UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

New York Independent System Operator, Inc.)Docket No. ER14-2518-000

REQUEST FOR LEAVE TO ANSWER AND ANSWER OF

THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

Pursuant to Rules 212 and 213 of the Federal Energy Regulatory Commission’s

(“Commission’s”) Rules of Practice and Procedure,1 the New York Independent System

Operator, Inc. (“NYISO”) submits this request for leave to answer and answer to the protests filed in the above-captioned proceeding by (i) Independent Power Producers of New York, Inc. (“IPPNY”), and (ii) Astoria Generating Company, L.P. (“Astoria”) on September 2, 2014.2 The NYISO previously filed a motion seeking leave to submit this answer later than the response period specified in Commission Rule 213(d).

IPPNY supports several of the proposals set forth in the NYISO’s July 28 filing of

proposed tariff revisions (“Outage States Filing”) including revisions to the calculation of a

generator’s derating factor when it is returning to service from an outage, such as a Mothball

Outage or ICAP Ineligible Forced Outage, that precluded Installed Capacity3 (“ICAP”)

eligibility and the 180 day cap on ICAP eligibility for generators in a Forced outage that have not Commenced Repair.4

1 18 C.F.R. §§ 385.212, 213 (2014).

2 Referred to herein as “IPPNY Protest” and “Astoria Protest.”

3 Terms with initial capitalization that are not otherwise defined herein shall have the meaning set forth in the NYISO Market Administration and Control Area Services Tariff (“Services Tariff”), and if not defined therein, the NYISO Open Access Transmission Tariff (“OATT”), or the meaning set forth in the NYISO’s Outage States Filing.

4 IPPNY Protest at 4-6.

Nonetheless, IPPNY and Astoria ask the Commission to reject several other aspects of
the NYISO’s Outage States Filing. IPPNY’s request is based on erroneous claims that the
proposed revisions will authorize the NYISO to abrogate existing contractual interconnection
rights and take generator property rights in violation of the Fifth Amendment to the U.S.
Constitution (“Fifth Amendment”).5 IPPNY also makes several erroneous claims that the
NYISO proposal establishes unreasonable obligations on units taking outages. Contrary to these
assertions, the proposed tariff modifications represent a balanced and reasonable approach to
effectively address a set of reliability and market concerns that are not adequately addressed in
the current tariffs. They establish clear rules regarding the consequences of a unit’s removal
from service for an extended period of time without abrogating contracts or infringing on
cognizable property rights.

Accordingly, for the reasons explained below, the protests should be rejected6 and the Commission should issue an order accepting the Outage States Filing without any
modifications.7

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

5 U.S. Const. amend. V.

6 The NYISO also urges the Commission to reject IPPNY’s request that the Commission order
the NYISO to complete its incorporation of these rule changes into its Comprehensive Planning Process
within 60 days of a Commission Order. (IPPNY Protest at 2.) The NYISO is committed to completing
this incorporation process in a deliberate manner, with the considered input of its stakeholders well in
advance of the February 1, 2015 proposed effective date and a Commission order in this regard is
unnecessary.

7 The NYISO has limited its response to those issues for which it believes that providing

additional information will best assist the Commission reach its decision. The NYISO’s silence with
respect to any particular argument or assertion should not be construed as acceptance or agreement.

the record in a proceeding.8 The Commission should follow its precedent and accept the

NYISO’s answer in this instance. This answer clarifies complex issues, addresses inaccurate statements and mischaracterizations, and provides additional information that will help the
Commission better understand the issues and fairly evaluate the tariff revisions proposed in the Outage States Filing.

II.ANSWER

A.The Proposed Tolling Period for the Expiration of an ICAP Ineligible Forced

Outage Is Just and Reasonable and Benefits Generators, Instead of Harming Them, by Extending by 120 Days the Amount of Time the Generator Would Otherwise Have to Return to Service

The Commission should reject IPPNY’s alternative proposal to toll the expiration of an
ICAP Ineligible Forced Outage “so long as the generator continues to make reasonable and
credible repair efforts.”9 The NYISO’s original proposal is just and reasonable for the reasons
specified in the Outage States Filing and below.10 IPPNY’s alternative is unnecessary and could

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).

9 IPPNY Protest at 7. Inexplicably, IPPNY complains the 120 day tolling period is arbitrary for units in an ICAP Ineligible Forced Outage but makes no complaint over the NYISO proposal to similarly limit the tolling available to a unit on a Mothball Outage to 120 days.

10 Under Section 205 of the FPA, the Commission may only reject the NYISO’s proposal if it

finds that the changes proposed are not just and reasonable. The Commission need not determine whether
the NYISO’s proposal is more or less just and reasonable than alternative proposals. See, e.g., Oxy USA,
Inc. v. FERC, 64 F.3d 679 at 692 (D.C. Cir. 1995) (finding that, under the Federal Power Act, as long as
the Commission finds a methodology to be just and reasonable, that methodology “need not be the only
reasonable methodology, or even the most accurate one”); cf. City of Bethany v. FERC, 727 F.2d 1131 at
1136, 234 U.S. App. D.C. 32 (D.C. Cir. 1984) (when determining whether a proposed rate was just and
reasonable, the Commission properly did not consider “whether a proposed rate schedule is more or less
reasonable than alternative rate designs”). See also Cal. Indep. Sys. Operator Corp., 128 FERC ¶ 61,282
at P 31 (2009) (finding that, because the Commission found the ISO's proposal to be just and reasonable,
it need not assess the justness and reasonableness of an alternative proposal); Louisville Gas & Electric
Co., 114 FERC ¶ 61,282 at P 29 (2006) (finding that “the just and reasonable standard under the FPA is

unreasonably encourage generators to delay their repairs in order to extend their outage state indefinitely. It would also fail to resolve the planning and market uncertainty that indefinite outages create and that these proposed amendments were intended to remedy.

Importantly, the NYISO’s proposal introduces new flexibility for Market Participants facing the expiration of their generators’ Mothball Outage or ICAP Ineligible Forced Outage, and related CRIS, because they cannot complete repairs in time. Market Participants that
Commenced Repair of their generators before the outage and related CRIS expires, but which cannot complete those repairs before the three year period would otherwise close, have an
additional three months, under the NYISO proposal, to complete those repairs. This is a
significant generator benefit and the first time that the NYISO has proposed an extension for CRIS which is currently limited to three years.

The NYISO’s proposal is reasonable. It is limited in scope and makes the period of the
extension clear and objective by providing a bright-line, 120 day definition.11 Contrary to
IPPNY’s assertions, the NYISO’s tolling provision reasonably provides for the “myriad
unforeseeable contingencies”12 that could cause repairs13 to be delayed beyond a three year
outage period while retaining the important objective of establishing finite, transparent expiration
dates for the Mothball and ICAP Ineligible Forced Outages. As the NYISO explained in the
Outage States Filing, clearly defined expiration dates for Mothball and ICAP Ineligible Forced

not so rigid as to limit rates to a ‘best rate’ or ‘most efficient rate’ standard. Rather, a range of alternative approaches often may be just and reasonable”).

11 Contrary to IPPNY’s assertions, the 120-day tolling provision does not “trigger” the

termination of a generator’s interconnection rights. As is explained in greater detail in Section II. B. of
this Answer, the expiration of a Mothball Outage and ICAP Ineligible Forced Outage after three years is
reasonable and does not result in automatic termination of a generator’s Interconnection Agreement.

12 IPPNY Protest at 8.

13 Extensions are available only for generators that Commenced Repair before the outage expiration date. See proposed Services Tariff §§ 5.18.2.3.2 and 5.18.3.3.2.

Outages improve the ability of system planners to separate units which may be available in the future from those that will not be without further study and evaluation. Clearly defining the extension period facilitates both economic and reliability planning.14

By contrast, IPPNY’s alternative to “allow for the tolling period to run as long as the

generator continues to make reasonable and credible repair efforts” would indefinitely extend an outage in the event of unforeseen difficulties in completing a repair. It would therefore prevent the application of any expiration date to these outages, so long as the generator continues
“reasonable and credible repair efforts.”15 As such, the IPPNY proposal would not resolve the
uncertainty that currently surrounds the future availability of generators in these outage states
and thus would, at best, fail to address the very problem that prompted the NYISO’s proposal
and, at worst, could aggravate it.

It would be a mistake to abandon the benefits of establishing the NYISO’s 120-day

outage expiration extension in order to address IPPNY’s concern. The rare occurrence that may
legitimately require a repair to take more than 120 days can be better addressed through an
individual generator seeking a tariff waiver to extend an individual outage.
A tariff waiver is appropriate when the strict application of a tariff provision could create a “concrete problem” that a party cannot address through good faith efforts.16 The need for
additional time to complete repairs before an outage expires in the face of unique, unforeseen

14 Outage States Filing at 17.

15 IPPNY Protest at 8.

16 New York Independent System Operator, Inc., 139 FERC ¶ 61,108, at P 14 (2012). See also,
e.g., PJM Interconnection, LLC, 137 FERC ¶ 61,184, at P 13 (2011); PJM Interconnection, LLC, 137
FERC ¶ 61,109, at P 11 (2011); PJM Interconnection, LLC, 135 FERC ¶ 61,069, at P 8 (2011); ISO-New
England, Inc., 134 FERC ¶ 61,182, at P 8 (2011); California Independent System Operator Corp., 132
FERC ¶ 61,004, at P 10 (2010); Hudson Transmission Partners, 131 FERC ¶ 61,157, at P 10 (2010);
Pittsfield Generating Co., L.P., 130 FERC ¶ 61,182, at P 9-10 (2010); ISO New England Inc. - EnerNOC,
122 FERC ¶ 61,297 (2008); Central Vermont Public Service Corp., 121 FERC ¶ 61,225 (2007);
Waterbury Generation LLC, 120 FERC ¶ 61,007 (2007); Acushnet Co., 122 FERC ¶ 61,045 (2008).

contingencies or other extraordinary circumstances is much more reasonably and appropriately
resolved by an a petition for a tariff waiver than by indefinitely extending all Mothball or ICAP Ineligible Outages while repairs continue. Such a waiver request is not an “unnecessary burden” or an “administrative hurdle” but rather the most appropriate approach to resolve the issues
IPPNY has presented.

B. Defining What it Means for a Generator to Be “Retired” and Requiring New

Interconnection Requests of Retired Generators Are Reasonable Responses to Promote Reliable Service and Do Not Impermissibly Abrogate or Modify Existing Interconnection Agreements

The Commission should reject IPPNY’s erroneous assertion that the NYISO’s proposals
to define the term “Retired” in its tariff and require that a “Retired” generator submit a new
Interconnection Request before returning to commercial operation, would impermissibly modify,
or even terminate, existing Interconnection Agreements.17 Similarly, the Commission should
reject Astoria’s claim that providing a Transmission Owner with temporary access to Astoria’s
interconnection point unlawfully modifies the terms of its Continuing Site Agreement.18 In both
respects, the NYISO proposals are reasonable, promote reliable service and do not revise the
term(s) of any existing two-party or three-party Interconnection Agreements.
IPPNY’s claim that the designation of a unit with an expired Mothball or ICAP Ineligible Forced Outage as Retired “frustrates considered business decisions” does not support a
conclusion that the NYISO’s proposal impermissibly modifies or terminates existing
Interconnection Agreements.19 Similarly, IPPNY’s claim that the definition of the term
“Retired” in the NYISO tariff “[could] potentially trigger rights and obligations under various

17 IPPNY Protest at 9-12.

18 Astoria Protest at 2-4.

19 IPPNY’s references to New England Power Generators Ass’n v FERC and the Permian Basis Areas Rate Cases are inapplicable to the case before the Commission because the NYISO is not
proposing to amend or abrogate existing agreements.

agreements” does not render the proposed amendment a “unilateral terminat[ion]”20 or a revision
to the body of any existing Interconnection Agreement.21 While the NYISO’s proposed tariff
revisions may inform the Commission’s future interpretation of certain Interconnection
Agreement provisions, as determined by the Commission on a case-by-case basis, there is
nothing impermissible about that outcome. Any modification to, or termination of, an existing
Interconnection Agreement even after the effective date of the proposed tariff revisions will
continue to be subject to the terms and conditions of the underlying agreements.
Similarly, the NYISO’s proposal to require an out-of-service generator22 to provide
temporary use of its unused interconnection point to the Transmission Owner in order to
maintain reliability would not modify any existing Interconnection Agreement, including
Astoria’s Continuing Site Agreement. The NYISO’s proposal provides only for temporary use
and requires the Transmission Owner to provide for the unit’s return to service on six months
notice, at no cost, 23 using “efforts that are timely, [and] consistent with Good Utility Practice.”24
Moreover, the tariff requires these efforts be substantially equivalent to those the Transmission
Owner would use to return its own equipment to service.25 Since temporary use of a point of

20 IPPNY Protest at 10.

21 IPPNY Protest at 11. A unit with an expired Mothball or ICAP Ineligible Forced Outage has
not participated in the Energy or Capacity markets for at least three years, nor is it engaged in activity
necessary to make such a return possible. Such a unit would need a new Interconnection Agreement to
re-establish its CRIS and otherwise assure a reliable interconnection under existing tariff and manual
provisions. See Services Tariff § 25.9.3.1. and Transmission Expansion and Interconnection Manual, §

3.3.4.A.3.) These facts and existing provisions reasonably indicate a unit out of service for three years

has ceased operating. The definition of the term “Retired” in the NYISO tariffs simply reflects in the tariff the existence of these circumstances.

22 A generator in a Mothball Outage or ICAP Ineligible Forced Outage is not operating in the Energy market nor is it eligible to sell Capacity.

23 A no -cost return is available unless the unit’s own failure to return to service under Proposed Services Tariff § 5.18.4.3, required use of the interconnection point.

24 See proposed Services Tariff § 5.18.5.2.

25 Id.

interconnection does not amend Astoria’s Continuing Site Agreement, judicial and Commission precedent involving the Mobile-Sierra doctrine is not implicated by the NYISO’s proposal.26
Neither do either of these tariff amendments constitute a taking without compensation under the Fifth Amendment.27

Both the proposed provision to add the term “Retired” to the tariff and the provision to
require new Interconnection Requests for Retired units serve legitimate purposes, are not unfair
to any party, and help to ensure the transmission system is operated in a safe and reliable
manner.28 They are therefore just and reasonable and should be accepted.
Defining the term “Retired” and establishing requirements for Retired units to follow before returning to service assures that the NYISO, Transmission Owners and Developers have accurate information about the generators’ future availability. This is essential to the ability of the NYISO and the Transmission Owners to maintain and plan for a reliable system. Better information also provides significant value to developers planning new projects in New York.
Authorizing use of the interconnection point of an out-of-service unit is a reasonable amendment to the NYISO tariff and necessary to ensure that the transmission system remains reliable notwithstanding an unexpected reliability issue that arises after the unit’s outage began. The application of the NYISO’s proposed tariff revisions to any unit that enters into an outage

26 Because the NYISO is not proposing to revise the body of any existing Interconnection

Agreements, IPPNY’s reference to Midwest Indep. Transmission Sys. Operator, Inc. is also misplaced. IPPNY Protest at n. 30.

27 IPPNY Protest at 13-14. See discussion at Section II.C.

28 Moreover, these provisions build on and are consistent with existing limitations in the tariff.

The NYISO’s existing Services Tarff indicates that units will lose their CRIS if they do not participate in the ICAP market for more than three years (See OATT § 25.9.3.1) and the NYISO’s current procedures require units on certain extended outages to go through the NYISO’s interconnection process before reentering the market. (See Transmission Expansion and Interconnection Manual, § 3.3.4.A.3.)

after the effective date of the revisions, regardless of when its Interconnection Agreement was entered into, is consistent with Commission precedent.29

Further, the potential adverse consequences of a Commission ruling that applies Mobile-
Sierra protections to generic revisions to the NYISO’s tariffs proposed to enhance its
interconnection procedures cannot be ignored. Such a ruling would not only hinder the NYISO’s
ability to enhance its operating procedures and protocols to ensure reliability, it would also
restrict the Commission’s ability to take generic action to improve interconnection rules
generally. 30

Finally, the Commission should reject IPPNY’s proposed revision to subpart (ii) of the NYISO’s proposed definition of “Retired” as unnecessary and incomplete. 31 It is unclear what issue IPPNY’s suggestion, that a generator with an expired Mothball Outage or ICAP Ineligible Forced Outage should be “deemed” to have permanently ceased operating, would resolve.
Adopting IPPNY’s proposal would also leave unanswered whether the NYISO could pursue planning activities by assuming such a unit would not be returning to service - a result at odds with the purpose of the amendments proposed in the Outage States Filing.

29 See, e.g., Midwest Indep. Transmission Sys. Operator, Inc., 117 FERC ¶ 61,363, at PP 74-76,
100-107 (2006) (accepting operating protocols for existing generators and confirming that the protocols
supersede existing interconnection agreements to the extent necessary for MISO to maintain the safety
and reliability of the transmission assets under its control). See also Midwest Indep. Transmission Sys.
Operator, Inc., 138 FERC ¶ 61,233, at PP 74-76, 100-107 (2012) (accepting MISO’s proposal to
prospectively apply changes to its generator interconnection procedures to units with existing generator
interconnection agreements). IPPNY cites the latter order as supporting its assertion that amendments to
existing generator interconnection agreements must be filed with the Commission and shown to be just
and reasonable. (IPPNY Protest at n. 30). But that aspect of the Commission’s holding is inapplicable to
this proceeding because the NYISO is not proposing to modify, or terminate, the terms of any existing
interconnection agreements.

30 See, e.g., Interconnection Queuing Practices, Order on Technical Conference, 122 FERC ¶

61,252 (2008); Small Generator Interconnection Agreements and Procedures, Order No. 792, 145 FERC ¶ 61,159 (2013).

31 IPPNY Protest at 10.

C. Nothing in the NYISO’s Proposal Will Result in a Compensable “Taking”

The Commission should reject IPPNY’s legally erroneous assertion that: (i) a generator’s
uninterrupted, continued use of its interconnection point pursuant to the terms of an
Interconnection Agreement is a “property interest” and (ii) even a temporary loss of access to an
interconnection point that a non-operational generator is, by definition, no longer capable of
using would somehow constitute “a taking without just compensation under the Fifth
Amendment.”32 The Commission should also reject IPPNY’s incorrect claim that the
“Commission itself held that a generator has a property interest in its interconnection point.”33
Using an interconnection point pursuant to the terms of an Interconnection Agreement provides a generator with access to the grid but in no way transfers ownership rights from
Transmission Owners to generators. As the Outage States Filing explained, it is the
Transmission Owner, not the generator, that owns the physical facilities where a generator’s unit
is interconnected to the transmission system.34

Likewise, IPPNY’s claim that the Commission found, in a single order issued fourteen years ago and prior to the establishment of its current interconnection regime, that a generator has a property interest in its interconnection point is contradicted by more recent precedent. In 2012, the Commission indicated that the issue of whether interconnection rights are “properly viewed as ‘property rights” has not been resolved by the Commission.35 The Commission should not create such rights in this proceeding.

32 Id. at 13-17.

33 Id. at 13.

34 Outage States Filing at 23.

35 PJM Interconnection, L.L.C., 139 FERC ¶ 61,079 at P 53 (2012) (accepting PJM’s tariff

amendments limiting a generator’s right to transfer capacity interconnection rights to the one year period after the unit is deactivated and finding that the issue of whether those interconnections rights are property rights to be an unresolved question.)

Even if it were assumed that a generator had some form of property right in the

interconnection point that it uses when operational, the NYISO’s proposed tariff revisions would not give rise to a compensable taking under the Fifth Amendment. IPPNY claims that the
NYISO’s proposal would constitute a “direct physical occupation” of generator property36 and cites the Supreme Court’s Loretto decision, which held that regulations that result in direct
physical occupations constitute “per se” takings.37 But IPPNY’s claim of physical occupation is implausible given that Transmission Owners own the physical interconnection points. Any
generator takings claim related to an interconnection point could thus only be considered under conventional “regulatory takings analysis.”

A regulatory taking is one in which a government regulation is “so onerous that its effect
is tantamount to a direct appropriation or ouster.”38 Courts have held that a regulatory taking
occurs when a regulation results in a property owner suffering a total deprivation of the value of
its property.39 Governmental actions that fall short of causing a “total deprivation of value” are
analyzed based “on a complex of factors including the regulation's economic effect on the
[property owner], the extent to which the regulation interferes with reasonable investment-
backed expectations, and the character of the government action.”40 These inquiries are
informed by the purpose of the Takings Clause, which is to prevent the government from

36 IPPNY at 13, 14, 16.

37 IPPNY at n. 39, citing Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 434-35

(1982).

38 Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005).

39 See, e.g., Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).

40 Palazzolo v. Rhode Island, 533 U.S. 606, 617-18 (2001). See also Penn Central

Transportation Co. v. City of New York, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978).

"forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”41

IPPNY has not come close to establishing that it has, or will be, subject to a regulatory
taking under either of these standards. It has simply, and wrongly, asserted that a taking would
occur under the “physical occupation” theory. In reality, there would be no “total deprivation of
value” under the NYISO’s proposal given the potentially temporary and limited nature of the
loss of access to an interconnection point. Nothing is misappropriated by a tariff amendment that
requires a generator with an out-of-service unit to provide temporary use of the unit’s unused
interconnection point to the Transmission Owner in order to maintain reliability and then
requires the Transmission Owner to reconnect the unit to the transmission system upon the
generator’s request.42

The temporary use of an interconnection point by a Transmission Owner does not destroy its future value to the generator nor permanently deprive it of future use. Moreover, it is
ultimately the generator’s own decision to keep its unit in an outage instead of taking steps to
timely return to service.

Under the proposed tariff amendments, the Transmission Owner is obligated to reconnect
the generator to the transmission system upon a notice of the generator’s intent to return to
service provided at least six months before the expiration of the outage.43 During that six month
period, the Transmission Owner must regularly update the generator and the NYISO about the
status of its reconnection of the unit.44 The regular notices of the Transmission Owner’s

41 Id.

42 When such request follows the generator’s failure to make a timely return, the generator may also have a cost responsibility. See proposed Services Tariff § 5.18.4.3.

43 Proposed Services Tariff §5.18.5.2 with the caveat noted in footnote 42.

44 Id.

progress provide ample time to correct inadvertent delays or seek other solutions. Requiring the payment of lost opportunity costs in the event of an inadvertent delay is unnecessary and
inconsistent with principles underlying the Fifth Amendment and the Transmission Owner’s return of the use of the interconnection point to the generator. Nothing about these
circumstances should raise any concern about generators being forced to unfairly bear burdens that ought to be borne by the public as a whole.

Similarly, temporary use of an unused interconnection point to resolve a reliability issue does not justify a cost-based payment or other form of compensation. IPPNY does not define a right at the interconnection point that is interfered with by a temporary use—particularly since this use would only occur when the generator itself is not using the interconnection point.
Furthermore, the generator would continue to have the ability to return to service within the permitted timeframe without incurring additional interconnection costs.45

D. IPPNY”s References to Attachment S “Headroom” and Order No. 1000
Evaluations are Misplaced

IPPNY’s argument that there should be compensation for use of generator’s “rights” to
facilities beyond the point of interconnection is likewise misplaced. IPPNY points to the
Headroom provisions in Attachment S of the OATT as support for its assertion. Attachment S
contains the process under which the NYISO allocates to a “Class Year” of proposed projects the
costs of System Upgrade Facilities that would not be necessary “but for” those proposed
projects. The Headroom mechanism in Attachment S identifies circumstances where a
subsequent developer must reimburse a prior developer for System Upgrade Facility costs.

45 Although, as noted, when a request to return to service follows the generator’s failure to make a
timely return, the generator may also have a cost responsibility. See proposed Services Tariff § 5.18.4.3.

Rather than recognizing a property right, the Headroom mechanism seeks to equitably assign
cost responsibility for System Upgrade Facilities among developers in different Class Years.46
IPPNY’s Protest does not support its assertion that generators have a “property right[] to . . . system capability” created by System Upgrade Facilities. First, the NYISO’s tariff is clear that Transmission Owners own System Upgrade Facilities (and pay for operating and
maintaining them), and the Commission has clarified that such facilities are an integrated part of the transmission system. Further, paying for a System Upgrade Facility does not give a
generator a priority right to “use” the upgrade in actual operations—instead, paying for the
upgrade is a requirement for the generator to interconnect. Again, under the NYISO’s proposal, the generator retains that right to return to service (i.e., interconnect) within the permitted
timeframes. For all these reasons, the NYISO’s proposals are reasonable and do not justify a
Commission finding that they represent a compensable taking.

Finally, the Commission should also reject IPPNY’s proposal to require a Transmission
Owner to demonstrate that use of the interconnection point connecting the generator is “the most
efficient and cost-effective reliability solution” before being allowed to use it.47 The NYISO
proposal provides for temporary use of an interconnection point only if such use has been
selected as a Gap Solution48 or to resolve a reliability issue on a facility other than those of the

46 The Headroom mechanism recognizes that upgrades may have capability in excess of the

minimum necessary to resolve the issue create by a given project. The Headroom mechanism addresses what would be an undesirable result of allowing a developer to avoid a cost allocation merely by being in a later Class Year.

47 IPPNY Protest at 16.

48 The term Gap Solution is defined in Attachment Y, § 31.1.1 of the OATT as:

A solution to a Reliability Need that is designed to be temporary and to strive to be compatible with permanent market-based proposals. A permanent regulated solution, if appropriate, may proceed in parallel with a Gap Solution.

New York State Bulk Power Transmission Facilities49 system (“non-bulk system”).50 In

selecting, as a Gap Solution, a transmission project that uses an unused interconnection point, the NYISO’s tariff requires that the NYISO evaluate and report to the governmental agency with
jurisdiction over the implementation or siting of Gap Solutions on whether any or all of the Gap Solutions proposed meet the Reliability Need or imminent threat before use of the
interconnection point is chosen. 51

IPPNY's suggestion that Order 1000 principles should be applied to the Gap Solutions
process is unreasonable and not practicable. The NYISO has filed tariff provisions to evaluate
and select the more efficient or cost effective solution to transmission needs but only in the
normal course of its expanded two-year planning process.52 FERC has not directed the
application of this lengthy process, reserved for regulated transmission solutions, to obtaining
solutions designed to be temporary or to fill the gap between regular planning processes.53
Moreover, it is simply not practicable to apply the evaluation and selection process to obtaining Gap Solutions needed to maintain reliability in the Comprehensive Reliability Plan or to mitigate an imminent threat to reliability. Under these circumstances, the tariff requires
immediate action by the NYISO, after consultation with the New York Department of Public

49 The term New York State Bulk Power Transmission Facilities is defined in Attachment Y, §

31.1.1 of the OATT as:

The facilities identified as the New York State Bulk Power Transmission Facilities in the annual Area Transmission Review submitted to the NPCC by the ISO pursuant to NPCC requirements.

50 Proposed Services Tariff § 5.18.5.1

51 OATT § 31.2.10.

52 See OATT Section 31.2.6.5.2 (NYISO selection of more efficient or cost effective regulated transmission solution to satisfy reliability need).

53 See OATT Section 31.2.10.5 (Gap Solutions "shall be designed to be temporary solutions and to strive to be compatible with permanent market-based proposals").

Service, and by the Transmission Owners to maintain bulk power system reliability.54

Appropriate governmental agencies and authorities then decide whether to proceed with a Gap Solution or any alternative Gap Solution that is offered. 55

E. The Commission Should Reject as Unnecessary IPPNY’s Proposal to Require
the NYISO to Further Clarify the Return to Service Process

IPPNY argues that the NYISO’s proposal requiring that generators return to service when
necessary to resolve a reliability need is incomplete and should be revised. Pursuant to the
NYISO proposal, a generator would be required to return to service following an order
establishing compensation for such return from an applicable regulatory agency.56 Complaining
that such an order “must be issued by the Commission,” IPPNY requests that the Commission
direct the NYISO to “amend its proposal to clarify that the Compensation Order must be issued
by the Commission”57 and include language in its tariff “specifying a generator owner’s right to
file proposed rates with the Commission for approval pursuant to Section 205 if the generator is
required to operate to meet a reliability need.”58 The Commission should reject both requests as
unnecessary.

The NYISO proposal does not add or detract from any right a generator may have to make a filing with the Commission seeking a wholesale rate in the circumstances outlined in Section III.G of the Outage States Filing. Nor could it possibly add to or detract from the Commission’s authority.

54 See OATT Section 31.2.10.2 and 31.2.10.3.

55 OATT Section 31.2.10.4.

56 Proposed Services Tariff § 5.18.4.1

57 IPPNY Protest at 18.

58 IPPNY Protest at 20.

F. The Commission Should Reject IPPNY’s Alternate Payment Proposal for

Generators Needed for Reliability that Fail to Make a Timely Return to Service, but Later Return to Service

IPPNY complains that the NYISO would require generators to make excessively large

payments if they choose to return to service after failing to return to service under the provisions
of proposed Services Tariff § 5.18.4, thereby causing the need for a reliability solution to be
installed at their interconnection points. The NYISO designed this cost obligation to encourage
generators on outage to return to service when they are be needed to remedy a reliability issue,
once arrangements for compensation related to their return to service are in place.59 The
Commission should reject IPPNY’s proposal that a generator that fails to make a timely return to
service, but later returns to service, “pay only the excess amount above what customers would
have had to pay if the generator had returned to service and received full cost of service rate
recovery”60 as it could completely undermine the incentive that the cost assignment was intended
to create. Moreover, Dr. Patton never concluded that the NYISO’s proposal in this regard
would deprive energy markets of efficient suppliers unwilling to take on high risks. Indeed, Dr.
Patton was quite supportive of the need for the NYISO and the Transmission Owners to devise
rules that would allow them to maintain reliability under circumstances where one or more
generators unexpectedly cease to operate.61

The NYISO’s proposal to impose the cost of the alternate reliability solution on a

generator that fails to make a timely return to service, but later returns to service, unless the

generator and the Transmission Owner agreed on an alternate rate, is just and reasonable. These
are costs the generator had the opportunity to avoid by making a timely return to service, or

59 Proposed Services Tariff § 5.18.4.1

60 IPPNY Protest at 21.

61 Patton Affidavit at P 33

seeking a waiver from the Commission if its untimely return to service was unavoidable for

extraordinary circumstances. Further, imposing the full cost of the alternate reliability solution on a generator that fails to make a timely return to service establishes an appropriate, readily quantifiable financial deterrent to a generator’s untimely return to service. Even if the alternative proposal by IPPNY would be a reasonable methodology, the Commission must accept the
NYISO’s proposal because it is just and reasonable.62

If the Commission determines, nevertheless, that a generator that fails to make a timely

return to service, but later returns to service, should pay for something less than all of the costs to
install the alternate reliability solution, then the NYISO respectfully requests that the
Commission order the NYISO to work with its stakeholders to determine the appropriate amount
to allocate to the generator. This issue of the appropriate costs to impose on a non-returning
generator was debated in the stakeholder process and the proposal the NYISO put forward was
accepted by the requisite super majority of its Market Participants. Rather than rush to adopt the
IPPNY proposal, the Commission should indicate the criteria which it believes should apply in
these cases and allow the stakeholders to return to this issue and craft an acceptable proposal
based on them. Net cost calculations are complex and should be developed and adopted after
thorough evaluation.

G. The NYISO’s Definition of “Catastrophic Failure” and Its Approach to Physical
Withholding Evaluations Are Just and Reasonable

The Outage States Filing proposed that the NYISO would perform an audit and review
(“Physical Withholding Test”) on the removal of a unit in a Mitigated Capacity Zone from the

62 Cf. Southern California Edison Co. et al, 73 FERC ¶ 61,219 at 61,608 n. 73 (1995) (“Having
found the plan to be just and reasonable, there is no need to consider in any detail the alternative plans
proposed by the Joint Protestors.” (citing Cities of Bethany, et al. v. FERC, 727 F.2d 1131, 1136 (D.C.
Cir. 1984))).

ICAP market as a result of the reclassification of the unit from a Forced Outage to an ICAP

Ineligible Forced Outage.63 The purpose of this review is to determine whether the unit owner is intentionally avoiding repair of its unit in order to raise ICAP prices or has a legitimate
economic justification for its actions. Under the proposed tariff revisions, a unit entering into an ICAP Ineligible Forced Outage would be exempt from the Physical Withholding Test if: (1) it experienced a “Catastrophic Failure,” defined as damage that would reasonably require at least 270 days to repair; or (2) the unit owner experienced “Exceptional Circumstances” inhibiting the owner’s ability to obtain the data necessary to determine the viability of repairing the unit but later Commenced Repair when the data became available.

IPPNY proposes to shorten, from 270 days to six months, the amount of time it would

take to repair a damaged unit for that damage to constitute a “Catastrophic Failure” and,

thereby, broaden the exemption from the Physical Withholding Test to a potentially larger set of
generators.64 The Commission should reject IPPNY’s proposal because the NYISO’s proposal
is reasonable and appropriately identifies those units that should receive this broad exemption

The underlying rationale for applying the Physical Withholding Test when a unit enters
an ICAP Ineligible Force Outage is to ensure that the ICAP market performs competitively
when existing suppliers might otherwise withhold capacity. The NYISO’s view is that defining
Catastrophic Failure as damage that would require at least 270 days to repair appropriately
exempts from the Physical Withholding Test only those units that experience such severe
damage that it is very unlikely that an owner might be intentionally seeking to remove capacity
from the market. As Dr. Patton noted in his affidavit appended to the Outage States Filing:

63 Outage States Filing at 24-27. This evaluation would be the same whether the unit removed
itself from the ICAP market or was reclassified from a Forced Outage to an ICAP Ineligible Forced
Outage.

64 IPPNY Protest at 24.

[I]f a repair requires more than nine months, it is more likely that the costs of repair and the revenues the generator would earn following the repair would be uncertain, making the evaluation of whether the decision had a legitimate
economic justification overly speculative. Furthermore, if a repair requires more than nine months, it is more likely that the generator would be unable to return to service by the next summer peak conditions.65

IPPNY justifies its request to broaden the Catastrophic Failure exemption to cover

additional generators by expressing concern that the NYISO, and the MMU, are incapable of

fairly determining whether the cost of repair is economic, particularly for a unit with “extensive
failure” or “costs that are difficult to estimate.”66 In making this argument, however, IPPNY
disregards the option available to a unit owner, with repair costs that are difficult to estimate, to
request a finding of “Exceptional Circumstances” and thereby delay a Physical Withholding
Test until complete information can be acquired or to completely avoid it by Commencing
Repair once data is available.67 As the proposed definition of Exceptional Circumstances states:

Exceptional Circumstances may include, but are not limited to: the

inaccessibility of the physical facility; the inaccessibility of necessary
documentation or other data; and the unavailability of information
regarding the regulatory obligations with which the Market Party will be required to comply in order to return its Generator to service which
regulatory obligations are not yet known but which will be made known by the applicable regulatory authority under existing laws and regulations provided that none of the above described circumstances are the result of delay or inaction by the Market Party. 68

The inaccessibility of the physical facility or the inaccessibility of necessary

documentation or other data with which to estimate repair costs, which can lead to a finding of
Exceptional Circumstances, sound very much like the circumstances that IPPNY claims support
its redefinition of Catastrophic Failure to six months. As such, a redefinition is unnecessary and

65 Outage States Filing Attachment V, Patton Affidavit at P 26.

66 IPPNY Protest at p 22.

67 Proposed Services Tariff § 23.4.5.6.2.2.

68 Services Tariff, proposed amendment to § 23.2.1

a generator that delays its Physical Withholding Test upon a showing of Exceptional
Circumstances and then Commences Repair will avoid its Physical Withholding Test
altogether.69

The Commission should also reject IPPNY’s proposal to require the NYISO to

incorporate into its tariffs as the criteria for the Physical Withholding Test, the factors Dr.

Patton articulated in his affidavit as, in general, demonstrating when a generator would have a
legitimate economic justification for not repairing a unit.70 Dr. Patton included in his affidavit a
representative list of the factors that go into a Physical Withholding determination and did not
intend to indicate he would be ignoring any additional factors that may be particularly relevant
in specific circumstances, factors that could, actually, inure to the benefit of the generator. The
NYISO has already posted many documents to its website that provide transparency and a

comprehensive level of detail on how the NYISO will perform the Physical Withholding Test.71 The Commission should approve the NYISO proposal in this regard as it is reasonable and
consistent with the NYISO’s administration of the other physical withholding mitigation
provisions already in its tariffs.

69 Proposed Services Tariff §23.4.5.6.2.2

70 IPPNY Protest at 23.

71 For the template of information that the NYISO would be requesting in making this determination see:

http://www.nyiso.com/public/markets_operations/services/market_monitoring/index.jsp Under ICAP
Market Mitigation-->Supply Side Mitigation-->Data Submission-->GFC Input Template
For template Instructions see:

http://www.nyiso.com/public/webdocs/markets_operations/services/market_monitoring/ICAP_Marke
t_Mitigation/Data_Submission/GFC%20Input%20Template%20Instructions.pdf
For the Physical Withholding ICAP Reference System Online Training, see:
http://www.nyiso.com/public/services/market_training/online_resources/PhysicalWithholdingICAPR
eferenceSystemTraining/player.html

H. IPPNY’s Request for an Explicit Exemption Addressing Pivotal Supply
Requirements is Unnecessary and Should be Rejected

The further amendment requested by IPPNY to address Pivotal Supplier requirements is unnecessary and should be rejected. The NYISO has committed to developing procedures that would provide consistency between a unit’s qualification to participate as a supplier in the
capacity auctions and the inclusion of a unit’s MWs in the determination of whether a party is a Pivotal Supplier. This consistency should address the concern identified by IPPNY without needing to introduce an express exception into the tariff.

III.CONCLUSION

WHEREFORE, for the reasons set forth above, the NYISO respectfully requests that the Commission reject the protests as discussed herein, and accept the Outage States Filing.

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

September 29, 2014

cc:Michael A. Bardee

Gregory Berson

Anna Cochrane

Jignasa Gadani

Morris Margolis

Michael McLaughlin
David Morenoff
Daniel Nowak

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 29th day of September, 2014.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207