UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Independent Power Producers)

of New York, Inc.)

)

v.)Docket No. EL13-62-000

)

New York Independent System)

Operator, Inc.)

ANSWER OF THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC. TO
MOTION TO AMEND, AND AMENDMENT TO, COMPLAINT

In accordance with Rule 213 of the Commission’s Rules of Practice and Procedure and the March 28, 2014 Notice of Amendment to Complaint, the New York Independent System Operator, Inc. (“NYISO”) respectfully submits its answer to the Motion to Amend, and
Amendment to, Complaint of the Independent Power Producers of New York, Inc. (“Amended Complaint”). This answer also addresses certain aspects of the Supporting Comments filed by Entergy Nuclear Power Marketing, LLC (“ENPM”) on April 10.1

As is set forth in detail below, the Amended Complaint should be denied. The

Independent Power Producers of New York, Inc. (“IPPNY”) have once again failed to carry their
burden of proof to show that the NYISO’s existing tariff provisions are unjust and unreasonable
under Sections 206 and 306 of the Federal Power Act (“FPA”) and Commission Rule 206.
IPPNY has failed to demonstrate, as Commission precedent requires, that “uneconomic

1 Supporting Comments on Amended Complaint of Entergy Nuclear Power Marketing, LLC (filed
April 10, 2014) (“ENPM Comments”). The fact that the NYISO has chosen not to respond to other
aspects of the ENPM Comments should not be construed as acquiescence in, or agreement with, ENPM’s
assertions.

retention” of existing resources in the New York Control Area (“NYCA”)2 constitutes a “well-
defined structural problem” that necessitates the adoption of a new form of buyer-side market
power mitigation. IPPNY has not even established that the contractual arrangement identified in
the Amended Complaint takes an unjustified approach to addressing anticipated electric system
conditions.

It is inappropriate and unproductive for IPPNY to continue to seek to unilaterally impose
market rule changes on the NYISO and all other stakeholders. It is also unnecessary because the
generation station that is the subject of the arrangement identified in the Amended Complaint is
not anticipated to re-enter the market until September 1, 2015, at the earliest. IPPNY should be
directed to fully articulate its concerns and submit its proposal in the NYISO stakeholder
process. The NYISO will, with input from the independent market monitoring unit (“MMU”),
evaluate those concerns and whether they should lead to any market rule changes. The NYISO
stakeholder process is well suited to vet IPPNY’s concerns and obtain stakeholder input on
possible remedies. The MMU has authorized the NYISO to state that it believes that

uneconomic retention is a potential competitive concern that should be evaluated and addressed
as needed. However, under the specific facts and circumstances of this proceeding, the MMU
believes further evaluation is necessary and agrees that the NYISO’s stakeholder process is the
appropriate place to review and consider the issues raised in the Amended Complaint.

Finally, the NYISO renews its request that the still pending May 10, 2013 Complaint
Requesting Fast Track Processing of the Independent Power Producers of New York, Inc.

(“Complaint”) be denied.

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

I.BACKGROUND

The Complaint focused on what IPPNY alleged to be artificial price suppression caused by Reliability Service Support Agreements (“RSSAs”) involving generating facilities owned by Dunkirk Power, LLC (“Dunkirk”) and Cayuga Operating Company, LLC (“Cayuga”).3 It also alluded to hypothetical market threats that it claimed could arise from future RSSAs and other anticipated New York State policy initiatives.4

The Complaint requested that the Commission mitigate the “uneconomic retention” of

existing resources that are prevented from exiting the market by bilateral contracts that allegedly convey state-sponsored subsidies. Existing capacity resources, as compared to new entrants, are not currently subject to buyer-side mitigation under any Independent System Operator or
Regional Transmission Organization (“ISO/RTO”) tariff.

The Complaint also asked that the Commission order the NYISO to either: (i) exclude

Cayuga and Dunkirk from the capacity market; or (ii) require them to offer capacity at a level no lower than their “going-forward costs,” as defined by IPPNY in proposed tariff revisions that were developed outside of the stakeholder process.

The NYISO’s answer emphasized that the NYISO and the MMU strongly support buyer-
side market power mitigation measures when and where they are needed.5 But, as the NYISO
explained, the Complaint was based on fundamental flaws and wholly without merit.6 The
Cayuga and Dunkirk units were not uneconomic and RSSAs only raise competitive concerns if:

3 Complaint at 20.

4 Id. at 18-19.

5 Answer of the New York Independent System Operator, Inc. at 5 (filed May 30, 2013) (“NYISO Answer”).

6 Complaint at 11-16.

(i) there is no legitimate need for the resource; or (ii) the need addressed by an RSSA already fully captured by capacity market requirements.7

The NYISO also explained that, although IPPNY had a statutory right to file the

Complaint, the filing represented a unilateral attempt to bypass the NYISO’s shared governance system that was inconsistent with clear Commission policy favoring the use of stakeholder
processes. The NYISO asked the Commission to follow its precedent by discouraging IPPNY’s attempted “end-run.”8

The Amended Complaint focuses on a 2014 term sheet between Niagara Mohawk Power
Corporation d/b/a National Grid (“National Grid”) and Dunkirk (the “Term Sheet”).9 According
to the Amended Complaint, the Term Sheet provides for coal-fired Units 2, 3, and 4 of the
Dunkirk Generating Station (“Dunkirk 2-4”) to add natural gas-fired generating capability, and
for energy and capacity from those units to be available for ten years.10 Also according to the
Amended Complaint, the Term Sheet would result in “uneconomic retention in the Rest of State
on a scale and over a term far beyond that occurring under the [RSSAs] that prompted the
Complaint.”11 IPPNY argues that even under the analysis set forth by the MMU in the NYISO
Answer, “Dunkirk 2-4 is not ‘the most economic means to satisfy a reliability need that is not
reflected in the NYISO market requirements.’”12 The Amended Complaint concludes that the

7 Complaint at 11.

8 Id. at 24.

9 Amended Complaint at 1.

10 Id. at 7.

11 Id. at 2.

12 Id. at 3, citing Patton Initial Affidavit to NYISO Answer at P 40.

Commission must act to address what IPPNY anticipates will be an “eye-popping $841

million”13 of “artificial [capacity] price suppression” in New York over the course of ten years.14
On April 10, ENPM filed comments asking the Commission to grant the Amended
Complaint and urging it to use this proceeding to adopt certain “principles” related to
uneconomic retention that would apparently apply to all Commission-jurisdictional organized
capacity markets.15

Nothing in the Amended Complaint or the ENPM Comments causes the NYISO to alter the position stated in the NYISO Answer. The Amended Complaint’s suggestion that the Term Sheet somehow reinforces the need for Commission action is, as demonstrated in this Answer, without merit. Therefore, the NYISO renews its request that the Commission deny IPPNY’s
requests for relief in the Complaint related to the Cayuga and Dunkirk RSSAs, as well as its
other requests for relief.16

II.ANSWER

The MMU has advised the NYISO that it continues to support the indicators for

determining when uneconomic retention arrangements may be problematic that are included in the NYISO Answer.17 The NYISO continues to agree with the MMU. The NYISO and the MMU also agree that contractual arrangements that result in price suppression can have adverse competitive consequences that require mitigation.

13 Amended Complaint at 11 (emphasis in original omitted here).

14 Id. at 16.

15 See ENPM Comments at 9-14.

16 This includes Motion to Lodge of the Independent Power Producers of New York, Inc. (filed in this docket on Nov. 12, 2013), to which NYISO has not previously responded.

17 See NYISO Answer at 2-3.

The NYISO has actively sought tariff changes when it concluded that mitigation rules were justified. For example, it proposed buyer-side mitigation rules for New York City
(“NYC”)18 and then buyer- and supplier-side rules for any Mitigated Capacity Zone, including the newly established G-J Locality.19 In addition, the NYISO worked through the stakeholder process to propose significant enhancements to its buyer-side mitigation rules to add
transparency and certainty for all stakeholders.20 The NYISO also enforces those rules, which results in mitigation when warranted.

At the same time, the NYISO is cognizant of the fact that over-mitigation can harm the
markets. The Commission has clearly held that rules that result in over-mitigation are not
permissible.21 In addition, the NYISO understands that buyer-side market power mitigation
measures can be administratively burdensome and can impose unintended costs. Dr. David B.
Patton, the President of the MMU, indicated in NYISO stakeholder discussions in 2013 that it is

18 See Initial Tariff Compliance Filing of the New York Independent System Operator, Inc.

Implementing New York City ICAP Mitigation Measures, Docket No. ER08-695 (filed March 20, 2008)
(proposing tariff revisions to implement market power mitigation of ICAP suppliers in NYC) and Second
Tariff Compliance Filing of and Request for Waiver of the New York Independent System Operator, Inc.
Implementing New York City ICAP Market Mitigation Measures, Docket No. ER08-695-001 (filed May
6, 2008).

19 New York Independent System Operator, Inc., 143 FERC ¶ 61,217 (2013) (accepting, with conditions, the NYISO’s proposed buyer-side and supplier-side market power mitigation measures for new capacity zones; i.e., Mitigated Capacity Zones).

20 New York Independent System Operator, Inc., Proposed Enhancements to In-City Buyer-Side Capacity Mitigation Measures, Request for Expedited Commission Action, and Contingent Request for Waiver of Prior Notice Requirement, Docket No. ER10-3043 (filed Sept. 27, 2010).

21 See, e.g., New York Independent System Operator, Inc., 143 FERC ¶ 61.217 (2013) at P 77

(directing NYISO to work with stakeholders to “consider whether the buyer-side market power rules for NYC, when applied to a new zone, will appropriately balance the need for mitigation of buyer-side
market power against the risk of over-mitigation” and whether modifications were needed to achieve that balance); citing Edison Mission Energy, Inc., et al., v FERC, 394 F. 3d 964 (D.C. Cir. 2005) (noting
potential dangers of over-mitigation).

difficult to structure the tests in a manner that would ensure that buyer-side mitigation would not restrict economic investment.22

The NYISO stakeholder process has been an effective vehicle for considering and

addressing changes to market power mitigation rules while guarding against over-mitigation. For instance, in 2013 TC Ravenswood, LLC proposed tariff revisions to extend to the Rest of State (“ROS”) market mitigation measures that are currently in place in NYC, the G-J Locality, and any future Mitigated Capacity Zones. After vetting in the stakeholder process, the proposal failed to obtain stakeholder approval, and TC Ravenswood appealed to the NYISO Board of Directors. The Board denied the appeal. It explained that:

There is no evidence that supplier-side market power exists in the ROS, or that
buyer-side market power has been, or is expected to be, exercised there. TCR
provides no analysis substantiating the alleged harm that would result if
uneconomic new generation entered the ROS. While TCR expresses concern
about potential, future uneconomic activities in the ROS, TCR fails to support its
claim that uneconomic activity exists today in ROS and warrants immediate
action without the support of a majority of NYISO stakeholders.23

Because of the potentially significant consequences of both under- and over-mitigation, it
is important to fully evaluate whether mitigation rules are appropriate, and, if so, to carefully
develop them so that they properly address market power issues. The NYISO’s stakeholder
process is clearly a better forum than a formal complaint proceeding for the thorough
consideration, and if warranted, the development of, appropriate market mitigation rules. 24

22 NYISO Board of Directors’ Decision on Appeal of the Management Committee’s Decision Rejecting a Proposal to Apply Capacity Market Mitigation Measures in Rest of State at n. 3 (Sept. 4, 2013) (“Board Decision”); citing NYISO Business Issues Committee Minutes for May 9, 2013 at 3. The Board Decision is available at:

˂http://www.nyiso.com/public/webdocs/markets_operations/committees/appeals/Appeals_to_the_BOD/J
une_11,_2013/Board%20Decision%20ROS%20Mitigation%20Appeal.pdf˃.

23 Board Decision at 3.

24 In its written comments in Docket No AD13-7-000, Technical Conference re Centralized

Capacity Markets in Regional Transmission Organizations and Independent System Operators,

(“Centralized Capacity Market Proceeding”) the NYISO stated that its stakeholder process had “recently

The NYISO is also mindful, notwithstanding ENPM’s and IPPNY’s assertions that

Commission-jurisdictional mitigation rules have no impact on legitimate state prerogatives,25

that the question of whether wholesale capacity market rules are “effectively accommodate” state policies was among the most important issues discussed in the Commission’s recent Centralized Capacity Market Proceeding.26

IPPNY has not provided a basis for the Commission to require that the proposed bilateral agreement contemplated by the Term Sheet be mitigated. It has fallen far short of what is
required to justify the acceptance of its proposed new system of NYCA-wide mitigation rules. ENPM has likewise failed to justify the imposition of its novel “principles” on the NYISO or on other ISO/RTO markets.27 Moreover, neither IPPNY nor ENPM has shown that its proposed mitigation measures strike the right balance between over- and under-mitigation.

struggled” to resolve certain capacity market design issues after extensive discussions. Those issues do
not include the “uneconomic retention” related questions involved in this proceeding. There is thus every
reason to expect that the issues in this proceeding are “controversial and consequential capacity market
design questions” that can and should be addressed through the shared governance process in the first
instance. Post-Technical Conference Comments of the New York Independent System Operator, Inc. at 10
(filed Jan. 8, 2014).

25 ENPM Comments at 6, citing PJM Interconnection, L.L.C., 137 FERC ¶ 61,145 at P3 (2011) and New England States Comm. on Elec. v. ISO New England Inc., 142 FERC ¶ 61,108 at P 35 (2013); Complaint, at n. 123, citing Astoria Generating Co. L.P. v. New York Indep. Sys. Operator, Inc., 140 FERC ¶ 61,189 at P 142 (emphasizing that the Commission’s actions “do not serve to restrict the
authority state or local agencies may have to address reliability concerns”).

26 See e.g. Supplemental Notice of Technical Conference, Final Agenda at 3, Docket No. AD13-7-
000 (August 23, 2013) (“1. Do centralized capacity markets effectively accommodate various federal
and state policies, such as state resource planning policies, renewable portfolio standards, and compliance
with environmental regulations? If not, how can such policy considerations be better accommodated in
centralized capacity market design? 2. Are there specific aspects of capacity market design or specific
capacity market design elements that create barriers to effective implementation of federal or state
resource procurement, planning, energy or environmental policies?”); Notice of Technical Conference,
Docket No. AD13-7-000 (June 17, 2013) at 1 (“[S]ome states have pursued individual resource adequacy
policies to ensure the development of new resources in particular areas or with particular characteristics,
and questions have been raised as to how those individual policies can be accommodated in centralized
capacity markets.”)

27 Attachment C to Complaint and ENPM Comments at 9-14.

A.The Amended Complaint Fails to Demonstrate that Uneconomic Retention Is

a Well-Defined Structural Problem that Necessitates the Adoption of Market Power Mitigation Rules

Under the FPA and the Commission’s procedural rules, a complainant faces a dual
burden of proof: it must both show that the provisions it challenges are unjust, unreasonable,
unduly discriminatory or preferential, and must affirmatively establish that the changes it
proposes are just and reasonable, and not unduly discriminatory or preferential.28 Commission
precedent is clear that “unsubstantiated allegations” are not sufficient to meet the dual burden of
proof. Rather, complainants must offer “clear and convincing” evidence to support their requests
for relief.29 The Commission rightly looks with disfavor on “poorly supported” complaints
based on nothing but speculation and “broad allegations” of violations.30
The Commission has stringent standards for the approval of new market power mitigation measures. As the Commission has held, it “only accepts mitigation measures that address well-
defined structural problems in the market, and has consistently rejected mitigation proposals that
are not adequately supported by a showing of the potential to exercise market power.”31 New

28 Louisiana Public Service Comm’n v. Entergy Corp., 134 FERC ¶ 63,016 at P 13 (2011).

29 See Astoria Gas Turbine Power LLC v. New York Independent System Operator, Inc., 131 FERC ¶ 61,205 at P 19 (2010) (“NRG, as the complainant, bears the burden of proof in this case, but failed to demonstrate with clear and convincing evidence that it met that burden.”)

30 See e.g. Arena Energy, LP v. Sea Robin Pipeline Co., 133 FERC ¶61,140 at P 59 (2010)

(denying a request to remove provisions from a tariff because the claims regarding the misuse of certain tariff provisions were speculative and unsupported and the tariff was not shown to be unjust and
unreasonable); and Public Service Co. of New Mexico, 95 FERC ¶ 61,481 at 62,715 (2001) (rejecting as speculative, unsupported and without merit a claim that the Public Service Company of New Mexico would reap windfall profits from engaging in a certain practice, when there was no showing that the company had historically engaged in such a practice).

31 California Independent System Operator Corp., 139 FERC ¶ 61,211 (2011) (“CAISO”), citing 126 FERC ¶61,150 at P 71.

mitigation proposals must have the support of “a fully developed factual record.”32 By their very
nature, ISO/RTO stakeholder processes help to ensure that the Commission’s standards are
satisfied by producing proposals that consider stakeholders’ input and balance their interests.
The Commission has followed these standards when declining to accept energy market power mitigation rules proposed by ISOs/RTOs in unconstrained regions within their markets.33 For instance, in denying mitigation measures proposed by the California Independent System Operator Corporation (“CAISO”), the Commission found that CAISO had presented “no new evidence or analysis of continuing structural problems ”34 Similarly, as IPPNY

acknowledged in the Complaint, the 2010 Order rejected TC Ravenswood’s claim that a change in contractual or financial arrangements pertaining to an existing generation facility35 should subject it to a new form of buyer side mitigation.36 The Commission found that the possibility that uneconomic capacity that should be mothballed or retired might attempt to exercise market power through contractual or financial arrangements was “too speculative at this point to require an immediate remedy.” The Commission therefore concluded that the evidence to date
supported only offer floor mitigation for uneconomic new entrants.37

32 New York Independent System Operator, Inc., 106 FERC ¶ 61,111, PP 22, 28, 30 (2004) (rejecting, without prejudice, a NYISO proposal to apply automated mitigation procedures outside of New York City.)

33 See ISO New England, Inc. 101 FERC ¶ 61,344, PP 26-28 (2002) and ISO New England, Inc., 100 FERC ¶ 61,287, P 41 (2002) (rejecting market power mitigation proposals absent a convincing
showing of “well-defined structural problems.”)

34 CAISO at P 76.

35 The 2010 Order’s distinction between existing and new resources belies ENPM’s claim that there is no legal basis for viewing uneconomic entry and uneconomic retention differently. See ENPM Comments at 6-9.

36 New York Independent System Operator, Inc., 131 FERC ¶ 61,170 (2010) (“2010 Order”).

37 Complaint at n. 4, citing 2010 Order at P 43. See also CAISO at P 78 (holding that that

“CAISO has not demonstrated why the Commission should base its approval of market power mitigation measures on the mere suspicion of the potential for abuse”).

IPPNY has not met its dual burden of proof under the FPA - it has not shown that

artificial price suppression has occurred under the existing Services Tariff or will occur in the future (assuming that the Term Sheet is actually executed and implemented.) Nor has it
demonstrated that its proposed “remedies” are just and reasonable. It has likewise failed to demonstrate that uneconomic retention is a “well-defined structural problem” in the NYISOadministered capacity market or that circumstances have changed so much since 2010 that concerns about uneconomic retention through contractual or financial arrangements are no longer speculative. The Complaint therefore should be denied.

As the NYISO’s filings in response to the Complaint demonstrated, with the MMU’s

support, IPPNY’s concerns about the Cayuga and Dunkirk RSSAs were overstated and without
merit. Dr. Patton explained in his Initial Affidavit that IPPNY’s assertions are based on
fundamental misunderstandings of these units’ roles in the NYISO market: it is efficient for them
to clear in the capacity market, and any provision imposed that would cause them not to clear
would be unreasonable.38 The NYISO’s earlier filings also explained that IPPNY’s concerns
about possible dangers to the market posed by other existing or hypothetical New York State
public policy initiatives were speculative, premature, and insufficiently established. 39
Although the conclusory allegations offered by the Amended Complaint relate to
potential concerns regarding uneconomic retention, they do not satisfy IPPNY’s burden of proof.
IPPNY’s predictions of artificial price suppression are not supported by “clear and convincing”
evidence and, as discussed below in Section II.B, rest on an overly simplistic and incomplete
assessment of electric system conditions. Given that the Commission already is considering how

38 Patton Initial Affidavit at P 25.

39 See Initial Answer of the New York Independent System Operator, Inc. Opposing Fast Track Processing (filed May 13, 2013) and NYISO Answer at 9-10.

best to balance existing uneconomic entry rules against state public policy prerogatives in the Centralized Capacity Market Proceeding it should not accept IPPNY’s proposed new regime of “uneconomic retention” mitigation rules.

Nor should the Commission adopt ENPM’s uneconomic retention principles.40 There is no record basis for doing so in this proceeding and the Centralized Capacity Market Proceeding already exists as a generic policymaking docket. Indeed, ENPM has already called in that
proceeding for the adoption of rules that would mitigate “uneconomic retention” and would
establish “core market policies.”41

B. The Amended Complaint Has Not Accurately Assessed the Relationship

Between the Term Sheet and the Anticipated Electric System Conditions and Contingencies that it Could Address

Dr. Patton’s Initial Affidavit stated that “to the extent that other units in the future receive RSSAs because they are the most economic means to satisfy a reliability need that is not
reflected in the NYISO’s market requirements, these units should similarly not be mitigated or otherwise prevented from selling capacity.”42 The Amended Complaint relies on this statement to support its claim that the possible implementation of the Term Sheet in September 2015 is
sufficient to justify imposition of new mitigation measures on all ICAP Suppliers in the NYCA. IPPNY’s demand is based on an implicit assumption that all anticipated system conditions could be addressed by a 150 MW transmission upgrade.

40 ENPM Comments at 1-3.

41 In its comments in the Centralized Capacity Market Docket, ENPM echoed the arguments that it seeks to advance in this proceeding, alleging that “experience has shown that the integrity of the
capacity markets has been compromised by market rules that have allowed uneconomic entry, including by generating units operating under ‘reliability must run’ contracts in NYISO and ISO-NE.” ENPM also urged the Commission to use its authority “to establish core market policies that will guide the Northeast RTO[s] in improving their centralized wholesale markets.” Comments of Entergy Nuclear Power
Marketing, LLC, Docket No. AD13-7-000, at 2, 3 (filed Jan. 8, 2014).

42 Patton Initial Affidavit at P 40.

IPPNY is attempting to apply an overly literal interpretation of statements made in the
NYISO’s earlier filings in this docket, and in filings made in a New York State Public Service
Commission (“NYPSC”) proceeding.43 IPPNY’s focus on National Grid’s reference to a 150
MW transmission solution44 is simplistic and potentially misleading. There are many potential
electric system conditions that will need to be addressed by one or multiple projects (especially
when evaluated over a long-term planning horizon). Likewise, it should be beyond dispute that
looking exclusively at just a single electric system condition, in isolation from all of the other

conditions that currently exist, that are expected to exist, or that could come into existence over a long-term planning horizon, distorts the realities facing system planners and operators as well as state policymakers.

In reality, projects are often needed not just because they narrowly address an immediate
or anticipated electric system condition but also because they will address future conditions and
contingencies that could otherwise trigger applicable reliability criteria. The Order Instituting
Proceeding in NYPSC Case 12-E-0503 demonstrates the interrelated nature of electric system
conditions, the universe of potential solutions to the conditions, and how the loss of one resource
can exacerbate existing issues and create new ones.45 The Amended Complaint does not show

43 Amended Complaint at 13, citing NYISO Answer at 18 and Initial Patton Affidavit at P 36 and
Amended Complaint at 15, citing National Grid’s February 13, 2014 filing with the NYPSC at 8 and 11.

44 Second Supplemental Younger Affidavit at P 19.

45 See Order Instituting Proceeding and Soliciting Indian Point Contingency Plan, Case 12-E-

0503, Proceeding on Motion of the Commission to Review Generation Retirement and Contingency Plans (November 30, 2012) (describing implications of the potential retirement of a major nuclear generating station in New York) available at

<HYPERLINK "http://documents.dps.ny.gov/public/common/viewdoc.aspx?docrefid=0fe5ea7e-68a6-42a0-/" http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={0FE5EA7E-68A6-42A0-

85FB-A68C812FAC88}>; see also New York Energy Highway Blueprint at 44 (2012) (Emphasizing that “[d]ynamic and proactive scenario planning can provide many benefits” and the potential importance of taking a “long-term view” that would “allow for longer-term alternative solutions ”) available at

<http://www.nyenergyhighway.com/Content/pdf/Blueprint_FINAL.pdf>.

that it is reasonable to ignore these interrelationships or to consider individual system needs and responses in isolation.

The NYISO has not reviewed the scope and interrelationships of potential system

contingencies which might have been considered by the NYPSC or National Grid in relation to the Dunkirk repowering. The NYISO can state, however, that there may be broader electric system benefits. One example of system benefits that may be desirable and realized by more generation (in the case of Dunkirk, more than the 150 MW identified in the Amended
Complaint) is enhanced reliability and operational flexibility.46

In any case, measuring the true extent of an electric system need over an extended period of time involves many considerations and requires a complex exercise of judgment. It is not a
task that can be reduced to a single test, formulation, or to the myopic approach espoused by
IPPNY. The Amended Complaint does not evaluate such factors in connection with the Term
Sheet. Therefore, it is not reasonable to rely on the Amended Complaint’s assessment of the
relationship between the Term Sheet and the anticipated electric system conditions and
contingencies that it could address.

46 See, e.g., April 7, 2014 Comments of NRG Energy, Inc. in NYPSC Case 12-E-0577,

Proceeding on Motion of the Commission to Examine Repowering Alternatives to Utility Transmission Reinforcements - Term Sheet Agreement Between National Grid and Dunkirk Power LLC Regarding Dunkirk Generation (describing potential reliability, operational, planning, grid stabilization, and other benefits of the Term Sheet) available at

<HYPERLINK "http://documents.dps.ny.gov/public/common/viewdoc.aspx?docrefid=7eebdf1c-803b-4629-/" http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={7EEBDF1C-803B-4629-

860D-B61909409121}>; Dunkirk Repowering Power Flow Analysis Prepared by the NYISO as

Requested by NYS DPS (October 25, 2013) (describing scenario in which 435 MW of generation capacity
at Dunkirk would provide greater operational flexibility than 150 MW) available at
<http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={A4F199EA-7DE8-447C-
95D1-D0E86F6BE067}>.

arrangement.”58 It would also seem to require an assessment of the actions each resource might take in scenarios that might prompt it to mothball or retire, the potential timing of such actions, and other factors such as other potential legal and regulatory changes. An analysis of so many scenarios would be impracticable given the time that will be available to conduct it.

IPPNY’s first proposed remedy, precluding resources with contractual arrangements that IPPNY opposes from offering capacity into the market, could result in excluding capacity that is the most economic means of satisfying system conditions.59

IPPNY’s second proposed remedy, that resources’ offers into the market be at a level that
reflects their GFCs and that does not consider revenue from bilateral contracts, is fundamentally
flawed. As Dr. Patton explained, capacity resources that are the subject of RSSAs will normally
not be anti-competitive, and requiring these units to ignore the revenue from the RSSAs would
effectively require them to submit inflated offers.60 The potential breadth of revisions could also
impact resources when there are valid public policy reasons for excluding them from

mitigation.61

In short, even if there were reason to think that mitigation measures should be adopted in
this proceeding, any such measures should be subject to stakeholder review and revision before
they are implemented. The NYISO’s shared governance process would provide an opportunity
to obtain input from all market sectors, to consider implications for potential future contracts

58 See IPPNY’s proposed revisions to the definition of “Uneconomic Existing Resource” in Attachment D to the Amended Complaint.

59 Patton Initial Affidavit at P 40.

60 See NYISO Answer at 15; Patton Initial Affidavit at PP 30-31.

61 In its comments in the Centralized Capacity Market Proceeding, the NYISO suggested that a “best practice should be exempting wind and solar renewable resources, and perhaps other kinds of renewable fuel resources from buyer-side capacity market power mitigation measures.” Post-Technical Conference Comments of the New York Independent System Operator, Inc. at 14.

with existing generators, RSSAs, and state and local initiatives in New York, and to find a balance between competing interests. It would also help to reduce market uncertainty and to avoid unintended adverse consequences which are more likely to be identified through
discussions than via litigation. IPPNY provides no justification for its refusal to bring its
concerns and its proposed solutions before the stakeholders and fails utterly to show that those proposed solutions are just and reasonable.

III.CONCLUSION

For the foregoing reasons, the NYISO respectfully requests that the Commission deny the Complaint, as amended, including its proposals to revise the Services Tariff and all other
requested forms of relief.

Respectfully submitted,

/s/ Gloria Kavanah

Gloria Kavanah
Counsel for the

New York Independent System Operator, Inc.

cc:Michael A. Bardee

Gregory Berson

Anna Cochrane

Jignasa Gadani

Morris Margolis

David Morenoff

Michael McLaughlin Daniel Nowak

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 April, 2014.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207