10 Krey Boulevard Rensselaer, NY 12144

April 1, 2013

ELECTRONICALLY SUBMITTED

Kimberly D. Bose

Secretary

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

Washington, D.C. 20426

Re: New York Independent System Operator, Inc.’s Fifth Informational Report on
Efforts to Develop Rules Addressing Compensation to Generators that Are
Determined to be Needed for Reliability; Docket No. ER10-2220-000.

Dear Secretary Bose:

In accordance with paragraph 54 and ordering paragraph “(C)” of the Federal Energy
Regulatory Commission’s (“Commission’s”) October 12, 2010, Order On Proposed Mitigation
Measures in Docket No. ER10-2220-000 (“Order”),1 the New York Independent System
Operator, Inc. (“NYISO”), hereby submits this Fifth Informational Report on Efforts to Develop
Rules Addressing Compensation to Generators that Are Determined to be Needed for Reliability
(“April 2013 Informational Report”). The NYISO submitted its Fourth Informational Report on
Efforts to Develop Rules Addressing Compensation to Generators that Are Determined to be
Needed for Reliability on October 1, 2012, (“October 2012 Informational Report”). In footnote

44 of its Order the Commission stated that it does not intend to issue public notices, accept comments, or issue orders on this Informational Report.

Paragraph 54 of the Order stated, in part, as follows:

Because fixed cost recovery issues do not go to whether NYISO’s mitigation
proposal is in itself just and reasonable, this proceeding is not the appropriate
forum in which to raise such issues. Further, commenters do not present factual
evidence that demonstrates that market participants generally will be unable to
recover their costs due to application of the proposed mitigation provisions. We
note, however, that the NYISO Board of Directors, in its July 29, 2010 decision

1New York Independent System Operator, Inc., 133 FERC ¶ 61,030.

Kimberly D. Bose, Secretary April 1, 2013

Page 2

on the appeal of the NYISO Management Committee’s adoption of the instant
mitigation proposal, directed NYISO management to work with stakeholders to
examine the generation owners’ claims that existing cost recovery mechanisms
are inadequate and to review the process that evaluates permanent solutions to
reliability problems. Accordingly, we believe the better course is to await the
outcome of the stakeholder process as directed by the NYISO Board of Directors.
In this regard, we direct NYISO to file status reports every 180 days beginning
180 days from the date of this order for informational purposes only.44

44 The Commission does not intend to issue public notices, accept comments, or issue orders on such informational filings.

In compliance with the cited sections of the Order, the NYISO submits this Informational

Report.

I. Informational Report

A. Summary of the October 2012 Informational Report

On April 16, 2012 and July 12, 2012, the NYISO presented an Alternative Reliability
Resource Compensation (“RRC”) proposal at a joint Market Issues Working Group
(“MIWG”)/Electric System Planning Working Group (“ESPWG”)/ICAP Working Group
(“ICAPWG”) meeting. The alternative proposal would require generators to fund a confidential
reliability study by the NYISO and associated Transmission Owner, and for the New York State
Public Service Commission (“PSC”) to receive confidential notice of the study. These two
proposals included enhancements of the prior proposals that the NYISO believes better align the
study with the existing Comprehensive Reliability Planning Process (“CRPP”) contained in
Attachment Y of the NYISO’s Open Access Transmission Tariff (“OATT”). Once a reliability
need has been determined and the PSC has selected the generator as the appropriate
solution, compensation negotiations between the PSC and/or Transmission Owner and the
generator may commence immediately after the generator submits its retirement notice.

At the July 12, 2012, joint MIWG/ESPWG/ICAPWG meeting, a representative of the
New York State Department of Public Service (“DPS”) presented a DPS staff proposal for a
retirement compensation timeline and process. The proposed timeline was generally consistent
with the existing six month notice period for retirement of generators in excess of 80MW.

B.April 2013 Informational Report

The NYISO has not presented new or updated proposals to its stakeholders since filing
the October 2012 Informational Report. In addition, the NYISO has not received any new or
updated proposals from its stakeholders or DPS staff. The NYISO continues to actively monitor
and assess whether additional rules addressing compensation to generators needed for reliability,

Kimberly D. Bose, Secretary April 1, 2013

Page 3

such as the Alternative RRC proposal discussed in the October 2012 Informational Report, are necessary to improve the NYISO administered markets.

C.Additional Market Activity Update

The October 2012 Informational Report included information on a matter that involved
certain New York Control Area resources seeking to retire. The PSC issued an order that
approved a mechanism for a transmission owner to compensate specific generating units that
were seeking to retire but were determined to be necessary to address a reliability need.2 The
subject of the order was a proposal for the transmission owner (Niagara Mohawk Power Corp.
d/b/a/ National Grid) to compensate the generator owner (Dunkirk Power LLC, “Dunkirk”) for
“reliability support services” (“RSS”) provided by two of the four generating units at the
Dunkirk facility. National Grid filed its contract with Dunkirk for RSS with the PSC for
approval and cost recovery.

Since October 2012, National Grid issued a Request for Proposal (“RFP”) for solutions to
address the continuing reliability needs beyond May 31, 2013. Three responses to the RFP were
received and, after review, National Grid determined that the proposal to continue operating one
of the Dunkirk units was the preferred solution. The Dunkirk unit provided the least cost
solution and the only solution available to operate starting on June 1, 2013. National Grid filed a
request with the PSC to extend the RSS agreement for one of the Dunkirk units on March 5,
2013. The agreement provides for the deferral of mothballing one 115 kV-connected 80 MW
Dunkirk generating unit. The deferral would allow the continued operation and maintenance of
the one Dunkirk unit from June 1, 2013 through May 31, 2015 for a fixed total price of
approximately $72.741 million.

Units at another generating plant in New York are also currently operating under a

Reliability Support Service Agreement (“RSSA”) with a transmission owner, which was

approved by the PSC. On July 20, 2012, Cayuga Operating Company, LLC (“Cayuga”) filed a
180-day notice with the PSC, stating that Cayuga intended to mothball both of its two generating
units at the Cayuga Generating Station on January 16, 2013. In response, New York State
Electric & Gas Corporation (“NYSEG”) and the NYISO conducted reliability studies and
determined that both units at the Cayuga Generating Station are necessary for reliability needs in
NYSEG’s territory. Cayuga and NYSEG then negotiated a Term Sheet under which NYSEG
would compensate Cayuga for continuing to run the Cayuga Generating Station for one year
beginning January 16, 2013. On October 29, 2012, NYSEG filed the Term Sheet with the PSC
and received PSC approval on December 17, 2012. Based on the Term Sheet, NYSEG and
Cayuga executed an RSSA. In addition to the PSC proceeding, Cayuga filed a proposed
unexecuted reliability must-run agreement (“RMR Agreement”) with the Commission on
November 16, 2012. Cayuga stated at the time of its filing with the Commission, however, that a

2 NYPSC Case No. 12-E-0136, Order Deciding Reliability Issues and Addressing Cost Allocation and Recovery (issued August 16, 2012). Order may be retrieved from

<http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={34D25567-D7B7-41EA-
822F-6585B344BC0E}>

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 Rules of Practice and Procedure, 18 C.F.R. §385.2010.
Dated at Rensselaer, NY this 1st day of April, 2013.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207