New York Independent System Operator,
Inc.,

New York Transmission Owners PJM Interconnection, L.L.C.

Duquesne Light Company
PJM Interconnection, L.L.C.

ISO New England Inc.,

New England Power Pool Participants
Committee

)

)Docket No. ER13-1942-000
)

)
)

)Docket No. ER13-1947-000
)

)Docket No. ER13-1926-000
)

)

)Docket No. ER13-1960-000
)

)
) (Not Consolidated)

REQUEST FOR LEAVE TO ANSWER, AND ANSWER,
AND MOTION TO INTERVENE OUT-OF-TIME OF THE
NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

Pursuant to Rule 213 of the Rules of Practice and Procedure of the Federal Energy

Regulatory Commission (“Commission”),1 the New York Independent System Operator, Inc.
(“NYISO”) respectfully seeks leave to answer, and submits this answer, to the September 9,
2013 protests2 of: (i) the Public Interest Organizations (“PIOs”);3 and (ii) the Indicated New

1 18 C.F.R. § 385.213 (2013).

2 See Motion to Intervene and Protest of Public Interest Organizations Conservation Law

Foundation, Environment Northeast, Natural Resources Defense Council, Pace Energy and Climate

Center and Sustainable FERC Project, Docket Nos. ER13-1933-000, ER13-1960-000, ER13-1947, and ER13-1926 (September 9, 2013) (“PIOs’ Protest”); Protest of Indicated Transmission Owners, Docket No. ER13-1942-000 (Sept. 9, 2013) (“Indicated NYTOs’ Protest”).

3 The PIOs are the Conservation Law Foundation, Environment Northeast, Natural Resources Defense Council, Pace Energy and Climate Center, and the Sustainable FERC Project.

York Transmission Owners (“Indicated NYTOs”)4 in the above-captioned proceedings. Both
protests relate to5 the July 10, 2013 joint compliance filing by the NYISO and its transmission-
owning members (including the Indicated NYTOs) in response to Order No. 1000’s6
interregional planning and cost allocation requirements (the “Interregional Compliance Filing”).7
The protests also concern the conforming interregional compliance filings by the NYISO’s
Commission-jurisdictional neighbors, i.e., the PJM Interconnection, LLC (“PJM”), and ISO New
England, Inc. (“ISO-NE”), and their respective transmission-owning public utility members.
The PIOs are the only stakeholders in the NYISO, PJM, or ISO-NE (collectively, the “ISOs/RTOs”) to raise any issues regarding the coordination of interregional transmission
planning in any of the three regions’ Order No. 1000 compliance proceedings. For the reasons
set forth below, they have not shown that the enhanced arrangements proposed by the
ISOs/RTOs fail to satisfy the requirements of Order No. 1000. To the contrary, the proposed
interregional planning arrangements far surpass what is required under Order No. 1000. The
additional changes requested by the PIOs are beyond the scope of Order No. 1000, unnecessary,
and redundant.

4 The Indicated NYTOs are the Long Island Power Authority, its operating subsidiary, Long

Island Lighting Company, Consolidated Edison Company of New York, Inc., Orange & Rockland

Utilities, Inc., the New York Power Authority, and Central Hudson Gas & Electric Corporation. The

Indicated NYTOs were joint filing parties in Docket No. ER13-1942-000 but reserved their right to file a protest regarding the single issue addressed in their filing.

5 As is discussed below in Section II, neither the PIOs nor the Indicated NYTOs filed in all of the
dockets related to interregional planning coordination and cost allocation among the three ISOs/RTOs.

6 Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No. 1000, 136 FERC ¶ 61,051 (2011) (“Order No. 1000), order on reh’g and
clarification, Order No. 1000-A, 139 FERC ¶ 61,132 (2012) (“Order No. 1000-A), order on reh’g and clarification, 141 FERC ¶ 61,044 (2012) (“Order No. 1000-B”). For convenience, unless otherwise
specified, references in this filing to “Order No. 1000” should be understood to encompass Order Nos. 1000, 1000-A, and 1000-B.

7 New York System Independent System Operator and New York Transmission Owners,

Interregional Compliance Filing, Docket No. ER13-1942-000 (July 10, 2013) (“Interregional Compliance
Filing”).

The PIOs are also the only stakeholders in the three ISO/RTO regions to call for rejection
of the proposed avoided cost methodology for interregional transmission cost allocation. They
have failed to show that this methodology does not comply with Order No. 1000 or is otherwise
unjust or unreasonable. The PIOs’ arguments reflect a fundamental misunderstanding of the
relationship, and differences, between Order No. 1000’s intraregional and interregional planning
compliance directives. Similarly, the Indicated NYTOs, who support the use of the avoided cost
methodology except in a single hypothetical scenario, have failed to justify compelling the
ISOs/RTOs to create a new cost allocation approach for that sole scenario.
The Commission should therefore reject both protests and accept the Interregional
Compliance Filing, as well as the corresponding filings for the PJM and ISO-NE regions,
without requiring any modifications.

I.REQUEST FOR LEAVE TO ANSWER

The Commission has discretion to accept answers to protests when they help to clarify complex issues, provide additional information, or are otherwise helpful in the development of the record in a proceeding.8 This answer should be accepted because it addresses and clarifies complex issues and provides additional information that will help the Commission to fairly evaluate the arguments in this proceeding.

8 See, e.g., Southern California Edison Co., 135 FERC ¶ 61,093 at P 16 (2011) (accepting

answers to protests “because those answers provided information that assisted [the Commission] in [its] decision-making process”); New York Independent System Operator, Inc., 134 FERC ¶ 61,058 at P 24 (2011) (accepting the answers to protests and answers because they provided information that aided the Commission in better understanding the matters at issue in the proceeding); PJM Interconnection, LLC, 132 FERC ¶ 61,217 at P 9 (2010) (accepting answers to answers and protests because they assisted in the Commission’s decision-making process).

II.MOTION TO INTERVENE OUT-OF-TIME IN DOCKET NOS. ER13-1926-000

AND ER13-1960-000

The NYISO is one of the three ISOs/RTOs that made interregional planning coordination
and cost allocation compliance proposals under Order No. 1000 that have been challenged by the
PIOs and the Indicated NYTOs. The PIOs and the Indicated NYTOs did not, however, submit
their protests in all of the proceedings that they implicate. The Indicated NYTOs filed only in
the NYISO’s compliance docket, i.e., Docket No. ER13-1942-000. The PIOs filed in several
dockets but not the NYISO’s. Although the PIOs filed in one PJM docket in which the NYISO
is a party, i.e., Docket No, ER13-1947-000, that docket does not directly address cost allocation
issues.

Accordingly, the NYISO respectfully moves under Rule 214 of the Commission’s Rules
of Practice and Procedure9 for leave to intervene out-of-time in: (i) Docket No. ER13-1926-000,
which concerns the PJM version of the NYISO-PJM interregional cost allocation proposal; and
(ii) Docket No. ER13-1960-000, which concerns both interregional planning coordination and
cost allocation for the ISO-NE region. The NYISO is not seeking leave to intervene in the other
proceeding referenced in the caption of the PIOs’ Protest, i.e., Docket No. ER13-1933-000,

because ISO-NE withdrew its compliance filing in that docket as the result of an eTariff issue nearly a month before the PIOs filed their protest.

The NYISO has a substantial interest in Docket Nos. ER13-1926-000 and ER13-1960-

000 because it is a co-sponsor of the interregional planning and cost allocation proposals pending
in those proceedings. No other party can adequately represent the NYISO’s interests. The
NYISO’s request for leave to intervene out-of-time is necessitated by the PIOs’ decision to
protest those proposals in some, but not all, of the relevant Commission proceedings. Good

9 18 C.F.R. § 385.214 (2013).

cause therefore exists for the Commission to grant the NYISO’s request to intervene out of time in Docket Nos. ER13-1926-000 and ER13-1960-000.

III.ANSWER

A.The PIOs’ Request that the Joint Interregional Planning Committee Post and

Share More Information Is Unnecessary, Goes Beyond What Order No. 1000 Requires, and Would Impose Redundant Requirements on ISOs/RTOs

The Northeastern ISO/RTO Planning Coordination Protocol (“Protocol”), which was

adopted by the ISOs/RTOs in 2004, established an interregional stakeholder process to

coordinate interregional planning of the transmission systems operated by the three ISOs/RTOs.
It also set forth procedures for exchanging planning-related data and information between and
among the ISOs/RTOs and all interested stakeholders. The Protocol established a stakeholder
process comprised of: (i) the Joint Interregional Planning Committee (“JIPC”) - which is staffed
by ISO/RTO representatives and coordinates the planning process among the three regions, and
(ii) the Inter-area (now Interregional) Planning Stakeholder Advisory Committee (“IPSAC”) -
which is open to any stakeholder with an interest in planning coordination and has direct input
into and review of JIPC analyses. In addition to the IPSAC, each of the ISO/RTOs provides

other opportunities for stakeholder input as part of their regional planning processes. For

example, the NYISO has an Interregional Planning Task Force which is a committee established
at the request of its stakeholders for the express purpose of engaging NYISO stakeholders
directly on interregional planning topics—including Order No. 1000 interregional planning
processes.

After conducting extensive stakeholder processes for nearly two years to gather input on
the development of their respective interregional compliance filings, the ISOs/RTOs proposed
further enhancements to the Protocol. The proposals incorporated input from the regions’

stakeholders and included several revisions that the ISOs/RTOs made in response to the PIOs’ comments. Among other things, the “Amended Protocol” would establish additional
opportunities for IPSAC members to provide input to the JIPC and to review studies. The
improvements ensure that the ISOs/RTOs will more than satisfy Order No. 1000’s interregional transmission planning coordination requirements.

Alone among all stakeholders in the three ISO/RTO regions, the PIOs now question the
transparency of, and the level of stakeholder involvement in, the IPSAC and the JIPC. They ask
that the Commission direct the ISOs/RTOs to revise the Amended Protocol to require the JIPC to
post or present to IPSAC not just the results of its studies and analysis, but literally every study
and document related to the evaluation of interregional projects.10 They offer nothing to support
this request except for conclusory allegations that there is a “risk” that the ISOs/RTOs would

block “comprehensive engagement”11 by stakeholders absent Commission action.

The Commission should reject the PIOs’ unsupported and unnecessary request. As an

initial matter, the PIOs’ depiction of the JIPC as an opaque “body composed of three individuals
representing each TP [i.e., Transmission Provider]” is not accurate. It is misleading for the PIOs
to equate the ISOs/RTOs with transmission developers that have an interest in advancing their
own projects and thus have incentives to disfavor competitors. Their comments ignore the fact
that the three ISOs/RTOs are independent, neutral system planners that have administered the
existing Protocol for nine years in a transparent and inclusive manner in keeping with their

administration of transparent markets and open access transmission services. The PIOs provide
no basis for their allegation that the ISOs/RTOs would somehow use the JIPC to deprive
IPSAC’s stakeholder members of information needed to enable them to review and provide input

10 PIOs’ Protest at 10.

11 PIOs’ Protest at 9.

regarding the evaluation of needs and potential interregional solutions. In fact, the opposite is true. The ISOs/RTOs have provided study inputs, analyses and draft reports to all interested parties through the IPSAC since the original protocol was implemented. No complaints have been submitted to the Commission or to the ISOs/RTOs regarding the transparency of the existing Protocol’s stakeholder processes over the last nine years.

The reality is that the Amended Protocol provides for even greater transparency and

stakeholder participation in the interregional transmission planning process than the Commission
requires. Order No. 1000 determined that interregional transmission coordination does not
require stakeholder procedures comparable to what is required under regional transmission plans.
This is because stakeholders have the opportunity to participate fully in the consideration of an
interregional transmission facility during the regional transmission planning process.12 Order
No. 1000 thus does not require regions to establish formal interregional planning stakeholder
committees. Nevertheless, the currently effective Protocol already provides for extensive
stakeholder participation via the IPSAC. Under the Amended Protocol, the IPSAC will continue
to be a standing, publicly-noticed committee that meets regularly and frequently. Membership
will continue to be open to all interested parties and will convey expanded opportunities for
active, fully-informed participation in interregional transmission planning matters.
In response to Order No. 1000, Section 2.2 of the Amended Protocol was modified to describe the IPSAC’s expanded role in the evaluation of system needs and the evaluation and selection of Interregional Transmission Projects,13 including the requirements for the IPSAC to

12 Order No. 1000 at P 465.

13 An “Interregional Transmission Project” is defined in the Interregional Compliance Filing as a new transmission project that will be physically located within two or more neighboring transmission planning regions. See Interregional Compliance Filing at n 8.

review and provide input on: (i) JIPC’s review of regional needs and solutions to identify

potential Interregional Transmission Projects, (ii) the scope of analysis and assumptions for the Northeastern Coordinated System Plan (“NCSP”), (iii) the draft results of JIPC’s evaluation of Interregional Transmission Projects, and (iv) the preliminary results of the coordinated system planning analysis for the NCSP and on sensitivity analysis that may be required. The JIPC
actively solicits IPSAC input on all of these items. It should be noted that providing for the
creation of a NCSP with review in the IPSAC process is another feature of the ISOs/RTOs’
proposal that exceeds the requirements of Order No. 1000, which does not require the
development of interregional transmission plans.14

The ISOs/RTOs also fully comply with Order No. 1000’s directive that public utility
transmission providers must “make transparent the analyses undertaken and determinations
reached by neighboring transmission planning regions in the identification and evaluation of
interregional transmission facilities.”15 Proposed new Section 7.1 of the Amended Protocol
provides that JIPC will post on each region’s interregional planning webpages the results of its
review, with IPSAC input, of whether there are Interregional Transmission Project concepts that
could meet multiple regional needs more efficiently or cost effectively than separate regional
projects. New Section 7.3 provides that JIPC shall post information on the interregional
planning webpages addressing whether a proposed Interregional Transmission Project may be
more efficient or cost effective than intraregional alternatives. It also provides that JIPC will
present to IPSAC for its input the results of its studies and analysis regarding a proposed
Interregional Transmission Project as soon as practicable upon their completion.

14 Order No. 1000 at P 399.

15 Order No. 1000 at P 465.

Even the PIOs support the “continued use of the [IPSAC] as a forum for stakeholder
review and input into coordinated system planning.”16 They concede that “the IPSAC forum
will provide an Order No. 1000-compliant opportunity for stakeholder engagement.”17 It is
unreasonable for the PIOs to demand that the ISOs/RTOs provide a stakeholder process that
exceeds these parameters in an undefined way based on unfounded allegations against
ISOs/RTOs that have conducted open and transparent planning for nearly a decade.
Consequently, the Commission should reject the PIOs’ Protest and not require additional compliance revisions. Imposing such an obligation is unjustified because the Amended Protocol already provides stakeholders with everything needed for “comprehensive engagement” in
interregional planning and for greater transparency and participation than Order No. 1000
requires. Granting the PIOs’ request would only subject the ISOs/RTOs to unnecessary and
potentially redundant compliance obligations.

B. The PIOs and the Indicated NYTOs Have Not Shown that the Proposed

Avoided Cost Methodology Is Not Compliant with Order No. 1000 for Any Type of Interregional Transmission Project

Order No. 1000 established requirements to govern the allocation of the costs of

Interregional Transmission Projects that are voluntarily approved by neighboring transmission
regions. Specifically, it promulgated six Interregional Cost Allocation Principles,18 of which
only one, Principle No. 1, is contested by the PIOs or the Indicated NYTOs. Under Interregional
Cost Allocation Principle No. 1, the costs of a new Interregional Transmission Project must be

16 PIOs’ Protest at 9.

17 Id.

18 Order No. 1000 at PP 622-685.

allocated “in a manner that is at least roughly commensurate with the estimated benefits” of the project in each region.19

The Interregional Compliance Filing, and the corresponding compliance filings for PJM
and ISO-NE, proposed to allocate the costs of Interregional Transmission Projects using an
avoided cost methodology. Under that methodology, each region’s share of the costs of an
Interregional Transmission Project is determined by the ratio of the present value of the
estimated cost of the projects in the region that are displaced by the Interregional Transmission
Project to the sum of the estimated cost of all projects in all affected regions that are displaced by
the Interregional Transmission Project. The Interregional Compliance Filing explained that the
avoided cost methodology complies with all of the Interregional Cost Allocation Principles,
including Principle No. 1, because it allocates costs in proportion with the quantifiable benefits
of the displaced regional transmission projects.20 Displaced regional project costs represent a
reasonable and relatively easily quantified measure of the benefits a region will realize from the
Interregional Transmission Project, because each displaced project will necessarily have been
found to be beneficial, efficient and cost-effective by the region.21

As the following subsections explain, there is no basis for either the PIOs’ claim that the
proposed cost allocation methodology is generally non-compliant with Order No. 1000 or the
Indicated NYTOs’ concerns about applying the methodology to the unlikely scenario in which
an Interregional Transmission Project is selected despite being more costly than displaced
regional options.

19 Id. at P 622.

20 Interregional Compliance Filing at 24.

21 Interregional Compliance Filing at 26.

1.The PIOs Incorrectly Claim that Order No. 1000 Requires

Interregional Cost Allocation Processes to Consider the Same Factors as Intraregional Processes and Ignore Relevant Commission and
Judicial Precedents

The PIOs ask the Commission to reject the proposed avoided cost interregional cost

allocation methodology.22 They allege that it violates Interregional Cost Allocation Principle No.

1 because it purportedly “does not ensure that the cost of an interregional project will be

allocated among the project’s beneficiaries in a manner roughly commensurate with benefits . . .” In an attempt to support this position they point to several orders in other Order No. 1000
compliance proceedings concerning intraregional cost allocation methodologies proposed by entities that are not ISOs/RTOs.23 They go on to argue that these intraregional holdings should automatically apply in the context of interregional cost allocation.24 The PIOs argue that the ISOs/RTOs’ proposal “oversimplifies” the benefits analysis because it allegedly does not
properly account for economic and public policy benefits.25

The PIOs have not refuted the Interregional Compliance Filing’s demonstration that the
use of an avoided cost interregional cost allocation methodology by the three ISOs/RTOs is fully
compliant with Order No. 1000, including Interregional Cost Allocation Principle No. 1. That
filing explained that intraregional cost allocation rulings rejecting the exclusive use of an
avoided cost methodology were not “determinative or relevant with respect to interregional cost
allocation.”26 Nothing in the PIOs’ Protest, or in any Commission order issued subsequent to the
submission of the Interregional Compliance Filing, undermines the Interregional Compliance

22 PIOs’ Protest at 10.

23 See id. at 13-14.

24 Id. at 14-16.

25 Id. at 12.

26 Interregional Compliance Filing at 25.

Filing. The fundamental flaw in the PIOs’ argument is its failure to account for the relationship,
and the differences, between the intraregional and interregional cost allocation processes.
Order No. 1000 specifies that “the method . . . for interregional cost allocation used by two transmission planning regions may be different from the method or methods used by either of them for regional cost allocation.”27 It did not require that public policy or economic benefits be considered in the interregional planning process.28 These considerations are already
addressed in the three ISOs/RTOs’ intraregional planning processes, each of which has already
been found to be in substantial compliance with Order No. 1000.29 The purpose of the
interregional coordination process is to “consider whether the local and regional transmission
planning processes result in transmission plans that meet local and regional transmission needs
more efficiently and cost-effectively, after considering opportunities for collaborating with
public utility transmission providers in neighboring transmission planning regions.”30
Under the framework clearly established by the Commission in Order No. 1000, for an Interregional Transmission Project to receive consideration, it must first be proposed within the regional planning processes of the neighboring regions.31 If an interregional analysis shows that an Interregional Transmission project may be more efficient or cost effective than two or more regional projects, the results of that analysis is provided to the respective regions for
consideration and approval. A proposed Interregional Transmission Project is not eligible for

27 Order No. 1000 at P 733.

28 Order No. 1000 at P 401 (“Order No. 1000 does not require [] . . . consideration of

transmission needs driven by Public Policy Requirements, or the evaluation of economic considerations” in interregional coordination.) (Footnotes omitted).

29 New York Independent System Operator, Inc., Order on Compliance Filing, 143 FERC ¶

61,059 (2013); PJM Interconnection, L.L.C., et al., Order on Compliance Filings, 142 FERC ¶ 61,214 (2013); ISO New England, Inc., Order on Compliance Filings, 143 FERC 61,150 (2013).

30 Interregional Compliance Filing at 25 (citing Order No. 1000-A at P 511).

31 Order No. 1000 at P 436.

inclusion in regional plans for purposes of cost allocation unless it is first approved within the
respective regional planning processes. Interregional planning processes therefore inform, and
are inherently complementary to, intraregional processes because decision making authority
unquestionably resides at the regional level. It is the regions that will consider the costs and
benefits of their share of interregional project costs under their regional cost allocation
methodologies in deciding whether to adopt an Interregional Transmission Project in their
regional plans.

The PIOs’ Protest ignores this relationship between the interregional and intraregional
processes established by Order No. 1000.32 The PIOs further ignore recent Commission and
judicial precedents interpreting the “roughly commensurate benefits” standard that is at the heart
of Interregional Cost Allocation Principle No. 1.33 Those precedents emphasize that “roughly
commensurate” is to be interpreted broadly and that certain kinds of benefits cannot readily “be
quantified in absolute terms.... ” or calculated with “exacting precision.”34 It is sufficient that

there be “an articulable and plausible reason” to believe that benefits are at least roughly

32 In fact, it is the PIOs, not the NYISO or the other sponsors of the avoided cost allocation

methodology, that are making arguments based on “post hoc disagreements with the final rule’s

requirements for interregional cost allocation.” PIOs’ Protest at 14. The PIOs are effectively making an
untimely and impermissible collateral attack on Order No. 1000’s interregional planning and cost
allocation requirements by attempting to revise them long after they were finalized by the Commission.
See, e.g., San Diego Gas & Electric Co. v. Sellers of Energy and Ancillary Services, et al., 134 FERC ¶
61,229 at P 15 (2011) (“[collateral attacks on final orders and relitigation of applicable precedent by
parties that were active in the earlier cases thwart the finality and repose that are essential to
administrative efficiency and are strongly discouraged.”) (citing Entergy Nuclear Operations, Inc. v.
Consolidated Edison Co., 112 FERC ¶ 61,117, at P 12 (2005)); see also EPIC Merchant Energy NJ/PA,
LP v. PJM Interconnection, LLC, 131 FERC ¶ 61,130 (2010) (dismissing as an impermissible collateral
attack a complaint that merely sought to re-litigate the same issues that were raised in the prior case citing
no new evidence or changed circumstances).

33 See e.g., PJM Interconnection, LLC, 138 FERC ¶ 61,230 (2012), order on rehearing, 142

FERC ¶ 61,216 (2013); Illinois Commerce Comm’n v. FERC, 576 F.3d 470 (7th Cir. 2009). The types of public policy benefits that the PIOs focus on have similar hard-to-quantify characteristics as the reliability and other benefits addressed in the cited proceedings.

34 See 138 FERC ¶ 61,230 (2012) at P 57; 142 FERC ¶ 61,216 (2013) at P 38.

commensurate with costs. Even if the Commission were to conclude that the proposed avoided
cost allocation methodology was not the perfect means of allocating costs, the United States
Court of Appeals for the Seventh Circuit has found that even “crude” allocation methods may be
upheld because “if crude is all that is possible, it will have to suffice.”35 The PIOs’ theory with
regard to the use of an avoided cost methodology for interregional cost allocation must be
considered in light of these precedents. The NYISO respectfully submits that there is clearly an
articulable and plausible reason to believe that the avoided cost rate methodology will ensure a
roughly commensurate allocation of costs to beneficiaries. The proposed methodology will
divide the costs of an Interregional Transmission Project based on the avoided costs of regional
projects, and those costs are then further allocated within regions based upon each region’s
approved allocation methodology(ies).

Similarly, the proposed avoided cost allocation methodology is consistent with the

requirements of the “just and reasonable” standard. The Commission is not required to find that
the proposed methodology is the perfect means of allocating costs associated with Interregional
Transmission Projects. The methodology does not have to be “theoretically perfect”36 or “the
only reasonable methodology, or even the most accurate.”37 Nor does the Commission have to
consider if alternatives offered by others might be superior better.38 Rather, the Commission
need only find that the avoided cost methodology falls within a zone of reasonableness and is not

35 Ill. Commerce Comm’n v. FERC, 721 F.3d 764 (7th Cir. 2013) (“It’s not enough for Illinois to point out that MISO’s and FERC’s attempt to match the costs and the benefits of the MVP program is crude; if crude is all that is possible, it will have to suffice.”).

36 City of Batavia, et al. v. Federal Energy Regulatory Comm’n, 672 F.2d 64, 84 (1982).

37 OXY USA, Inc. v. Federal Energy Regulatory Comm’n, 64 F.3d 679, 692 (D.C. Cir. 1995).

38 American Electric Power Service Corporation, 116 FERC ¶ 61,179 (2006) at P 25.

unduly discriminatory or preferential.39 The Interregional Compliance Filing offered substantial support for the reasonableness of the proposed cost allocation methodology. The mere fact that the PIOs would prefer a different methodology that accounts for additional factors (that are not required by Order No. 1000) does not make the proposal unjust or unreasonable.

2. The Proposed Interregional Cost Allocation Methodology Enjoys

Widespread Stakeholder Support in the Three ISO/RTO Regions

The proposed avoided cost methodology was developed in consultation with

stakeholders, pursuant to the directives of Order No. 1000.40 Order No. 1000 does not require that stakeholders be unanimous in their support for a methodology before the Commission may accept it. As was noted above, the three ISOs/RTOs, their transmission owners, and other
stakeholders vetted and contributed to the development of the avoided cost methodology through an extensive stakeholder process over the course of nearly two years.41

The Commission has emphasized the importance of broad regional support as a factor in
its finding that a proposed rate design is just and reasonable. In American Electric Power
Service Corp. v. Midwest Independent Transmission System Operator, the Commission stated
that “[a]lthough stakeholder support alone cannot ultimately prove that a rate design is just and
reasonable, the overwhelming support for [the proposed methodology for pricing transmission
service between the RTOs] in this proceeding is a strong factor we consider in finding that [the
proposed methodology] is just and reasonable.”42 In PJM Interconnection, L.L.C, the

39 PJM Interconnection, LLC and Carolina Power & Light, 134 FERC ¶ 61,048 (2011) at n 61.

40 Order No. 1000 at P 588, Order No. 1000-B at P 66.

41 Interregional Compliance Filing at 2.

42 American Elec. Power Serv. Corp. v. Midwest Indep. Transmission Sys. Operator, Inc. and

PJM Interconnection, L.L.C., 122 FERC ¶ 61,083 (2008) at P 172; see also Midwest Indep. Transmission Sys. Operator, Inc. and Public Utilities with Grandfathered Agreements in the Midwest ISO Region, 109 FERC ¶ 61,285 (2004) at P 51.

Commission emphasized the position of the majority of the transmission owning members of
PJM, even though there was not complete stakeholder consensus: “regional or stakeholder
consensus is an important factor to consider in reviewing the justness and reasonableness of a
rate design.”43 The PIOs have not presented a compelling argument that would justify
overriding the significant, interregional consensus that supports the Interregional Compliance
Filing.

The avoided cost methodology enjoys such broad interregional support due in large part to its transparency and relative ease of implementation. The Commission has found that
transparency and ease of implementation are factors that contribute to a finding that a proposed provision is just and reasonable. In Midwest Independent Transmission Operator, Inc. and
Public Utilities with Grandfathered Agreements in the Midwest ISO Region, for example, the Commission accepted a proposed methodology for the refund of marginal loss surpluses
because, among other things, the methodology had the “advantage” of “ease of
implementation.”44 Similarly, the Commission found a registered cost option bid cap proposed by the California Independent System Operator, Inc. to be a reasonable mitigation measure due in part to “its transparency and ease of implementation.”45

The transparency and ease of implementation of a cost allocation method is very

important in this proceeding because the allocation of costs between regions is significantly more
complex than the allocation of costs within a region. Each regional entity must meet different

43 PJM Interconnection, L.L.C, 119 FERC 61,063 at (2007) at P 56; see also California

Independent System Operator Corporation, 123 FERC ¶ 61,288 (2008) at P 25 (noting that the mitigation measures the CAISO proposed “were thoroughly vetted through the stakeholder process” and that CAISO modified its proposal “based on market participant input.”)

44 Midwest Indep. Transmission Operator, Inc. and Public Utilities with Grandfathered Agreements in the Midwest ISO Region, 109 FERC ¶ 61,285 (2004) at P 171.

45 California Independent System Operator Corporation, 123 FERC ¶ 61,288 (2008) at P 26.

transmission needs, must answer to different stakeholders and must abide by different tariffs and
governing agreements. All of the affected regions agreed that the avoided cost methodology
provides a simple, roughly commensurate calculation of each region’s cost responsibility
because it uses as an input a factor - displaced regional project costs - that is transparent, readily
quantifiable and easily comparable across regions. It seems all but certain that the kind of
interregional cost allocation methodology that the PIOs favor would not have this important
advantage.

3. The Unlikely Hypothetical Presented by the Indicated NYTOs Does

Not Justify the Creation of a Separate Cost Allocation Methodology

The Indicated NYTOs argue that it would be “unreasonable” to apply the proposed

avoided cost allocation methodology to a hypothetical Interregional Transmission Project that is more expensive than the combined cost of the regional projects it displaces.46 They urge the Commission to require additional compliance filings to develop methods for evaluating the
benefits and costs of, and to establish an alternative cost allocation methodology for, such a project.47 The Indicated NYTOs support the application of the proposed cost allocation
methodology to all other Interregional Transmission Projects.48

The Commission should reject this request. The proposed cost allocation methodology is
a just and reasonable way to allocate costs for all Interregional Transmission Projects in a
manner that is roughly commensurate with their benefits. It is appropriate regardless of whether
the cost of the Interregional Transmission Project is greater than, equal to, or less than the costs
of the displaced regional projects. The proposed methodology uses as its primary input the costs

46 Indicated NYTOs’ Protest at 2.

47 Indicated NYTOs’ Protest at 3.

48 Indicated NYTOs’ Protest at 6.

of regional projects that are displaced by Interregional Transmission Projects, based - contrary to the assertion of the Indicated NYTOs49 - on the reasonable assumption that a regional project
would not have been selected for any purpose had the region not found the project’s costs to be
aligned with its benefits.50 The ratio of the costs of displaced regional transmission projects
among regions agreeing to the project to the total cost of the Interregional Transmission Project
that is selected provide a reasonably accurate signal of the benefits the region expects to gain
from those displaced projects. This ratio demonstrates the value of the Interregional
Transmission Project to each region and, therefore, allocates the costs of that project in a just and reasonable manner “that is at least roughly commensurate with estimated benefits”51 under the
precedents described in Section III.B.1 above.

In addition, the fact that there is such broad stakeholder support for the proposed cost
allocation methodology in the three ISO/RTO regions is just as valid a basis for rejecting the
Indicated NYTOs’ protest as it for rejecting the PIOs’. The proposed methodology’s relative
ease of administration is an equally strong rationale for upholding it against the Indicated
NYTOs’ argument.

An Interregional Transmission Project must be selected by the regional planning process
in each region in which it is to be located, and each region can decline to select a project that is
not cost-effective from its perspective.52 It therefore appears unlikely that an Interregional
Transmission Project that was expected to cost more than the sum of the costs of displaced

49 Indicated NYTOs’ Protest at 7.

50 Interregional Compliance Filing at 26.

51 See e.g. Public Service Co. of Colorado, 142 FERC ¶ 61,206 (2013) at P 314.

52 Interregional Compliance Filing at 25.

regional projects would ever be approved by all three ISO/RTO regions. It seems quite possible
that a separate cost allocation methodology aimed at such projects would never be used. And if
an interregional project that is more expensive than the regional projects it displaces were
adopted, each region has agreed to pay for it in ratio to its avoided regional transmission project
costs. By contrast, creating and implementing a new cost allocation methodology at the
interregional level that somehow would account for or rebalance all of the factors already used in
regional cost allocation methodologies surely would require a substantial commitment of time
and resources by the ISOs/RTOs, their transmission-owning members, other stakeholders, and
the Commission itself. The NYISO respectfully submits that making such an effort would not be
an efficient use of time or resources. The Commission should therefore accept the application of
the proposed avoided cost methodology to all Interregional Transmission Projects.
If, however, the Commission were to find that the proposed avoided cost methodology should not be applied in the scenario identified by the Indicated NYTOs, it should nevertheless confirm that the methodology would continue to apply to all Interregional Transmission Projects up to the point, if applicable, where the costs of such a project is equal to the costs of the regional projects that it displaces. If required, any additional cost allocation should address only that
portion of project costs that exceed the sum of regional costs, and should not delay the
implementation of the proposed avoided cost methodology.

IV.CONCLUSION

WHEREFORE, for the foregoing reasons, the NYISO respectfully requests that the

Commission accept this answer, accept the NYISO’s motion for leave to intervene out-of-time
necessitated by the PIOs’ decision not to file their protest in NYISO compliance dockets, reject

the PIOs’ and Indicated NYTOs’ protests and accept the NYISO’s Interregional Compliance
Filing and the corresponding filings of ISO-NE and PJM without ordering any modifications.

Respectfully submitted,

/s/ Ted J. Murphy

Hunton & Williams, LLP Counsel for

New York Independent System Operator, Inc.

September 24, 2013

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 24th day of September, 2013.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207