UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

New York Independent System Operator, Inc.)Docket No. ER13-102-000

ANSWER OF THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.
AND THE NEW YORK TRANSMISSION OWNERS

Pursuant to Rules 212 and 213 of the Rules of Practice and Procedure of the Federal

Energy Regulatory Commission (“Commission”),1 the New York Independent System Operator,
Inc. (“NYISO”) and the New York Transmission Owners2 (“NYTOs”) (collectively, the “Filing
Parties”) respectfully submit this answer (“Answer”) to the requests for clarification in the
above-captioned proceeding.3 In its April 18, 2013 order, the Commission conditionally
accepted the Filing Parties’ proposed revisions to the NYISO’s planning process to comply with
Order No. 1000 and directed the Filing Parties to make a further compliance filing regarding
certain matters within 120 days (“April Order”).4 In response to the April Order, (i) the
Independent Power Producers of New York, Inc. (“IPPNY”), Multiple Intervenors (“MI”) and
Pace Energy and Climate Center (“Pace”) have requested clarification or, in the alternative,

2 The New York Transmission Owners are: Central Hudson Gas & Electric Corporation, Consolidated

Edison Company of New York, Inc., Long Island Lighting Company d/b/a LIPA, New York Power Authority, New York State Electric & Gas Corp., Niagara Mohawk Power Corp. d/b/a National Grid, Rochester Gas & Electric Corp., and Orange & Rockland Utilities, Inc.

3 The Filing Parties are entitled to answer requests for clarification as a matter of right. The issues that
IPPNY, MI, and Pace request clarification for overlap with the issues they request rehearing on in the alternative.
To the extent that the Commission deems all or a portion of this Answer to be a response to a request for rehearing
the Filing Parties respectfully request that the Commission exercise its discretion to accept it. The Commission has
discretion to accept answers to requests for rehearing and has done so when they help to clarify complex issues,
provide additional information, or are otherwise helpful in the Commission’s decision-making process. See, e.g.,
Transcontinental Gas Pipe Line Corp., 113 FERC ¶ 61,129 at P 11 (2005) (accepting a response where an applicant
“filed its pleading as a request for clarification, to which answers lie, and only asked that it be considered a request
for rehearing in the alternative”); New England, Inc., 120 FERC ¶ 61,122 at P 46 (2007) (stating that “unlike
answers to requests for rehearing, answers to requests for clarification are not prohibited under the Commission’s
Rules of Practice and Procedure”).

4 New York Independent System Operator, Inc., Order on Compliance Filing, 143 FERC ¶ 61,059 (April 18, 2013) (“April Order”).

rehearing,5 and (ii) LS Power Transmission, LLC and LSP Transmission Holdings, LLC

(collectively, “LSP Transmission”) have requested clarification6 regarding certain determinations by the Commission in the April Order.

The Commission has provided the transmission planning regions with significant

flexibility to work with their stakeholders to tailor the transmission planning and cost allocation
requirements set forth in Order No. 1000 in a manner that accommodates regional differences.7
Accordingly, for purposes of their compliance filing in response to the April Order, the Filing
Parties are already addressing the matters raised in the requests for clarification with NYISO
stakeholders. For this reason, the Commission should refrain from taking a position on or
prejudging matters that are under development and, instead, should encourage IPPNY, MI, Pace,
and LSP Transmission to provide their input and address any concerns as the NYISO develops
the compliance filing.

I.Background

The Commission issued its Order No. 1000 to improve local, regional, and interregional transmission planning processes and cost allocation mechanisms, building on the requirements set forth in its Order No. 890.8 The Commission’s proposed reforms in Order No. 1000 are intended to accomplish two primary objectives. Specifically, to:

(1) ensure that transmission planning processes at the regional level consider and
evaluate, on a non-discriminatory basis, possible transmission alternatives and
produce a transmission plan that can meet transmission needs more efficiently and

5 New York Independent System Operator, Inc., Request for Clarification or Rehearing of Independent

Power Producers of New York, Inc., Multiple Intervenors and Pace Energy and Climate Center, Docket No. ER13-
102-000 (May 17, 2013) (“IPPNY Filing”).

6 New York Independent System Operator, Inc., Request for Clarification of LS Power Transmission, LLC
and LSP Transmission Holdings, LLC, Docket No. ER13-102-000 (May 20, 2013) (“LSP Transmission Filing”).

7 Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities,

Order No. 1000, 136 FERC ¶ 61,051 (2011) (“Order No. 1000”) at PP 61, 149, 157, and 604, order on reh’g and clarification, Order No. 1000-A, 139 FERC ¶ 61,132 (2012), order on reh’g and clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012).

8 Order No. 1000 at P 1.

cost-effectively; and (2) ensure that the costs of transmission solutions chosen to
meet regional transmission needs are allocated fairly to those who receive benefits
from them.9

The Commission acknowledged that certain transmission planning regions may already have in
place transmission planning processes and cost allocation mechanisms that satisfy these
requirements.10 In addition, the Commission provided the transmission planning regions with
significant flexibility to tailor their transmission planning processes and cost allocation
mechanisms to accommodate the unique circumstances of their regions.11
The NYISO’s transmission planning process is contained in Attachment Y of the
NYISO’s Open Access Transmission Tariff (“OATT”) and is known as the Comprehensive
System Planning Process (“CSPP”). The CSPP has been composed of three components: (i) a
local transmission planning process for the New York Transmission Owners, (ii) a reliability
transmission planning process, and (iii) an economic transmission planning process.
Following the issuance of Order No. 1000, the NYISO and its stakeholders worked
diligently to develop enhancements to the CSPP consistent with the Order No. 1000
requirements. In an October 11, 2012, compliance filing regarding the Commission’s local and
regional transmission requirements, the Filing Parties described where the existing CSPP already
complies with or surpasses the Order No. 1000 requirements and proposed certain revisions to
the NYISO’s tariffs to ensure the CSPP is in full compliance with Order No. 1000.12 The Filing
Parties’ proposed revisions to the NYISO’s tariffs included: (i) making limited tariff revisions to
the reliability and economic transmission planning processes; (ii) introducing a new Public

9 Id. at P 4.

10 Id. at P 13.

11 Id. at PP 61, 149, 157, and 604.

12 New York Independent System Operator, Inc., New York Independent System Operator, Inc. and New York Transmission Owners, Compliance Filing, Docket No. ER13-102-000 (October 11, 2012) (“Filing Parties Compliance Filing”).

Policy Requirements (“PPR”) transmission planning process; (iii) supplementing the entity

qualification and project information criteria in the tariff; (iv) introducing a process to consider
more efficient or cost effective transmission solutions; and (v) making additional revisions
required to comply with Order No. 1000’s transmission planning process and cost allocation
requirements.

In its April Order, the Commission found that the Filing Parties’ proposed revisions were partially compliant with Order No. 1000 and identified certain matters requiring further
development through a supplemental compliance filing.13 Following the issuance of the April Order, the NYISO has initiated a stakeholder consultation process to review the Commission’s directives and to develop tariff revisions consistent with these requirements.

II.Answer

A.The Commission Should Deny IPPNY, MI, and Pace’s Requested Clarifications and

Encourage Them to Address their Concerns within the NYISO Stakeholder Consultation Process

In its April Order, the Commission found that the NYISO’s reliability and PPR

transmission planning processes do not fully comply with Order No. 1000 because they do not
require the NYISO to select the more efficient or cost-effective transmission solutions to
Reliability Needs or PPR-driven needs for purposes of cost allocation.14 The Commission also
found that the Filing Parties’ proposed PPR transmission planning process does not adequately
provide for the consideration of non-transmission alternatives on a comparable basis.15
Accordingly, the Commission directed the Filing Parties to include in a compliance filing a
process by which the NYISO will select in the regional transmission plan for purposes of cost
allocation the more efficient or cost-effective transmission solutions proposed to meet Reliability

13 April Order at P 13.

14 Id. at PP 77 and 145.

15 Id. at P 148.

Needs or PPR-driven needs.16 In addition, the Commission directed the Filing Parties to revise the PPR transmission planning process to provide for the evaluation of all resource types,
including non-transmission alternatives, on a comparable basis.17

In their requests for clarification, IPPNY, MI, and Pace request that the Commission

clarify these directives to require that the NYISO must “perform an evaluation comparing the

relative cost effectiveness and efficiency of transmission solutions with proposed non-

transmission alternatives and reporting which studied transmission and non-transmission solution
best meets the reliability need or PPR-driven need.”18 They also request that the Commission
clarify that if, after evaluating all solutions on a comparable basis, the NYISO identifies a non-
transmission solution to a Reliability Need or PPR-driven need as the most cost-effective or
efficient solution, the NYISO not be required to select a transmission solution for purposes of
cost-allocation.19

The Filing Parties object to the requested clarifications and urge the Commission to reject them. The Commission has previously indicated that it will provide transmission providers with significant flexibility to develop such processes with their stakeholders. The Commission stated in paragraph 61 of Order No. 1000:

Nevertheless, the Commission recognizes that each transmission planning region
has unique characteristics and, therefore, this Final Rule accords transmission
planning regions significant flexibility to tailor regional transmission planning
and cost allocation processes to accommodate these regional differences.

The Commission further stated in paragraph 149 of Order No. 1000:

We provide public utility transmission providers in each transmission planning
region the flexibility to develop, in consultation with stakeholders, procedures by
which the public utility transmission providers in the region identify and evaluate

16 Id. at PP 81 and 147.

17 Id. at P 148.

18 IPPNY Filing at p 7.

19 Id.

the set of potential solutions that may meet the region’s needs more efficiently or cost-effectively.20

For purposes of complying with the Commission’s April Order, the NYISO is already working with its stakeholders, with meetings on a bi-weekly basis, to develop processes that comply with the Commission’s directives. In particular, the NYISO and its stakeholders are developing a process by which the NYISO will select for its regional transmission plan for
purposes of cost allocation the more efficient or cost-effective transmission solutions to
Reliability Needs or PPR-driven needs. We are also developing a process by which the NYISO will conduct a comparable evaluation of all resource types, including transmission, generation, and demand response, for its PPR transmission planning process.21

Consistent with its statements in Order No. 1000, the Commission should provide the
NYISO and the NYTOs, in consultation with the NYISO stakeholders, the flexibility needed to
develop processes that both satisfy the Commission’s requirements and are tailored to the
specific circumstances in New York. The processes being developed are complex with impacts
on many stakeholders and are not limited to a single possible approach. IPPNY, MI, and Pace
are, in essence, requesting that the Commission act outside of this consultation process and
require that one particular approach be adopted for complying with the Commission’s directives
in its April Order. The Commission should not permit individual stakeholders to bypass this
stakeholder consultation process, nor should the Commission prejudge or limit the manner in
which the NYISO’s and the NYTOs’ process addresses its directives. For these reasons, the
Commission should deny IPPNY, MI, and Pace’s request for clarification and encourage the
parties to provide their input in the NYISO stakeholder consultation process.

20 Order No. 1000 at P 149. The Commission has allowed such flexibility in its orders approving different planning processes for different regions.

21 The NYISO’s reliability transmission planning process already provides for a comparable evaluation of all resource types.

B.Filing Parties Will Provide Criteria for a Developer to Demonstrate that It Can

Operate and Maintain a Transmission Facility for the Project’s Life in Their Supplemental Compliance Filing

In its April Order, the Commission accepted that the NYISO, in evaluating a transmission developer’s qualifications, can consider whether the developer’s existing resources and
commitments provide sufficient assurance that the developer will be able to operate and maintain a facility for the life of the project.22 LSP Transmission requests that the Commission clarify that the NYISO must submit information in its supplemental compliance filing “that would
identify what the NYISO would deem sufficient to establish that an entity has sufficient financial resources to operate and maintain a project for its life.”23

The Commission has already directed the NYISO in the April Order to revise the

financial pre-qualification and entity qualification criteria “to describe the information that a
potential developer must provide to demonstrate that it meets these criteria.”24 In complying
with this requirement, the Filing Parties intend to provide the criteria that a developer must
satisfy to demonstrate that it can operate and maintain a facility for the life of the project. These
criteria will be provided to NYISO stakeholders for their review prior to the supplemental
compliance filing. As the Filing Parties will address this matter in their supplemental
compliance filing, further action by the Commission is not required on this point.

C.Filing Parties Will Provide in Their Supplemental Compliance Filing for the

Inclusion in Project Costs of the Incremental Costs for Utilization of Existing Rights

of Way

In its April Order, the Commission indicated that the NYISO could consider whether an
entity has existing rights of way or experience or ability to acquire rights of way in evaluating

22 April Order at P 195.

23 LSP Transmission Filing at p 2.

24 April Order at P 200.

whether to select a proposed facility for purposes of cost allocation.25 LSP Transmission

expresses concerns that rights of way ownership could be given inappropriate weight in the

NYISO’s determination regarding which project is more cost-effective.26 For this reason, LSP Transmission requests that the Commission direct the NYISO to require entities with existing rights of way to indicate any incremental costs they would incur in connection with placing new or additional facilities on existing rights of way.27

The Filing Parties will address this issue in their supplemental compliance filing, rendering further action by the Commission unnecessary on this point.

D.Filing Parties Will Address in Their Supplemental Compliance Filing Recovery of

Development Costs by Non-Incumbent Transmission Projects Upon NYISO

Selection

In its April Order, the Commission indicated that:

[w]here an alternative regulated solution receives the necessary governmental

approval, a non-incumbent developer will be entitled to the same cost recovery as a Responsible Transmission Owner if the regulated backstop solution were
implemented (i.e., full recovery of all reasonably incurred costs, including costs related to the development of the project).28

LSP Transmission notes that as part of its April Order, the Commission required that the
NYISO, rather than the New York State Public Service Commission, select projects as
part of the reliability transmission planning process.29 For this reason, LSP Transmission
requests that the Commission correct its statement to clarify that a non-incumbent
developer is entitled to the same cost recovery as a Responsible Transmission Owner
where an alternative regulation solution(s) is selected by the NYISO.30 The Filing Parties

25 Id. at P 197.

26 LSP Transmission Filing at p. 2.

27 Id. at pp. 2-3.

28 April Order at P 326 (emphasis added).

29 LSP Transmission Filing at pp 3-4.

30 Id. at p 4.

will address the timing of cost recovery for transmission projects selected by the NYISO for purposes of cost allocation in their supplemental compliance filing.

E. A Responsible Transmission Owner Must Be Able to Recover Reasonably Incurred

Development Costs to Ensure That Reliability Needs Are Met

LSP Transmission further requests that the Commission clarify that if the NYISO selects an alternative regulated transmission project other than the Responsible Transmission Owner’s regulated backstop project as the more efficient or cost-effective solution to a Reliability Need, the selected project is from that point onward the sole project entitled to further cost recovery
under the NYISO OATT.31 That is, the Responsible Transmission Owner could not recover any costs that it incurs for its backstop project, including further development costs, following the NYISO’s selection of the other project.

The Filing Parties object to this clarification and urge the Commission to reject it. The
Responsible Transmission Owner should continue to be eligible to recover reasonably incurred
development costs following the NYISO’s selection of a non-incumbent’s alternative project.
As the Commission recognized in its April Order, the Responsible Transmission Owner has a
continuing obligation to serve, unlike the non-incumbent.32 The NYISO regional transmission
plan must address a Reliability Need to ensure system reliability and to satisfy mandatory NERC
reliability criteria. The obligation assumed by the Responsible Transmission Owner to provide a
regulated backstop solution and to proceed to develop that solution if needed must be fulfilled to

ensure system reliability. If the non-incumbent developer were unable to proceed with its project
for any reason, the Responsible Transmission Owner may be obligated to proceed with its
backstop project to meet the identified Reliability Need. For this reason, the Responsible
Transmission Owner should be permitted to recover fully its reasonably incurred costs to

31 Id. at pp 4-5.

32 April Order at P 326.

continue development of its backstop project beyond the date of the NYISO’s selection of the non-incumbent alternative project and until the point at which it is certain that the alternative transmission project will be completed in time to meet the Reliability Need.

III. CONCLUSION

WHEREFORE, the New York Independent System Operator, Inc. and the New York Transmission Owners respectfully request that the Commission address the requested
clarifications, and alternative rehearing requests, in the manner described above.

Respectfully submitted,

NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

By: /s/ Carl F. Patka

Robert E. Fernandez, General Counsel
Ray Stalter, Director of Regulatory Affairs
Carl F. Patka, Assistant General Counsel
New York Independent System Operator, Inc.

10 Krey Boulevard

Rensselaer, NY 12144

Email: rfernandez@nyiso.com Email: rstalter@nyiso.com

Email: cpatka@nyiso.com

Ted J. Murphy

Hunton & Williams LLP
2200 Pennsylvania Ave, NW
Washington, DC 20037
Email: tmurphy@hunton.com

Michael Messonnier
Hunton & Williams LLP
951 East Byrd Street
Richmond, VA 23219

Email: mmessonnier@hunton.com

/s/ John Borchert

John Borchert
Manager of Electric Engineering Services

NEW YORK TRANSMISSION OWNERS

By: /s/ Elias G. Farrah

Elias G. Farrah

Winston & Strawn, LLP 1700 K Street, NW

Washington, DC 2006-3817
Email: efarrah@winston.com

Paul L. Gioia

Whiteman Osterman & Hanna LLP 111 Washington Avenue

Suite 401

Albany, NY 12210

Email: pgioia@plg26.com

/s/ Richard B. Miller

Consolidated Edison Company of New York, Inc. Orange and Rockland Utilities, Inc.

Central Hudson Gas & Electric CorporationRichard B. Miller

284 South AvenueDirector of Energy Markets Policy Group

Poughkeepsie, NY 12601Consolidated Edison Co. of New York, Inc.

Email: jborchert@cenhud.com4 Irving Place

Room 1815-s

New York, NY 10003

Email: millerrich@coned.com

/s/Kristina Nifora

Consolidated Edison Company of New York, Inc. Orange and Rockland Utilities, Inc.

Kristina Nifora, Esq.

Senior Attorney

Consolidated Edison Co. of New York, Inc.

4 Irving Place

Room 1850-s

New York, NY 10003

Email: niforak@coned.com

/s/ Jacqueline Hardy/s/ Andrew Neuman

Jacqueline HardyNew York Power Authority

Assistant General CounselAndrew Neuman, Esq.

Long Island Power AuthorityNew York Power Authority

333 Earle Ovington Boulevard123 Main Street

Suite 403White Plains, NY 10601-3170

Uniondale, NY 11553Email: andrew.neuman@nypa.gov

Email: jhardy@lipower.org

Andrew Antinori

David ClarkeDirector Market Issues

Director of Power Markets PolicyNew York Power Authority

Long Island Power Authority123 Main Street

Alfred E. Smith BuildingWhite Plains, NY 10601-3170

80 South Swan Street, 6th FloorEmail: andrew.antinori@nypa.gov

Albany, NY 12210

Email: dclarke@lipower.org

/s/ R. Scott Mahoney/s/ Daniel Galaburda

R. Scott Mahoney, Esq.Niagara Mohawk Power Corporation

New York State Electric & Gas Corporationd/b/a/ National Grid

Rochester Gas and Electric CorporationNational Grid USA Service Company, Inc.

Durham Hall, 52 Farm View DriveAssistant General Counsel and Director

New Gloucester, ME 0426040 Sylvan Road

Email: scott.mahoney@iberdrolausa.comWaltham, MA 02451-1120

Email: daniel.galaburda@us.nrid.com

Bart Franey

Director of Federal Regulation

Niagara Mohawk Power Corporation d/b/a National Grid

300 Erie Boulevard West
Syracuse, NY 13202

Email bart.franey@us.ngrid.com