UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

New York Independent System Operator, Inc.)Docket No. ER14-500-001

REQUEST FOR LEAVE TO ANSWER AND ANSWER

OF THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

In accordance with Rule 213 of the Commission’s Rules of Practice and Procedure,1 the New
York Independent System Operator, Inc. (“NYISO”) respectfully submits this request for leave to
answer and limited answer to certain requests for rehearing filed in response to the Commission’s
January 28, 2014 Order Accepting Tariff Filing Subject to Condition and Denying Waiver (“January
Order”).2 Specifically, the NYISO responds to a few of the assertions made in the requests of the
Independent Power Producers of New York (“IPPNY”),3 including IPPNY’s “Supplement,”4 the

Indicated Suppliers,5 and the New York Supplier & Environmental Advocate Group (“NY-SEA”)6
(collectively, the “Supply Interests”). As discussed below, the rulings challenged by the Supply
Interests were all based on substantial evidence drawn from a complete record and reflected reasoned
decision-making. There is no factual or legal basis for overturning or “clarifying” any of those aspects
of the January Order. In addition, the NYISO addresses the Indicated Suppliers’ request for
clarification that effectively asks the Commission to misapply the existing rules governing the

1 18 C.F.R. § 385.213 (2012).

2 New York Independent System Operator, Inc., 146 FERC ¶ 61,043 (2014).

3 Request for Rehearing of Independent Power Producers of New York, Inc. (Feb. 24, 2014 as corrected on Feb. 27, 2014) (the “IPPNY Request”).

4 Supplement to Request for Rehearing of Independent Power Producers of New York, Inc. (Feb. 27, 2014) (“IPPNY Supplement”).

5 Request for Rehearing and Clarification of the Indicated Suppliers (Feb. 27, 2014) (the “Indicated Suppliers Request”).

6 Request for Rehearing of the New York Supplier & Environmental Advocate Group (Feb. 27, 2014) (“NY-SEA Group Request”).

development of Installed Capacity (“ICAP”) Demand Curves in future reset procedures.7 The fact that the NYISO has confined this answer to these points should not be construed as agreement with, or acquiescence in, any of the other arguments made by the Supply Interests.

I.BACKGROUND

The January Order accepted the ICAP Demand Curve parameters presented in the NYISO’s

November 29, 2013 filing for the 2014/2015-2016/2017 Capability Years (“November Filing”).8

Relevant to this Answer, the January Order thoroughly reviewed the evidence presented and arguments made in the November Filing. The November Filing alone provided a more than sufficient basis for the January Order but the Commission also had the benefit of a fully developed record that included9 the NYISO’s January 9 answer,10 the New York Transmission Owners’ (“NYTOs”) January 10
answer,11 and various other filings in this proceeding.

Among other things, the January Order approved as “reasonable”12 the NYISO’s recommended
proxy plant technology, which is comprised of the Siemens SGT6-5000F(5) class frame simple-cycle
combustion turbine (“F class frame”) with SCR emissions control for the New York City, Long Island

7 Capitalized terms that are not otherwise defined herein shall have the meaning specified in the NYISO’s Market Administration and Control Area Services Tariff.

8 New York Independent System Operator, Inc., Proposed Tariff Revisions to Implement Revised ICAP Demand Curves and a New ICAP Demand Curve for Capability Years 2014/2015, 2015/2016 and 2016/2017 and Request for Partial Phase-In and for Any Necessary Tariff Waivers, Docket No. ER14-500-000 and
Unrelated Ministerial Tariff Correction, Docket No. ER12-360-000 (filed November 29, 2013).

9 Although Section III of the January Order did not expressly reference pleadings filed after January 6, 2014, P 17 states that the Commission accepted “the answers filed in this proceeding because they have
provided information that assisted us in our decision-making process.”

10 Request for Leave to Answer and Answer of the New York Independent System Operator, Inc. (Jan. 9, 2014) (“NYISO Answer”).

11 Motion for Leave to Answer and Answer of the New York Transmission Owners (Jan. 10, 2014) (“NYTOs Answer”).

12 January Order at P 57.

and G-J Locality Demand Curves 13 It likewise accepted as reasonable the NYISO’s determination

that the F class frame unit without SCR “is economically viable for use as the proxy unit” for the New York Control Area (“NYCA”).14 In both cases, the January Order considered, and reasonably rejected, arguments that there was insufficient evidence in the record to support the NYISO’s selection.15
Similarly, the January Order considered, but rightly did not adopt, arguments proffered by certain
protestors that the stakeholder process leading up to the selection of the F class frame with SCR was flawed, finding that the Board acted “within its authority.”16

II. REQUEST FOR LEAVE TO ANSWER

Parties are permitted to answer requests for clarification as of right.17 To the extent that the
Commission accepts the IPPNY Supplement for filing,18 the NYISO should likewise be permitted to
answer it as of right because it purports to provide relevant new evidence. In addition, the
Commission has discretion19 to accept answers to requests for rehearing and has done so when they
help to clarify complex issues, provide additional information, or are otherwise helpful to its decision-

13 See Services Tariff Section 2.7, which defines G-J Locality as “[t]he Locality comprised of Load Zones G, H, I, and J collectively.”

14 January Order at P 76.

15 January Order at PP 60, 76-77.

16 January Order at P 29.

17 See 18 C.F.R. § 385.213(a)(3) and Mirant Americas Energy Marketing, L.P. v. ISO New England Inc., 97 FERC ¶ 61,360 (2001).

18 Motion for Leave to Answer and Answer of the New York Transmission Owners (March 13, 2014.)
Under Commission Rule 713(c)(3), new matters may be raised on rehearing only if “based on matters not
available for consideration by the Commission at the time of the final decision or order.” It is well-established that the Commission “generally will not consider new evidence on rehearing, as [it] cannot resolve issues finally and with any efficiency if parties attempt to have [it] chase a moving target.” Ocean State Power II, 69 FERC ¶ 61,146, at 61,548 & n. 64 (1994).

19 See 18 C.F.R. § 385.213(a)(2).

making process.20 The Commission should accept the NYISO’s answer in this instance, as it provides additional information that will assist the Commission.

III.ANSWER

1.The January Order Gave More than Sufficient Consideration to the Evidence and

Arguments and Provided a More than Sufficient Explanation of its Determinations

The Supply Interests allege that the Commission erred when it rejected or failed to give

adequate consideration to evidence and arguments that purportedly “demonstrated” that the NYISO’s
proxy unit selections and the other proposals included in the November Filing were “substantively
flawed.” 21 The IPPNY Request is essentially a laundry list of arguments that it previously offered and
now alleges were ignored without justification.22 The Indicated Suppliers similarly call for rehearing
because of the Commission’s claimed failure to engage their “serious objection” that the F class frame
with SCR cannot comply with Con Edison’s 45-second fuel switching requirement.23 The NY-SEA
Group also rehashes points that the January Order either reasonably rejected or did not adopt based on
clear record evidence.24

The Supply Interests would effectively require the Commission to respond in detail to every
single point made in each and every one of their pleadings. But reasoned decision-making does not
require the Commission to meet such an unreasonable and unrealistic standard. The NYISO is aware

20 See, e.g., PJM Interconnection, L.L.C., 128 FERC ¶ 61,157 at P 10 (2009) (accepting an answer to a
request for rehearing because it provided information that assisted the Commission in its decision-making
process).

21 IPPNY Request at 3, 6-11; Indicated Suppliers Request at 6-12.

22 IPPNY Request at 7.

23 Indicated Suppliers Request at 7-8.

24 See e.g. NY-SEA Group Request at 13, arguing again that the NY-SEA Group was entitled to an

opportunity to be heard through an evidentiary proceeding, a request that the Commission considered (January Order at P 67) and declined to grant. See NYISO Answer at 55-57 and the Request for Leave to Submit Limited Answer and Limited Answer of the New York Independent System Operator, Inc. at 2-5 (Jan. 28, 2014).

of no rule or precedent imposing such a requirement.25 To the contrary, reasoned decision-making
only requires an agency articulate the principal justifications for its decisions.26 The Supply Interests
arguments are thus exactly like those that the Commission rejected in its 2009 rehearing order in 330
Fund I, L.P. v. New York Independent System Operator, Inc.27 There the Commission explained that:

330 Fund broadly claims that the Commission’s October 1 Order is arbitrary and

capricious and demonstrates a lack of reasoned decision making. 330 Fund faults the

order because the Commission did not address certain arguments and inconsistencies in the pleadings. The Commission is not required to address every argument advanced by parties. The agency need only state the main reasons for its decision. Simpson v. Young, 854 F.2d 1429, 1434-35 (D.C. Cir. 1988). Many of the 330 Fund’s arguments are
disposed of by broader holdings in the October 1 Order. This order, like the October 1 Order, will present the central issues that dispose of the dispute, and will address the salient points raised in the request for rehearing.28

The January Order more than satisfied the true requirements of the reasoned decision-making
standard by articulating “the main reasons for its decision.”29 This standard is especially appropriate in
the context of proxy unit selection which, as the Commission acknowledged, is inherently a “matter of
judgment.”30 The arguments reiterated by the Supply Interests largely go to secondary or tertiary
factors that in some cases are relevant to, but are hardly dispositive in, a broad and comprehensive
evaluation of the economic viability of particular technologies. Such evaluations are necessarily
driven by the major factors that the January Order identified and relied upon. Just as in the 330 Fund
case, the lesser points that the Supply Interests pose on rehearing were inherently and understandably
considered and disposed of as part of the January Order’s broader determinations.

25 Fall River Rural Elec. Coop. v. FERC, 543 F.3d 519, 530-531 (9th Cir. 2008) (stating that the court

could not find “a single case requiring FERC’s orders to thoroughly analyze each and every argument in order to

engage in reasoned decision making...”)

26 See, e.g., Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168-69 (1962); Federal Power Comm'n v. Texaco, Inc., 417 U.S. 380, 397 (1974).

27 126 FERC ¶ 61,151 (2009).

28 Id. at n. 19.

29 See, e.g. January Order at PP 27 and 57-60 (setting out the major reasons for the Commission’s decision to support the NYISO’s selection of the F class frame with SCR).

30 January Order at P 60.

Moreover, there was ample record evidence for both the express rulings of the January Order
and its unstated refusal to adopt other arguments that the Supply Interests object to on rehearing. The
January Order speaks to the IPPNY’s alleged “substantive deficiencies.”31 For example, Paragraphs

40 and 52 of the January Order discuss the arguments on dual fuel capability that IPPNY and the

NYISO made. Paragraph 57 contains the Commission’s analysis and decision on the topic, and cites

evidence and analysis presented by the NYISO to support its holding that it was reasonable to conclude that the proxy unit for NYC, LI, and the G-J Locality could comply with dual fuel requirements.32
IPPNY also alleges that the Commission accepted the NYISO’s proposal to exclude any original issue discount (“OID”) costs from the financing cost assumptions of the proxy unit “without any detailed
reasoning.”33 But in Paragraph 121, the Commission explained why it found NYISO’s answer to
IPPNY’s protest on this issue to be convincing and the NYISO’s proposal on the level of OID to be
reasonable. Reasoned decision-making does not require the Commission to engage every detail of
every argument the Supply Interests made on these issues, especially given the strong record support
for the Commission’s determinations.

The Commission also squarely addressed IPPNY’s meritless claim that there was not enough operating data in the record, stating:

The Commission does not look for a minimum number of hours in order to
determine whether a technology is considered viable. In this case, there is a
difference of opinion as to whether the Marsh Landing Station provided
enough hours, and we find the record of evidence presented in support of the
frame unit with SCR is adequate in order to find that NYISO reasonably
concluded that the F class frame with SCR is a viable technology and able to
serve as the proxy unit in NYC, LI, and the G-J Locality.34

31 IPPNY Request at 5.

32 January Order at P 57, citing Licata Affidavit at PP 11-12.

33 IPPNY Request at 15.

34 January Order at P 60.

That record of evidence demonstrating that the F class frame with SCR was operational included the November Filing and its supporting affidavits (specifically that of Mr. Licata),35 the NYISO’s Answer, and the supplemental affidavit of Mr. Licata.36

Similarly, there was more than sufficient record evidence for the Commission to reject the

Indicated Suppliers’ allegation that the Commission failed to account for Con Edison’s fuel switching requirements. Both sides of this issue are presented in the January Order and the Commission
articulated the main reason for its determination.37 The record before the Commission also included the Thompson Affidavit (which was part of the NYTOs’ Answer but not expressly referenced by the January Order) which thoroughly supported the reasonableness of the NYISO recommendations and refuted the Indicated Suppliers’ arguments on this issue.38

2. Nothing in the IPPNY Supplement Justifies Granting Rehearing

The IPPNY Supplement contains what IPPNY characterizes as “direct evidence” that “strongly supports” IPPNY’s position that the Commission should reject the F class frame with SCR as the
proxy unit for the NYC, LI and G-J Localities.39 But the supposed direct evidence, a presentation by the Brattle Group to the New England Power Pool (“NEPOOL”) Markets Committee as part of the
ongoing development of sloped demand curves for the ISO New England (“ISO-NE”) market provides absolutely no basis for rehearing.

As an initial matter, even if one Brattle Group expert, i.e., Mr. Newell, were to take a position

35 See, e.g. November Filing at 12-16, and Attachment V (Affidavit of Mark W. Chupka, Principal, the
Brattle Group, including the Independent Evaluation of SCR Systems for Frame-Type Combustion Turbines:
Report for ICAP Demand Curve Reset (Nov. 2013)) and Attachment VII (Affidavit of Anthony Licata) to
November Filing.

36 NYISO Answer at 11-27, and Attachment 2 to the NYISO Answer (Supplemental Affidavit of Anthony Licata).

37 January Order at PP 36, 40 and 56.

38 Exhibit B to the NYTOs Answer, Affidavit of Edwin Thompson.

39 IPPNY Supplement at 1.

in an unrelated ISO-NE matter that differed from the position taken by another, i.e., Mr. Chupka, in
this proceeding it would in no way devalue Mr. Chupka’s conclusions. It should go without saying,
that Mr. Chupka, not the Brattle Group as a whole, is the NYISO’s expert in this case. Thus, even if
Mr. Newell’s opinion was directly contrary to Mr. Chupka’s, and the NYISO explains below that it
was not inconsistent with Mr. Chupka’s at all, that would not mean that the January Order’s reliance
on Mr. Chupka was misplaced. It would simply be another example of different experts coming to
different conclusions regarding a technical matter that requires the application of expert judgment.40

In addition, IPPNY claims that statements in the presentation about the commercial risk of the F class frame with SCR and the market risk associated with its selection represent “new” evidence.41 But this “new” evidence does not introduce anything new into the record. The Commission has
already fully considered IPPNY’s arguments regarding the commercial acceptance of the F class frame with SCR42 and Mr. Younger’s theory of asymmetric risk.43 The statements submitted with the IPPNY Supplement add nothing new to this discussion.44

Furthermore, these statements, which are part of Mr. Newell’s not-yet final recommendation to
the NEPOOL Markets Committee on the ISO-NE proxy unit, do not contradict Mr. Chupka’s because
they deal with substantially different facts and circumstances. ISO-NE is in the process of introducing
sloped demand curves for the first time and the ability of these curves to attract merchant investment in
capacity to meet the reliability requirements for New England, which has struggled to attract

40 See e.g. November Filing at 14 (noting that “qualified experts can sometimes come to competing
conclusions. This is especially true when it comes to predicting the future performance of technology.”)

41 IPPNY Supplement at 1, 2.

42 January Order at P 60.

43 January Order at P 54.

44 Long Island Lighting Company, 82 FERC ¶61,216 (1998).

investment for some time, is not yet proven.45 By contrast, the NYISO has had sloped ICAP Demand
Curves in place since 2003 and a successful record of attracting new investment.46 Thus, there may be
practical reasons that would justify choosing a “lower risk” (i.e., the higher fixed cost and lower
variable cost) unit in New England than in New York. The NYISO is required by tariff to base ICAP
Demand Curves on the economically viable peaking technology with the lowest fixed cost and highest
variable cost or the plant with the lowest Net CONE value. For ISO-NE, Mr. Newell is working with a
blank slate to develop a proposal for sloped demand curves. In doing so he has identified the F class
frame turbine as a potential reference technology that is both feasible and economic, but has based his
recommendation of the combined cycle technology for use in the new sloped demand curve on
concerns that are unique to ISO-NE and without any technology prescriptions included in the ISO-NE
tariff.47

It should also be noted that Mr. Newell’s presentation supports the recommendations made by
the NYISO and includes statements that support the Commission’s approval of the NYISO’s selection
of the F class frame with SCR as the lowest fixed cost, highest variable cost proxy unit that is
economically viable. The presentation shows that the Net CONE/Reference Price values calculated by
the Brattle Group for ISO-NE clearly support the outcome of the NYISO process, as the F class frame

45 See e.g., ISO New England Inc. Exigent Circumstances Filing of Revisions to Forward Capacity Market Rules at 3 (Nov. 25, 2013), discussing “the general decline in the amount of new resources seeking to participate in the [forward capacity auction] (likely because of low prices set by the current vertical demand curve structure, which signaled that new resources were not needed.” See also ISO-New England Inc., 146 FERC ¶ 61,043 at 7 (2014).

46 See e.g. Report on Performance Metrics for Independent System Operators and Regional

Transmission Organizations at 212 (Apr. 2011) (“Through [the NYISO’s] market-based approach, New York
has attracted significant private and public investment in transmission and generation.”) available at:
https://www.ferc.gov/industries/electric/indus-act/rto/rto-iso-performance.asp.

47 See Net CONE for the ISO-NE Demand Curve: Summary of Initial Analysis, presentation of The
Brattle Group to the NEPOOL Markets Committee at 2 (Jan. 14, 2014) available at: http://www.iso-
ne.com/key_projects/fcm_sloped_dem_curve/mc_mtrls/.

with SCR is the most economical of the units that Brattle studied.48 Brattle also notes that permitting
risks associated with the F class frame with SCR should not disqualify it as a reference technology.49

3. The Commission Should Not Grant the Indicated Suppliers’ Request for

Clarification or Rehearing Regarding Future ICAP Demand Curve Resets

The January Order expressly rejected challenges concerning the stakeholder process that
resulted in the NYISO’s selection of the proxy unit for NYC, LI, and the G-J Locality, including
specifically the NYISO Board’s decision to conduct additional due diligence near the end of that
process.50 The Commission also “suggested” that “in the future NYISO perform this process with more transparency in order to avoid any appearance of impropriety and allow adequate time
throughout the entire process for stakeholders to voice their opinions and concerns.”51 The Indicated Suppliers seek to convert this suggestion into an unwarranted censure of the NYISO by asking the Commission to “clarify” that the NYISO has been “placed on notice that a repetition of th[e] opaque and rushed [DCR] process will not be tolerated in the future.”52

There is no basis for such a clarification because the NYISO’s process was transparent and
went above and beyond what the tariff requires. There is nothing about the NYISO’s action that was
inappropriate or that should not be “tolerated.” Indicated Suppliers’ speculation that the January Order
will “eviscerate”53 future stakeholder processes is groundless and illogical. If anything, the results of
the last stakeholder process demonstrate the fundamental importance of active stakeholder

48 Exhibit 1 to the IPPNY Supplement at 27-29. Mr. Newell also concluded that the LMS100 unit should be rejected as uneconomic. Id. at 30.

49 Id. at 4

50 January Order at P 29 (“Therefore, we find that the Board acted within its authority to conduct

additional due diligence regarding the viability of the F class frame unit with SCR and their authority to reject a recommendation contained in the NYISO Staff Report. Furthermore, we note that stakeholders have the
opportunity to pursue their positions in the instant proceeding and indeed have done so. We therefore conclude that stakeholders’ procedural rights have not been violated.”)

51 Id.

52 Indicated Suppliers at 2.

53 Indicated Suppliers at 17.

participation at every stage because it was the diligence and persistence of load-side interests that

ultimately convinced the Board to reconsider the NYISO staff’s initial proxy unit recommendation.54
Consistent with the January Order’s suggestion, the NYISO will of course continue to provide as much
transparency as possible in future ICAP Demand Curve reset stakeholder processes. If it once again
becomes necessary to consider changes at a late stage in a future process, the NYISO will be mindful
of the fact that even its best efforts at outreach did not satisfy some stakeholders in the 2013 process
and will strive to do better. But the NYISO Board must retain final authority to decide what will be
proposed in future ICAP Demand Curve filings. The Indicated Suppliers should not be allowed to

undermine that authority in the guise of seeking clarification regarding the stakeholder process.

IV.CONCLUSION

For the reasons set forth above, the NYISO respectfully requests that the Commission deny the Supply Interests’ requests for rehearing and clarification in their entirety.

Respectfully Submitted,

/s/ Ted J. Murphy

Ted J. Murphy
Counsel to the

New York Independent System Operator, Inc.

March 14, 2014

54 November Filing at 10.

CERTIFICATE OF SERVICE

I hereby certify that I have this day caused the foregoing document to be served on the official service list compiled by the Secretary in this proceeding.

Dated at Washington, DC, this 14th day of March, 2014.

/s/ Catherine A. Karimi

Sr. Professional Assistant

Hunton & Williams LLP

2200 Pennsylvania Ave, N.W. Washington, DC 20037
(202) 955-1500