UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

New York Independent System Operator, Inc.)Docket No. ER14-552-000

MOTION FOR LEAVE TO RESPOND, AND RESPONSE OF THE
NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

Pursuant to Rules 212 and 213 of the Federal Energy Regulatory Commission’s (the
“Commission’s”) Rules of Practice and Procedure,1 the New York Independent System
Operator, Inc. (“NYISO”) respectfully requests leave to submit the following response
(“Response”) to the protest filed in this docket on December 27, 2013 by Great Bay Energy,
LLC and Financial Marketers Coalition (“Protest”).2  The Protest was submitted in response to
the NYISO’s December 6, 2013 Federal Power Act Section 205 filing of Proposed Tariff
Amendments to Implement External Coordinated Transaction Scheduling with PJM
Interconnection, LLC.

I.Motion for Leave to Respond

The NYISO recognizes that the Commission generally discourages responses to protests.
However, the NYISO respectfully requests leave to submit this Response.  The Commission has
allowed responses to protests when they help to clarify complex issues, provide additional
information that will assist the Commission, correct inaccurate statements, or are otherwise
helpful in developing the record in a proceeding.3  The NYISO’s Response meets this standard.

1 18 C.F.R. §§ 385.212 and 385.213.

2 See Motion to Intervene and Protest of Great Bay Energy, LLC and Financial Marketers Coalition.  The entities that signed-on to the Protest are referred to as the “Protesters” in this Response.

3 See, e.g., Morgan Stanley Capital Group, Inc. v. New York Independent System Operator, Inc., 93 FERC ¶ 61,017

at 61,036 (2000) (accepting an answer that was “helpful in the development of the record...”); New York

Independent System Operator, Inc., 91 FERC ¶ 61,218 at 61,797 (2000) (allowing “the NYISO’s Answer of April

27, 2000, [because it was deemed] useful in addressing the issues arising in these proceedings...”); Central

The NYISO’s response does not introduce new arguments, but instead is submitted for the

limited purpose of clarifying certain factual matters and correcting inaccurate statements in the Protest, thereby assisting the Commission in its review and consideration of the issues presented in this proceeding.  The NYISO therefore respectfully requests that the Commission exercise its discretion and accept this Response.

II.Response to Protest

A.Summary of Concerns Raised in Protest and Brief Responses to Concerns

Raised

The Protest asks the Commission to reject NYISO’s proposals to: (1) eliminate the RealTime Import Bid Production Cost Guarantee (“RT Import BPCG”) in advance of the NYISO’s implementation of CTS with PJM Interconnection, LLC (“PJM”); and (2) eliminate the Import Curtailment Guarantee at CTS Enabled Proxy Generator Buses at the New York Control Area (“NYCA”)/PJM border.4  Both of the concerns raised in the Protest should be rejected for the reasons explained in this Response.

The first concern raised in the Protest does not address a Tariff revision that the NYISO proposes in this Docket.  The NYISO has requested a November 2014 effective date for the Tariff revisions that the NYISO submitted in this Docket No. ER14-552-000, and for the Tariff revisions that the Commission accepted for filing in Docket No. ER12-701-0005 that are
necessary to implement CTS with PJM.  Hence, the effective date for all of the Tariff revisions at issue in this Docket will be the date in November 2014 on which NYISO and PJM implement CTS at their common border (following Commission review and acceptance).

Hudson Gas & Electric Corp., 88 FERC ¶ 61,138 at 61,381 (1999) (accepting prohibited pleadings because they helped to clarify the issues and because of the complex nature of the proceeding).

4 See Protest at 7 (the page with the signature bar).

5 See New York Independent System Operator, Inc., 139 FERC ¶ 61,048 (2012).

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The Tariff revisions and Tariff effective dates proposed in this Docket will not result in RT Import BPCG being eliminated before the NYISO implements CTS with PJM in November of 2014.  Because the NYISO is not proposing to eliminate the RT Import BPCG before the
NYISO implements CTS with PJM in this Docket, no relief is necessary, appropriate or available to address the Protest’s RT Import BPCG concern in this Docket.6

The second concern raised in the Protest asks the Commission to reconsider a Tariff rule
that the Commission previously accepted for filing.  The Commission accepted Tariff revisions
that eliminate Import Curtailment Guarantees for CTS Enabled Proxy Generator Buses in its
April 19, 2012 order that accepted the NYISO rules for implementing CTS with ISO-New
England (“ISO-NE”).7  The Protest apparently seeks different treatment of Import Curtailment
Guarantees at CTS Enabled Proxy Generator Buses at the NYISO’s border with PJM from the
rules that the Commission has already accepted for implementation at the NYISO’s border with
ISO-NE.  The Protest does not explain why Imports scheduled at CTS Enabled Proxy Generator
Buses that are located at the NYISO’s border with PJM should remain eligible to receive Import
Curtailment Guarantees that will not be available at CTS Enabled Proxy Generator Buses at the
NYISO’s border with ISO-NE when CTS is implemented at that border.  The NYISO responds
in greater detail to the request for differing treatment of Import Curtailment Guarantees at the
NYISO’s borders with PJM and ISO-NE below.

6 The NYISO has submitted a filing in FERC Docket No. ER14-864-000 that proposes to eliminate RT Import
BPCG (but not Import Curtailment Guarantees) at all of the NYISO’s Proxy Generator Buses effective April 8,
2014.  To the extent the Protest opposes the removal of RT Import BPCG at one or more of the NYISO’s Proxy
Generator Buses prior to NYISO’s implementation of CTS in November of 2014, Docket No. ER14-864 is the
appropriate Docket to raise those concerns in.  Comments are due in that Docket on January 17, 2014.

7 New York Independent System Operator, Inc., 139 FERC ¶ 61,048 at PP 19-21, 27 (2012).

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B.Response to Arguments Opposing Elimination of Import Curtailment

Guarantees at NYISO/PJM Border

In Docket No. ER12-701-000 the Commission accepted revisions to Section 25.6.1 of the
NYISO’s Market Administration and Control Area Services Tariff (“Services Tariff”) that
provide “[s]uppliers scheduling Imports at CTS Enabled Proxy Generator Buses shall not be
eligible for Import Curtailment Guarantee payments for those Transactions.”  In Docket No.
ER14-552-000, the NYISO proposes to apply the previously accepted Tariff rules to Imports at
CTS Enabled Proxy Generator Buses that represent the NYISO’s border with PJM.
The NYISO discussed the Tariff revisions that it filed in Docket No. ER12-701-000 with its stakeholders and obtained stakeholder approval before those Tariff revisions were submitted for the Commission’s consideration.  No entity protested the NYISO’s proposal to eliminate Import Curtailment Guarantees at CTS Enabled Proxy Generator Buses in Docket No. ER12-
701-000.

It is not clear to the NYISO why the Protest takes issue with the elimination of Import

Curtailment Guarantees at the NYCA/PJM border.  In 2012 and 2013 the NYISO paid a total of
$859,370,679 in LBMP settlements to Imports from PJM.  The total volume of Imports from
PJM over the same period was 19,687,707 MWh.  Dividing the LBMP $ paid by the total MWh
volume of Imports from PJM yields an average LBMP of approximately $43.65/MWh paid to
Imports from PJM.  Over the same two year period, the NYISO made Import Curtailment
Guarantee payments totaling $292,705.73 to Imports from PJM.  Dividing the total Import
Curtailment Guarantee $ paid by the total MWh volume of Imports the NYCA received from
PJM yields an average Import Curtailment Guarantee of approximately $0.015/MWh.8

8 Import Curtailment Guarantee payments made to each/any of the four NYISO Market Participants that joined the Protest for their Imports to the NYCA from PJM were less than the de minimis $0.015/MWh average Import
Curtailment Guarantee payment that the NYISO calculated for all Imports from PJM in 2012 and 2013.

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The de minimis nature of the Import Curtailment Guarantees that the NYISO paid to Imports from PJM in 2012 and 2013 makes it very difficult for the NYISO to understand why the Protest claims:

NYISO’s suggestion that importers incorporate the risk of curtailments into their
import offers is potentially absurd.  NYISO is apparently encouraging importers
to place import offers at higher than their actual costs to address this potential
risk, instead of simply making participants whole if the risk actualizes.  As a
result, if the Import Curtailment Guarantee is eliminated, prices on the PJM-
NYISO border will likely be higher than necessary to account for these risks.9

On average, the elimination of Import Curtailment Guarantees may increase the average LBMP paid to Imports from PJM by approximately $0.015/MWh.  Any increased LBMP costs are expected to be offset by the reduction in uplift costs allocations that will no longer accrue from Import Curtailment Guarantees.

The NYISO regularly receives a large volume of offers to import Energy from PJM to the
NYCA.  Competition to schedule Imports to the NYCA from PJM (and competition from
internal NYCA generators and import offers from other markets) is expected to discipline the
offering behavior of Transmission Customers that might attempt to inflate their import offers to
include “phantom” import curtailment cost risks that they are not likely to actually incur.  Import
offers that incorporate unrealistically high costs to reflect the risk they may be curtailed in the
Real-Time Market will not be scheduled.  Other resources, including import offers that include
more reasonable expectations, will be scheduled in their place.  Given the large volume of offers
to import Energy from PJM and the full set of resources available for selection by the NYISO’s

9 Protest at 7 (the page with the signature bar).

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Real-Time Commitment (“RTC”),10 the NYISO does not expect any increase in LBMPs will be higher than what is necessary to account for curtailment risk.

Traders are uniquely situated to evaluate the risks associated with taking a position in the
NYISO’s markets.  Traders can manage the nature and scope of the risk they assume by carefully
crafting the offers they submit and by setting the margins they will accept for engaging in an
Import, or any other External Transaction.  Unlike Imports, Exports from the NYCA have never
been eligible to receive a curtailment guarantee.  Traders that schedule Export transactions at the
NYISO’s borders already incorporate the risk of a possible curtailment into their bidding
strategy.

Incorporating the risk that an Import might be curtailed into LBMP offers will benefit the
NYCA because it will move the risk (cost) of having scheduled Imports curtailed in the Real-
Time Market into the LBMP component of an import offer, rather than “hiding” a portion of the
costs in uplift.  By incorporating the costs of curtailment into the import offer price, RTC’s
market evaluation can appropriately assess the value of scheduling these import offers.  In the
rare instances where curtailment risk is high, accurately reflecting the risk that import offers may
be curtailed in the LBMP at the PJM Proxy Generator Buses will enable RTC to correctly judge
the tradeoff between different resources and select a more efficient mix of resources to serve
NYCA load.

Finally, the NYISO notes that PJM does not offer Import Curtailment Guarantees at its
border with New York.  Eliminating Import Curtailment Guarantees from the NYISO’s markets
will bring the settlement rules that apply in the two, neighboring regions into closer convergence.

10 Real-Time Commitment (“RTC”): A multi-period security constrained unit commitment and dispatch model
that co-optimizes to solve simultaneously for Load, Operating Reserves and Regulation Service on a least as-bid
production cost basis over a two hour and fifteen minute optimization period.  See Section 2.18 of the Services
Tariff.

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III.Conclusion

WHEREFORE, for the foregoing reasons, the New York Independent System Operator, Inc. respectfully requests that the Commission (i) accept this Response to the Protest, and
(ii) accept the NYISO’s proposed CTS Tariff revisions for filing without modification.

Respectfully submitted,

/s/  Alex M. Schnell

Alex M. Schnell, Registered Corporate Counsel James H. Sweeney, Attorney

New York Independent System Operator, Inc.

Dated:  January 10, 2014

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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 10th day of January, 2014.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207