights policies as set forth in Order Nos. 681 and 681-A.7
I.Communications
Communications and correspondence regarding this filing should be directed to:
Robert E. Fernandez, General Counsel
Raymond Stalter, Director of Regulatory Affairs
*Mollie Lampi, Assistant General Counsel
New York Independent System Operator, Inc.
10 Krey Boulevard
Rensselaer, N.Y. 12144
Tel: (518) 356-6000
Fax: (518) 356-4702
rfernandez@nyiso.com
rstalter@nyiso.com
mlampi@nyiso.com
*Persons designated to receive service
II.Documents Submitted
1.This filing letter;
2.A clean version of the proposed revisions to the NYISO’s OATT
(“Attachment I”);
3.A clean version of the proposed revisions to the NYISO’s Services Tariff
(“Attachment II”);
4.A blacklined version of the proposed revisions to the OATT (“Attachment
III”);
5.A blacklined version of the proposed revisions to the Services Tariff
(“Attachment IV”);
in NYISO TCC Auctions. Tariff revisions describing the allocation of revenues from the conversion of existing Grandfathered Rights and Grandfathered TCCs into Historic Fixed Price TCCs will be submitted simultaneously, if not earlier.
7 Long-Term Firm Transmission Rights in Organized Electricity Markets, Order No. 681, FERC Stats. &
Regs. ¶ 31,226 (July 20, 2006), reh’g denied, Order No. 681-A, 117 FERC ¶ 61,201 (November 16, 2006)
(Final Rule).
Honorable Kimberly D. Bose May 30, 2012
Page 3
III.Background
In its April 2008 Order, the Commission determined that the NYISO’s proposal to allow LSEs to convert expiring, or previously expired, “Grandfathered Transmission
Rights” into “Fixed Price Transmission Congestion Contracts” was a reasonable initial
approach for meeting the requirements of the Final Rule.8 However, the Commission
required the NYISO to make certain limited modifications through future compliance
filings.9 All but one of those modifications has subsequently been accepted by the
Commission and put into place.10
The sole remaining issue concerns the availability of long-term transmission rights
(or, as they are known in New York, Transmission Congestion Contracts or “TCCs”)
between “non-historic” POI and Point of Withdrawal (“POW”) combinations.11 In its
April 2008 Order, the Commission directed the NYISO to “expand the availability of long
term transmission rights to LSEs that sought to use non-historic [POIs and POWs].”12 The
Commission further stated that the rights “may take the form of Fixed Price TCCs” or
alternative instruments that satisfied the Commission’s requirements.13 It specified that the
NYISO could:
[E]stablish reasonable priorities for the allocation of these rights, such as a preference for LSEs with long-term power supply arrangements, and may propose reasonable limits on the amount of existing transmission capacity used to support the rights.14
In its July 2010 Order, the Commission agreed to a 2012 implementation date for
the NYISO’s proposal to make long term transmission rights available for non-historic
uses of the transmission system, accepted the NYISO’s proposal to file compliance tariff
sheets in late 2011 or early 2012 and required a detailed implementation timetable and two
status reports.15 In its December 1, 2011 second status report, the NYISO submitted an
8 See: April 2008 Order at ¶ 81 and Ordering ¶ A.
9 April 2008 Order, ordering ¶¶ B, C and D.
10 These include: acceptance of compliance filings made on December 22, 2008 to adjust the offered term of Historic Fixed Price TCCs and on February 18, 2009 to adjust credit requirements for LSEs taking Historic Fixed Price TCCs (New York Independent System Operator, Inc., 127 FERC 61,042 (2009)); and acceptance of tariff amendments providing for an award of Incremental TCCs related to transmission system expansions (New York Independent System Operator, Inc., 126 FERC 61,029 (2009));
11 The NYISO intends to submit a final compliance filing in the third or fourth quarter of this year describing the allocation of revenues derived from the sale of Non-Historic Fixed Price TCCs.
12 April 2008 Order at ¶ 82.
13 Id.
14 Id.
15 July 2010 Order at ¶14
Honorable Kimberly D. Bose May 30, 2012
Page 4
amended implementation plan proposing a Spring 2013 NHFPTCC roll-out separate from the End-State Auction roll-out to avoid further delay.16
IV.Overview
Under the NYISO NHFPTCC proposal, LSEs would be able to obtain Fixed Price
TCCs between non-historic POI and POW combinations with a duration as long as ten
years through an initial two-year term and annual renewals thereafter. As the NYISO
described in its Dec. 2011 Implementation Update, this option is being offered in advance
of the End-State Auction to avoid further delay.17 The NYISO is including with these
amended tariff sections, an amended credit policy to govern nominating NHFPTCCs and
holding two-year TCCs. An amended credit policy is necessary to include NHFPTCCs
within the existing bidding requirement and to accommodate the Commission order to
allow purchasers of two-year NHFPTCCs to pay for them one year at a time.18
A.Overview of Fixed Price TCCs
The NYISO is proposing to pattern the NHFPTCC product design after its existing
Fixed Price TCC rules which themselves are based on the NYISO’s rules governing TCCs
generally.
TCCs have been available to market participants that wish to hedge their exposure
to congestion in the NYISO’s Day-Ahead Market (“DAM”) since the NYISO’s inception
in 1999. A TCC holder collects the congestion rent associated with transmitting one MWh
of energy from a specific POI to a specific POW. TCCs do not provide a physical
transmission priority but, as the Commission has recognized, allow customers to obtain the
functional equivalent of “physically firm” transmission service.19 TCCs may also be
obtained through NYISO-administered auctions, through “Direct Sales” by the New York
Transmission Owners (“NYTOs”), via secondary market transactions, by funding the
creation of transmission expansions (which can result in the award of “Incremental TCCs”)
or, in recent years, through the conversion of Grandfathered Rights or Grandfathered TCCs
into Fixed Price TCCs.
All TCCs are “fully funded” since the NYTOs are required by the tariff to cover
any Congestion Rent Shortfalls.20 The NYISO’s tariffs provide for the allocation of
Congestion Rent Shortfalls among the NYTOs and for the ultimate recovery of those costs
from their Transmission Customers. Similarly, if congestion charges exceed TCC
16 As mentioned, the Commission has not yet acted upon this filing. See: ft.nt. 4 supra.
17 Dec. 2011 Implementation Update at pages 5-6
18 See: July 2010 Order at ¶16
19 See Central Hudson Gas & Electric Co., et al., 86 FERC ¶ 61,062 at 61,228-33, Order on Reh’g and Compliance Filing, 88 FERC ¶ 61,138 at 61,399-61,402 (1999) (describing and generally approving TCC program and auction structure)
20 See NYISO OATT § 1.5e
Honorable Kimberly D. Bose May 30, 2012
Page 5
payments, the resulting congestion rent surplus will be distributed to the NYTOs (and on to
their Transmission Customers). Generally, the tariffs require that shortfalls and surpluses
be debited and credited monthly to each NYTO’s Transmission Service Charge (“TSC”).21
Historic Fixed Price TCCs have most of the attributes of TCCs. Like TCCs, they
provide congestion hedges in the DAM between a particular POI and POW and are fully
funded by the NYTOs via the existing TSC arrangements. Notable distinctions include the
fact that Historic Fixed Price TCCs will be available only to LSEs. They are currently
available to LSEs that hold expiring Grandfathered Transmission Rights, for a term of up
to ten years, if they can certify that they will be legally obligated to serve the load they
historically served and that they need the transmission capacity of the Historic Fixed Price
TCC to serve that Load.22 The new NHFPTCCs are proposed to also be available only to
LSEs, for ten year terms.
B. Overview of Non-Historic Fixed Price TCCs
The NYISO intends to make initial NHFPTCCs available at least every other year,
concurrent with one of its biannual Centralized TCC Auctions and to make renewal
NHFPTCCs available annually, also concurrent with one of its Centralized TCC Auctions.
Under the NYISO’s proposal, LSEs would register, and certify their eligibility, for initial
two-year NHFPTCCs prior to the Centralized TCC Auction in which the NYISO is
offering initial NHFPTCCs. The NYISO would verify LSE eligibility for such TCCs, by
Load Zone, on a timeline provided by the NYISO prior to the start of the Centralized TCC
Auction. Immediately following the first round of the Centralized TCC Auction in which
two-year TCCs are sold,23 the NYISO would provide, to these registered Load-Zone-
certified LSEs, the prices at which they could purchase initial NHFPTCCs sinking in their
Load Zones. The price of an initial two-year NHFPTCC between an identified POI and
POW would be the same as a two-year TCC with the same POI and POW as determined in
the just-concluded round of the Centralized TCC Auction. LSEs would have a defined
period of time to nominate NHFPTCCs for purchase at the disclosed price. Awarded
NHFPTCCs would follow a NYISO-conducted feasibility analysis. Should such analysis
indicate not all NHFPTCCs could be sold while maintaining the feasibility of existing
TCCs, the NYISO would reduce the number of NHFPTCCs awarded to maintain the
feasibility of all existing TCCs including the new NHFPTCCs. Once the feasibility
analysis was concluded and LSEs notified, the NYISO would continue with the balance of
21 In the case of the New York Power Authority, surpluses and shortfalls are passed through to the New
York Power Authority Transmission Adjustment Charge (“NTAC”). See NYISO OATT, Attachment H at
Section 2.1. Shortfalls due to outages on the transmission expansions that’s support awarded Incremental
TCCs are funded through outage TCCs imposed on holders of Incremental TCCs (see: OATT Sections
19.2.2.4 and 19.2.2.9).
22 LSEs purchasing Energy from the New York Power Authority under agreements that expire in 2025, and existing transmission agreements that expire in 2013, may obtain a twelve-year Historic Fixed Price TCC for related transmission service.
23 For any Centralized TCC Auction during which the NYISO makes initial NHFPTCCs available, it will also offer for sale two-year TCCs.
Honorable Kimberly D. Bose May 30, 2012
Page 6
the rounds in the Centralized TCC Auction. The NHFPTCC sale would conclude at the end of the Centralized TCC Auction.
One-year renewals would also be available, for a total term of ten years, at an
annual renewal price developed in a similar fashion following the conclusion of the first
round of the Centralized TCC Auction in which one-year TCCs were sold.24 LSEs
interested in renewals would also be required to register and certify continued eligibility.
The NYISO intends to make NHFPTCCs first available in conjunction with the Spring 2013 Centralized TCC Auction. The LSE registration period is expected to begin in late fall / early winter 2012.
C. Stakeholder Discussion of Non-Historic Fixed Price TCCs Market
Design, Credit Revisions and Compliance Tariff Proposals
The NYISO has discussed with its stakeholders the design for, and tariff revisions
necessary to support, the availability of NHFPTCCs at seven working group or committee
meetings since September, 2010. The six Market Issues Working Group meetings include
two in 2012 at which the NYISO provided the tariff revisions it is proposing here.25
Following the March 14, 2012 Business Issues Committee presentation of these tariff
revisions, the NYISO received editorial suggestions but no adverse comments from its
Market Participants. On Nov. 18, 2011, the NYISO also presented to the Credit Policy
Working Group tariff revisions for the NYISO’s TCC credit policies that would be
necessary to manage the annual payment for two-year TCCs.26 Changes to both the
Bidding and the Operating Requirement were discussed. Market Participants support the
design of NHFPTCCs as proposed here.
V.OATT Tariff Amendments
A.Definitions and General Revisions
The NYISO proposes to amend the defined term “Fixed Price TCC” in OATT
Section 1.6 to indicate that the term covers both Historic Fixed Price TCCs awarded
24 Renewal prices for these NHFPTCCs would be made available in the Centralized TCC Auction held
just prior to the expiration of the NHTCC’s initial two-year term or, thereafter, expirations of their annual
renewal term.
25 See: MIWG presentation March 2, 2012 at
http://www.nyiso.com/public/webdocs/committees/bic_miwg/meeting_materials/2012-03-
02/NHFPTCC_Compliance_Tariff_Language.pdf
and Feb. 2, 2102 presentation at
http://www.nyiso.com/public/webdocs/committees/bic_miwg/meeting_materials/2012-02-
02/NHFPTCC_Compliance_Tariff_Language_MIWG_020212.pdf
26 See CPWG Nov. 18, 2011 presentation at
http://www.nyiso.com/public/webdocs/committees/bic_spwg_cptf/meeting_materials/2011-11-18/Multi-
Duration_TCC_Credit_P1_NovCPWG_DraftFinal.pdf
Honorable Kimberly D. Bose May 30, 2012
Page 7
pursuant to the provisions of OATT Section 19.2.1 and NHFPTCCs awarded pursuant to the provisions of Section 19.2.2:
Fixed Price TCC: TCCs obtained pursuant to Sections 19.2.1 or 19.2.2 of
Attachment M of the OATT. If the TCC is obtained pursuant to Section 19.2.1 of Attachment M of this OATT, it is an Historic Fixed Price TCC. If it is awarded to an LSE pursuant to the provisions of Section 19.2.2 of Attachment M, it is a NonHistoric Fixed Price TCC.
Existing references to “Fixed Price TCCs” in Section 19.2.1 are proposed to be
replaced with a reference to the new term “Historic Fixed Price TCCs.” Provisions
regarding payment for Historic Fixed Price TCCs which are currently found in Section
19.2.3 are relocated to Section 19.2.1. A new Section 19.2.2 is inserted to describe the process for acquiring NHFPTCCs.
Existing provisions found in the balance of Section 19 are renumbered to
appropriately refer to Historic or Non-Historic Fixed Price TCCs as appropriate.
B. Initial Request for Non-Historic Fixed Price TCCs
In Section 19.2.2.1, the NYISO sets forth the eligibility certification requirements
for LSEs interested in purchasing NHFPTCCs. LSEs identify NHFPTCCs for possible
purchase by providing the NYISO with a Notice of Intent to Purchase in which they
indicate the TCCs they desire by MW size and POWs. LSEs are limited to POWs in the
Load Zones in which they serve Load as they must certify they expect to be legally
obligated to serve Load, as discussed below in Section V.C., in each such identified Load
Zone. The LSE would also provide the potential POIs in which they are interested.
C.LSE Certification and Eligibility
The LSE certification process, described in Section 19.2.2.1, is patterned after the
certification requirements currently imposed on LSEs converting existing Grandfathered
TCCs and Grandfathered Rights to Historic Fixed Price TCCs. Pursuant to this Section,
the NYISO is proposing that the LSE certify that it expects to be legally obligated to serve
Load, in each Load Zone in which an LSE-proposed NHFPTCC has a POW, in an amount
that equals or exceeds the sum of the NHFPTCCs it intends to purchase and the number of
Grandfathered TCCs, Grandfathered Rights, Historic Fixed Price TCCs and existing
NHFPTCCs, in effect for the same term, that are held by or on behalf of the LSE, with
POWs in that Load Zone. Thus, the LSE is limited to NHFPTCCs with POWs in the Load Zones in which the LSE serves load.
The LSE must also certify it has served Load in that Load Zone for at least the most recent concluded Capability Period.
Honorable Kimberly D. Bose May 30, 2012
Page 8
D. Non-Historic Fixed Price TCC Availability
Pursuant to proposed Section 19.2.2.1.1 the NYISO will determine, for each
Centralized TCC Auction during which initial NHFPTCCs are available, the amount of transmission capacity that can be made available to support them. The NYISO currently determines the amount of capacity to be made available, by duration, for TCCs sold in Centralized TCC Auctions and the authority to make similar determinations for
NHFPTCCs is patterned after that existing provision.27
The NYISO also proposes to limit the transmission capacity available to support
initial NHFPTCCs to no more than five (5) percent of the transmission capacity otherwise
available during that Auction.28 Nonetheless, the NYISO’s preliminary view is that it will
allocate only two and one-half percent (2.5%) of the transmission system capacity
otherwise available in the Centralized TCC Auction to support initial NHFPTCCs. This
assessment is informed by stakeholder discussions, the general preference for shorter-term,
auction-based rights in New York, and the fact that such a large portion of transmission
capacity is already committed to long-term transmission rights in the form of
Grandfathered Transmission Rights, Grandfathered TCCs and Historic Fixed Price TCCs.
The NYISO believes that this is a reasonable allocation given that the municipal electric
utilities that have expressed the greatest interest in NHFPTCCs to date already hold a
substantial quantity of Grandfathered Transmission Rights, Grandfathered TCCs and a
growing number of Historic Fixed Price TCCs. System transmission capacity allocated to
support, but not used to create NHFPTCCs, will be made available to support the sale of
TCCs in subsequent rounds of the Centralized TCC Auction. This should ensure that the
nomination of NHFPTCCs does not negatively impact auction liquidity.
Adding to the tariff an upper limit on capacity allocated to support NHFPTCCs that is higher than this initial assessment, however, will allow the NYISO and its stakeholders the flexibility to increase this allocation as the the terms of existing Historic Fixed Price TCCs expire and the availability of new Historic Fixed Price TCCs declines.
The NYISO also indicates in this Section 19.2.2.1.1 that it will incorporate a
scaling factor into the feasibility analysis it describes in OATT Section 19.2.2.3.2 and
discusses in Section V.G. below to ensure that it does not sell more transmission capacity in support of NHFPTCCs than is indicated by the percentage of available transmission capacity committed to support such TCCs.29
In Section 19.2.2.1.2, the NYISO proposes to extend NHFPTCC availability to the
broadest number of interested LSEs possible by requiring that NHFPTCCs be limited to an
27 OATT Section 19.8.4
28 Transmission capacity otherwise available in a Centralized TCC Auction is the balance of total transmission system capacity after accounting for fixed uses of the system, i.e. Grandfathered TCCs, Grandfathered Rights, Historic Fixed Price TCCs and Incremental TCCs.
29 The NYISO also incorporates a scaling factor into Centralized TCC Auctions to limit awarded TCCs to the capacity allocated to that round. See: OATT Section 19.8.4.
Honorable Kimberly D. Bose May 30, 2012
Page 9
LSE’s unhedged Load. To effectuate this eligibility, the NYISO will limit NHFPTCCs to
the MW of the LSE’s average hourly load in each of the Load Zones, in which it serves
customers, that is unsecured by existing Grandfathered TCCs, Grandfathered Rights,
Historic Fixed Price TCCs or previously purchased and still effective NHFPTCCs. 30 This
limitation will ensure that no LSE is able to purchase a NHFPTCC if, in the Load Zone for
which its proposed NHFPTCC sinks, the LSE is already completely hedged. The NYISO
will establish in its procedures the manner in which it will calculate the average hourly
Load for each LSE and will also provide each LSE with the number of NHFPTCCs in each
Load Zone for which it is eligible.
The NYISO may apply a uniform percentage reduction to each LSE’s average
hourly load in this calculation to further broaden NHFPTCC availability, if necessary.
Should significant requests for NHFPTCCs be subject to the proposed post-nomination
reduction process described in OATT Section 19.2.2.3.2 and discussed in Section V.G.
below, the NYISO may reduce the number of NHFPTCCs for which each LSE may be
eligible by reducing the percentage of the LSE’s average hourly load against which it will
evaluate each LSE’s unhedged Load (that is, the MW available for NHFPTCCs). Using
this approach would further broaden the award of nominated NHFPTCCs among a larger
set of LSEs. Before finalizing, however, the NYISO would discuss the percentage
reduction with stakeholders and include the percentage reduction in NYISO Procedures.
In Section 19.2.2.1.2 the NYISO also proposes to specify that new NHFPTCCs will be offered with two year initial terms at least every other year. Renewal terms will be
offered annually, with one year terms.
E.Renewals
Section 19.2.2.2 contains the NYISO’s proposed revisions describing the
NHFPTCC renewal process. Each interested LSE submits a Notice of Intent to Renew,
specifying the NHFPTCCs which it proposes to renew. The renewal process also requires
the LSE to again certify that it expects to be legally obligated to serve Load in each Load
Zone identified by a NHFPTCC POW in an amount (MW) at least equal to the number of
NHFPTCCs sought for renewal plus existing Grandfathered TCCs, Grandfathered Rights,
Historic Fixed Price TCCs and other existing NHFPTCCs with the same POW. The
limitation on the MW of NHFPTCCs that can be renewed is the same as it is for the
number of MW of new NHFPTCCs the LSEs are entitled to purchase; that NHFPTCCs
would be available for renewal in an amount that does not exceed the unhedged average
hourly Load in each Load Zone for which a NHFPTCC POW is chosen. The LSE is also
required to certify that it needs the transmission capacity between the POI and POW of the
30 This calculation is described in a Stakeholder presentation at:
http://www.nyiso.com/public/webdocs/committees/bic_miwg/meeting_materials/2011-10-19/Agenda_-
4_Multi-Duration_Project_Update.pdf
Honorable Kimberly D. Bose May 30, 2012
Page 10
NHFPTCC to serve its Load. This mirrors the certification required of LSEs seeking Historic Fixed Price TCCs.31
The initial and renewal terms of a NHFPTCC may extend for a period no longer than ten years.
F.Pricing NHFPTCCs
Consistent with previous Commission orders in this docket, the NYISO is not
proposing to require LSEs to bid into and win an auction for NHFPTCCs although the
NYISO does propose to base the price of a NHFPTCC on the price for a TCC with the
same POI, POW and term as determined in a Centralized TCC Auction. The process of
pricing NHFPTCCs is described in Section 19.2.2.3.1. The NYISO proposes to price
NHFPTCCs identified by the LSE for initial purchase or renewal at the Market-Clearing
Price for a TCC with the same POI / POW combination as established in the first round of
the Centralized TCC Auction in which TCCs of the same duration as the NHTCC being
sought were offered. A Market Clearing Price for such a TCC established in the Auction
at a price of less than zero will be set to zero. Initially nominated NHFPTCCs have a two-
year term and therefore are proposed to be priced based on the Market Clearing Price of a
TCC with the same POI / POW combination sold in the first round of the Centralized TCC
Auction in which two-year TCCs were offered. Similarly, renewal NHFPTCCs with a
one-year term would be priced, under this proposal, at the price of a one-year TCC, sold in the first one-year round of the Auction, with the same POI / POW combination.
G.Awarding NHFPTCCs
The NYISO proposes several administrative actions for awarding NHFPTCCs in
Section 19.2.2.3.2. Once the NHFPTCC price has been made available, the interested LSE
will have a short period of time during which to nominate which, if any, of its identified
NHFPTCCs it wishes to purchase. The NHFPTCCs each LSE is eligible to purchase is
limited by the NHFPTCCs it indicated were of interest in its Notice of Intent to Purchase
(or Renew). The NYISO also proposes to forfeit any further renewal opportunity for
NHFPTCCs a LSE declines to renew. The LSE is free, however, to return to the
NHFPTCC process and purchase new NHFPTCCs, even with the same path as the
forfeited NHFPTCC. This forfeiture process is modeled after the forfeiture of a five or
ten-year Historic Fixed Price TCC if an owner-LSE of such a TCC fails to pay the annual
portion of the purchase price.32
Before awarding the NHFPTCCs that each LSE nominated for purchase, however,
the NYISO will determine the feasibility of awarding all such requested NHFPTCCs. If
awarding all nominated NHFPTCCs does not result in a feasible power flow solution, the
NYISO will reduce the number of awarded NHFPTCCs by using the auction algorithm
which is currently used in each TCC Action to create a feasible set of awarded TCCs.
31 See: OATT Section 19.2.1.1
32 See: OATT Section 19.2.1.3
Honorable Kimberly D. Bose May 30, 2012
Page 11
When used during a Centralized TCC auction, this auction algorithm uses the dollar value
and number of MWs sought in each TCC Bid to allocate available capacity in such a way
as to maximize the use of available transmission capacity to support awarded TCCs and
maximize the total value to those Market Participants awarded TCCs in the Auction.
When used to allocate available transmission capacity across all nominated
NHFPTCCs, the NYISO will equalize the monetary value of each nominated NHFPTCC such that the algorithm will be limited to maximizing the use of available transmission
capacity to support awarded NHFPTCCs. That is, if all nominated NHFPTCCs can be
accommodated within the available 2.5% of the capacity offered, without overloading any transmission facilities or interfaces, all would be awarded. If such is not the case, the
software will allocate capacity available across constrained transmission facilities and
interfaces based on the transmission system capacity available and the NHFPTCCs being sought. As a general matter, this allocation will be accomplished by reducing the number of NHFPTCCs awarded across an oversubscribed constraint in proportion to the number of constraint-impacting NHFPTCCs being sought in individual requests. No NHFPTCCs will be awarded, however, in quantities of less than one MW.
As mentioned, a variation of the NHFPTCC allocation process described above, and proposed for use in the NHFPTCC award process, has been used to award TCCs to those seeking TCCs across constrained transmission facilities and interfaces since the
NYISO first auctioned TCCs. The process, described in OATT Section 19.9.7 for use in Auctions generally and in Section 19.8.2 for use in allocating Existing Transmission
Capacity to Serve Native Load (“ETCNL”) when all ETCNL cannot be feasibly modeled, is well accepted among the NYISO stakeholders and serves as a viable model for
allocating NHFPTCCs over constrained transmission facilities and interfaces when all
nominations cannot be feasibly accommodated.
Finally, the NYISO proposes that awarded NHFPTCCs will become effective with the first day of the Capability Period immediately following the close of the Centralized TCC Auction. This is the effective date for all TCCs sold in that Auction as well.
H.Payment for NHFPTCCs
In Section 19.2.2.3.3, the NYISO proposes to require LSEs that are acquiring
NHFPTCCs to pay for them one-year at a time in compliance with the Commission’s
requirement that the NYISO require LSEs pay for NHFPTCCs through annual
installments.33 Billing will be in accordance with ISO Procedures and challenges to
settlement information with regard to the award of initial or renewed NHFPTCCs will
require payment be made according to the payment timeline provided.34
LSEs that fail to make their required NHFPTCC payment will forfeit their entitlement to further renewals of their NHFPTCC.
33 July 2010 Order at ¶16
34 The process for challenging a NHTCC award is governed by Section 19.2.2.3.4.
Honorable Kimberly D. Bose May 30, 2012
Page 12
I. Miscellaneous Provisions Regarding Fixed Price TCCs
The NYISO proposes to amend Section 19.2.3 to apply to Non-Historic Fixed Price TCCs provisions it currently applies to Historic Fixed Price TCCs. As mentioned,
provisions regarding the payment for Historic Fixed Price TCCs have been relocated to the end of Section 19.2.1.
Among the existing provisions in Section 19.2.3 that the NYISO proposes to also apply to NHFPTCCs are:
a) The reassignment of TCCs to an LSE which has acquired Load from an LSE
with TCCs;
b) Provisions relocated from Section 19.2.1 for reassignment, reconfiguration, or
sale of such TCCs;
c) Provisions copied from Section 19.9.6 for resolving challenges to the award of
such TCCs. These provisions apply currently to disputes arising in the context
of TCC Auctions and are appropriate to also apply to disputes surrounding
Fixed Price TCCs.
J. Changes to the Balance of Section 19, OATT Sections 2.2.2 and 17
The NYISO proposes a variety of minor editorial or renumbering revisions to the balance of Section 19, as submitted. These include:
Section 19.1 where the availability of Non-Historic Fixed Price TCCs is added to the provisions describing how TCCs may be acquired;
Section 19.7 where buyers of Non-Historic Fixed Price TCCs are identified as Primary Holders of TCCs;
Section 19.8 where Fixed Price TCCs that are tested as feasible before the
Centralized TCC Auction is run are further defined as created pursuant to either Section 19.2.1 or 19.2.2
Section 19.9.6 where a provision describing how charges for Fixed Price TCCs are
billed is removed. Since this section deals with Centralized TCC Auctions, the
sentence more properly belongs in Section 19.2.3 where it has been relocated.
The NYISO proposes to revise OATT Sections 2.2.2 and 17 to indicate certain Fixed Price TCCs referenced therein are Historic Fixed Price TCCs.
Honorable Kimberly D. Bose May 30, 2012
Page 13
VI.Services Tariff Amendments
A.Definition of Fixed Price TCC
The NYISO proposes to amend the term “Fixed Price TCC” in Section 2.6 in the
same fashion as it is proposing to amend the term in the OATT (as discussed in Section
V.A. above).
B.Changes to Section 26.4: Credit Requirements for Bidding and Holding
Two-Year TCCs
Purchasers and holders of TCCs must meet two credit requirements. The first
credit requirement is known as the “Bidding Requirement.” The purpose of the Bidding
Requirement is to secure payments due at the time TCCs are awarded to cover the TCC’s
initial purchase. The second requirement is known as the “holding requirement” and is the
TCC Component of the Operating Requirement. The purpose of the TCC Component of
the Operating Requirement is to secure payment obligations due over the term of the TCC.
Changes to both to accommodate the purchase of NHFPTCCs are necessary.
The NYISO proposes to amend Section 26.4.3 (i), the description of the Bidding Requirement, to clarify that this requirement applies to LSEs desiring to purchase
NHFPTCCs during a Centralized TCC Auction. Because these LSEs will “nominate” the TCCs they wish to purchase, rather than “Bid” to purchase their NHFPTCCs, the NYISO proposes to add the word “nominate,” as appropriate, throughout this paragraph. The NYISO also proposes a clarification to Section 26.4.3(ii) to indicate that this provision applies only to the purchase of Historic Fixed Price TCCs.
The NYISO proposes significantly more revisions to Section 26.4.2.3, the
calculation of the TCC Component of the Operating Requirement. Currently, the NYISO
calculates the credit requirement for holding a two-year TCC by doubling the collateral
required to hold a one-year TCC with the same POI and POW.35 With this filing, the
NYISO proposes to amend the methodology for determining the credit requirement for
holding two-year TCCs to take into account the Commission’s requirement that the
NYISO allow purchasers of two-year NHFPTCCs to purchase them using the same annual
installment process as the NYISO offers to holders of Historic Fixed Price TCCs.36
Because the NYISO’s credit management system does not differentiate between two-year
TCCs purchased in an auction or through the NHFPTCC process, the proposed revisions to
the TCC Component of the Operating Requirement will apply to all two-year TCCs held as
of the effective date of these revisions.
35 See: New York Independent System Operator, Inc. Docket No. ER10-721-000, Letter Order issued
March 23, 2010. Currently, Market Participants pay the entire two-year market clearing price for a two-year TCC upon the initial award of the two-year TCC. As demonstrated in the formulas found in Section 26.4, as a general matter, payment offsets the collateral requirement.
36 See: July 2010 Order at ¶ 16
Honorable Kimberly D. Bose May 30, 2012
Page 14
The NYISO proposes to revise Section 26.4.2.3 to calculate the collateral required
for holding a two-year TCC in two parts: 1. collateral for year one of the two-year TCC
will be based on the market clearing price of a one-year TCC with the same POI and POW;
and 2. collateral for year two of the two-year TCC will be based on the difference between
the market clearing price of a two-year TCC and the market clearing price, used in part one
of the calculation, of the one-year TCC. As payment occurs and as the remaining term of
the two-year TCC falls to one year, six months and one month, the collateral required will
be re-calculated to reflect payments made and the remaining duration of the TCC.
As a general matter, the price of the one-year TCC used in the year one formula to
calculate the required collateral will be the market clearing price of a one-year TCC sold in
the most recently concluded final one-year round of a Centralized TCC Auction. Because
the NYISO sells TCCs in an auction from longest term to shortest term, this may be the
market clearing price from the final one-year round of the previous Centralized TCC
Auction. The price for the two-year TCC used in the year two formula to calculate the
required collateral will initially be the market clearing price at which the two-year TCC
was awarded. The two-year TCC price in this collateral calculation will change, and the
NYISO will recalculate the two-year TCC holding requirement when the final round of the
two-year rounds are closed at new market clearing prices. When the remaining term drops
to one year, the collateral calculation will match the collateral required of a holder of a
one-year TCC.
VII. Effective Date
The NYISO respectfully requests that the Commission accept the tariff revisions
proposed in this docket to become effective no earlier than October 10, 2012 and no later
than November 14, 2012 on notice to be provided to stakeholders and the Commission two
weeks before the effective date. The NYISO intends to offer NHFPTCCs in the first
quarter of 2013, in conjunction with the first Centralized TCC Auction following this
effective date. However, the credit revisions included herein would become effective with
the actual installation of the software implementing the NHFPTCC product design. The
NYISO expects such installation on October 17, 2012 but actual installation depends on
the conclusion of all quality testing and on system conditions at the time of the scheduled
installation.
Therefore the NYISO respectfully requests the Commission accept these revisions with an effective date to be determined on two week’s notice to the Commission and
Market Participants, such effective date to occur between October 10, 2012 and November 14, 2012. The NYISO proposes to refile accepted tariff revisions included herein with the established effective date as soon as that is known.
VIII. Conclusion
Wherefore, for the foregoing reasons, the New York Independent System Operator,
Inc. respectfully requests that the Commission accept the revisions proposed in this filing,
Honorable Kimberly D. Bose May 30, 2012
Page 15
recognize that subsequent filings as described herein may be made, and establish an
effective date between October 10, 2012 and November 14, 2012 as indicated by a notice provided two-weeks in advance of such effective date to the Commission by the New York Independent System Operator, Inc.
Respectfully submitted,
/s/ Mollie Lampi
Mollie Lampi
Assistant General Counsel
New York Independent System Operator, Inc.
10 Krey Blvd.
Rensselaer, New York 12144 (518) 356 7530
mlampi@nyiso.com
cc:Michael A. Bardee
Gregory Berson
Connie Caldwell
Anna Cochrane
Jignasa Gadani
Lance Hinrichs
Jeffrey Honeycutt
Michael Mc Laughlin
Kathleen E. Nieman
Daniel Nowak
Rachel Spiker
