10 Krey Boulevard  Rensselaer, NY 12144

September 23, 2014

ELECTRONICALLY SUBMITTED

Kimberly D. Bose

Secretary

Federal Energy Regulatory Commission 888 First Street, N.E.

Washington, D.C. 20426

Re: New York Independent System Operator, Inc.’s Eighth Informational Report on
Efforts to Develop Rules Addressing Compensation to Generators that Are
Determined to be Needed for Reliability; Docket No. ER10-2220-000.

Dear Secretary Bose:

In accordance with paragraph 54 and ordering paragraph “(C)” of the Federal Energy
Regulatory Commission’s (“Commission’s”) October 12, 2010, Order On Proposed Mitigation
Measures in Docket No. ER10-2220-000 (“Order”),1 the New York Independent System
Operator, Inc. (“NYISO”), hereby submits this Eighth Informational Report on Efforts to
Develop Rules Addressing Compensation to Generators that Are Determined to be Needed for
Reliability (“September 2014 Informational Report”). The NYISO submitted its Seventh
Informational Report on Efforts to Develop Rules Addressing Compensation to Generators that
Are Determined to be Needed for Reliability on March 27, 2014, (“March 2014 Informational
Report”). In footnote 44 of its Order the Commission stated that it does not intend to issue
public notices, accept comments, or issue orders on this Informational Report.

Paragraph 54 of the Order stated, in part, as follows:

Because fixed cost recovery issues do not go to whether NYISO’s mitigation
proposal is in itself just and reasonable, this proceeding is not the appropriate
forum in which to raise such issues. Further, commenters do not present factual
evidence that demonstrates that market participants generally will be unable to

1New York Independent System Operator, Inc., 133 FERC ¶ 61,030. Since issuance of this Order in October 2010, the Commission has accepted tariff revisions to establish a New Capacity Zone comprised of Load Zones G, H, I and J, and a corresponding revision to the definition of “Rest of State.” See New York Independent System
Operator, Inc., 144 FERC ¶ 61,126, (Docket No. ER13-1380-000, accepting Services Tariff Sections 2.7, 2.18). Effective January 27, 2014, Rest of State is defined as Load Zones A through F.

Kimberly D. Bose, Secretary September 23, 2014

Page 2

recover their costs due to application of the proposed mitigation provisions. We
note, however, that the NYISO Board of Directors, in its July 29, 2010 decision
on the appeal of the NYISO Management Committee’s adoption of the instant
mitigation proposal, directed NYISO management to work with stakeholders to
examine the generation owners’ claims that existing cost recovery mechanisms
are inadequate and to review the process that evaluates permanent solutions to
reliability problems. Accordingly, we believe the better course is to await the

outcome of the stakeholder process as directed by the NYISO Board of Directors. In this regard, we direct NYISO to file status reports every 180 days beginning 180 days from the date of this order for informational purposes only.44

44 The Commission does not intend to issue public notices, accept comments, or issue orders on such informational filings.

In compliance with the cited sections of the Order, the NYISO submits this Informational

Report.

I. Documents Submitted

1.This Informational Report;

2.An August 28, 2014 presentation titled Annual Capacity Market by Randy Wyatt,

of NYISO, to a meeting of the NYISO’s ICAP Working Group (“Attachment

A”); and

3.An August 28, 2014 presentation titled NYISO Capacity Market Assessment by

Analysis Group, to a meeting of the NYISO’s ICAP Working Group

(“Attachment B”).

II. Informational Report

A. Summary of the March 2014 Informational Report

The NYISO did not present new or updated proposals to its stakeholders in the period

between the September 2013 Informational Report and the March 2014 Informational Report. In addition, the NYISO did not receive new or updated proposals from its stakeholders or New
York Department of Public Service staff between submission of its sixth and seventh
informational reports. During this time, the NYISO continued assessing whether additional rules addressing compensation to generators needed for reliability are necessary to improve the
NYISO administered markets.

Kimberly D. Bose, Secretary September 23, 2014

Page 3

B.September 2014 Informational Report

In relation to “review[ing] the process that evaluates permanent solutions to reliability

problems,”2 the NYISO has continued to explore with stakeholders potential modifications to its Capacity market that could result in more advanced notice of a generating unit’s intent to
mothball or retire. More advanced notice could provide additional time to identify reliability
needs and implement permanent solutions. Two presentations were made at the NYISO’s ICAP Working Group (“ICAPWG”) meeting on August 28, 2014 that could advance the notice period. The first presentation, given by NYISO staff, analyzed the concept of an annual capacity market. The second presentation, given by the Analysis Group regarding the evaluation of potential
capacity market enhancements it is performing at the request of the NYISO, includes the element of advancing the retirement notification from generating units. Stakeholders provided input on both presentations and the NYISO is continuing its review.

C.Additional Market Activity Update

The March 2014 Informational Report also discussed a matter pending before the New
York State Public Service Commission (“NYPSC”) regarding the compensation of generating
units seeking to retire. In August 2012, the NYPSC issued an order that approved a proposal for
the transmission owner (Niagara Mohawk Power Corp. d/b/a/ “National Grid”) to compensate
the generator owner (Dunkirk Power LLC, “Dunkirk”) for “reliability support services” (“RSS”)
provided by two of the four generating units at the Dunkirk facility.3 National Grid then filed
proposed tariff revisions with the Federal Energy Regulatory Commission to certain National
Grid-specific components of the Wholesale Transmission Service Charge formula under

Attachment H of the NYISO Open Access Transmission Tariff.4 The Commission initially

rejected National Grid’s filing, prior to accepting National Grid’s filing of additional tariff

revisions amending its formula rate to incorporate costs incurred for RSS.5 National Grid’s

December 6, 2013 Federal Power Act Section 205 filing was accepted and suspended subject to further order of the Commission after additional consideration of the matter.

Since the March 2014 Informational Report, the NYPSC approved National Grid’s Term Sheet with the Dunkirk for refueling the Dunkirk facility.6 The Term Sheet provides for

2 Order at 54.

3 NYPSC Case No. 12-E-0136, Order Deciding Reliability Issues and Addressing Cost Allocation and Recovery (issued August 16, 2012). Order may be retrieved from

˂HYPERLINK "http://documents.dps.ny.gov/public/common/viewdoc.aspx?docrefid=34d25567-d7b7-41ea-822f-/" http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={34D25567-D7B7-41EA-822F-
6585B344BC0E}˃.

4 See Federal Energy Regulatory Commission Docket No. ER13-1182-000.

5 New York Independent System Operator, Inc., Niagara Mohawk Power Corporation, 146 FERC ¶ 61,065 (2014).

6 NYPSC Case No. 12-E-0577, Order Addressing Repowering Issues and Cost Allocation and Recovery (issued June 13, 2014. Order may be retrieved from

˂http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={6E52D9CF-DA63-4B09-9956-
DC22142D879F}˃.