10 Krey Boulevard Rensselaer, NY 12144
February 13, 2015
Submitted Electronically
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 Proposed Amendments to
its Market Administration and Control Area Services Tariff Rate Schedule 2; Docket No. ER15-___-___.
Dear Ms. Bose:
The New York Independent System Operator, Inc. (“NYISO”) submits this filing
pursuant to Section 205 of the Federal Power Act1 to propose amendments to Rate Schedule 2
of its Market Administration and Control Area Services Tariff (“Services Tariff”) that
redesign the compensation to Suppliers providing Voltage Support Service (“VSS”).2 The
proposed amendments to Rate Schedule 2 of the Services Tariff would compensate VSS
Suppliers based on their capability to provide both leading and lagging voltage support. The
proposed compensation rate is $2,592 per MVAr of both leading and lagging capability.3 The
NYISO also proposes to inflate the compensation rate annually with the Consumer Price
Index (“CPI”). Additional proposed amendments include compensating Suppliers with
automatic voltage regulator (“AVR”) outages that notify the NYISO of such outages.
The amendments being submitted in this filing received the support of a majority of the NYISO stakeholders, including more than half of the generation owners that voted at the November 20, 2014 Management Committee meeting.
1 16 U.S.C. § 824d.
2 Capitalized terms that are not otherwise defined herein shall have the meaning specified in the Services Tariff.
3 MVAr is the unit of measure for Reactive Power capability.
Kimberly D. Bose, Secretary February 13, 2015
Page 2
I.LIST OF DOCUMENTS SUBMITTED
The NYISO submits the following documents:
1.This filing letter;
3.A clean version of the proposed revisions to the NYISO’s Services Tariff
(“Attachment I”); and
4.A backline version of the proposed revisions to the NYISO’s Services Tariff
(“Attachment II”).
II.COPIES OF CORRESPONDENCE
Correspondence concerning this filing should be served on:
Robert E. Fernandez, General Counsel
Raymond Stalter, Director, Regulatory Affairs *James H. Sweeney, Attorney
New York Independent System Operator, Inc.
10 Krey Boulevard
Rensselaer, NY 12144
Tel: (518) 356-7659
Fax: (518) 356-7678
mlampi@nyiso.com
jsweeney@nyiso.com
* Person designated for receipt of service
III. BACKGROUND AND JUSTIFICATION
Voltage Support Service is an essential ancillary service for maintaining reliable bulk power system operations. Since Commission Order No. 888, voltage support has been a mandatory transmission ancillary service and transmission providers must provide at least some reactive power to the transmission system from generators.4 The Commission further directed that voltage support suppliers be compensated.5
4 Promoting Wholesale Competition Through Open-Access Non-Discriminatory Transmission Service by Public
Utilities: Recovery of Stranded Costs by Public Utilities and Transmitting Utilities. Order No. 888, FERC Stats.
& Regs., Regulations Preambles January 1991 - June 1996 ¶ 31,036, at ¶ 31,707 (1996), order on reh'g, Order
No. 888-A, FERC Stats. & Regs., Regulations Preambles July 1996 - December 2000 ¶ 31,048 at 30,319 (1997).
Order on reh'g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh'g. Order No. 888-C, 82 FERC ¶
61,046 (1998). aff'd in relevant part sub nom. Transmission Access Study Policy Group v. FERC, 225 F.3d 667
(D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 (2002) (“The transmission provider must
provide at least some reactive power from generation sources. For this reason, and because a transmission
customer has the ability to affect the amount of reactive supply required, we will require that reactive supply and
voltage control service be offered as a discrete service, and to the extent feasible, charged for on the basis of the
Kimberly D. Bose, Secretary February 13, 2015
Page 3
Since its inception in 1999, the NYISO has been compensating Suppliers of Voltage
Support Service.6 Rate Schedule 2 of the Services Tariff provides an annual capacity
payment per MegaVar (“MVAr”), through monthly payments, to those generators that test the
capability of the equipment used to supply MVArs and otherwise qualify for voltage support
payment under the NYISO’s procedures.7 The VSS compensation is cost-based. Currently
generators providing VSS are compensated $3,919/MVAr annually based on the lagging
reactive power capability demonstrated by the generator’s annual lagging reactive power test
or operational data. Leading reactive power tests are required once every three calendar years
to qualify for compensation; however, the leading reactive power test results are not directly
tied to a generator’s compensation.
The NYISO developed the VSS program compensation changes described in this
filing due to increased need for leading reactive power support throughout the New York
Control Area (“NYCA”). Since 2010, the number of NYISO requests for leading reactive
power support has substantially increased due to higher off-peak transmission voltages. More
than 90% of the NYISO’s reactive power support requests during this time have been for
leading reactive power support. In contrast, prior to 2010, more than 90% of the NYISO’s
reactive power support requests were for lagging reactive power support. To respond to the
substantial increase of leading reactive power support requests, the NYISO needs more
accurate data on generators’ ability to provide leading reactive power support and NYCA
generators should have an incentive to more accurately demonstrate their maximum leading
reactive power capabilities through testing or operational data. While reliability rules require
generators to perform leading reactive power tests,8 their amount of compensation does not
depend on the demonstrated capability. As a result, demonstrated capability has varied
dramatically from test to test for the same unit. Compensating a generator for its leading
reactive power capability will encourage generators to more accurately determine the leading
reactive power capability of the unit. Therefore, the NYISO is proposing to reformat the
current compensation framework to account for both demonstrated lagging and leading
reactive power capability.
The proposed VSS compensation structure will pay qualified VSS Suppliers
$2,592/MVAr annually for the total of their demonstrated lagging and leading reactive power
amount required”).
5 See e.g., Midwest Independent Transmission System Operator Inc., 109 FERC ¶ 61,005 (2004), order on reh’g. 110 FERC ¶ 61,267 (2005) (rejecting the Midwest ISO’s proposed revisions to its Rate Schedule 2 and directing it to provide compensation for generators providing reactive power and voltage control services).
6 VSS is provided under Rate Schedule 2 of the NYISO’s Open Access Transmission Tariff (“OATT”).
7 VSS suppliers are also compensated under Services Tariff Rate Schedule 2 for lost opportunity costs incurred when they reduce their energy output in order to provide VSS.
8 See Northeast Power Coordinating Council, Inc. Reliability Reference Directory # 10 R8 at p. 6. See also NYISO Ancillary Services Manual Section 3.6,
http://www.nyiso.com/public/webdocs/markets_operations/documents/Manuals_and_Guides/Manuals/Operation
s/ancserv.pdf.
Kimberly D. Bose, Secretary February 13, 2015
Page 4
capability. VSS Suppliers will be required to demonstrate both lagging and leading reactive power capability annually with test results or operational data. The NYISO expects this
compensation structure to result in suppliers demonstrating more accurate leading reactive
power capability through more precise testing or actual operations data. The NYISO
estimates that more accurate, annual leading reactive power demonstrations should produce a 5% to 15% increase in the amount of leading reactive power capability available to the
NYISO and more consistent leading reactive power tests from year to year. The increased
leading reactive power capability will allow the NYISO and other Transmission Owners to
operate the electric grid more reliably.
The NYISO also proposes to inflate the compensation rate annually based on the
average annual CPI. The NYISO added the CPI inflator to its compensation proposal in
response to stakeholder feedback. The CPI inflator is a just and reasonable method to escalate
VSS payments over time in accordance with cost and inflation trends.9 The modified VSS
compensation structure proposed in this filing is the product of more than one year of
stakeholder presentations, discussions and feedback. During this process, the NYISO
stakeholders agreed to add the average annual CPI inflator to the VSS compensation structure
starting in 2015. Therefore, the proposed VSS compensation rate for 2016 will be the
originally proposed $2,592/MVAr of tested leading and lagging capability plus one year of
the CPI inflator.
The NYISO’s proposed redesign of the VSS compensation structure is based on the
cost of service information available to the NYISO and extensive discussions with Market
Participants. The redesign maintains the approximate total dollar value of the current VSS
program in the near term. The redesign simply shifts compensation to both leading and
lagging reactive power capability as opposed to only compensating lagging reactive power
capability.
In 2002, the NYISO implemented, with the support of its Market Participants, a single
cost-based rate for lagging reactive power capability determined from the latest available
Commission-approved customer rates for Voltage Support Service for vertically integrated
generation owners in New York State.10 At that time, the NYISO and Market Participants
agreed to the $3,919/MVAr compensation rate based on total costs associated with the total
available MVArs of reactive power supply.11 “The current rate has been in place since 2002
and, when established in 2002, was based on full cost support that fully justified the
Commission’s accepting NYISO’s proposed rate. The mere passage of time does not, by
itself, invalidate the rate established in 2002.”12 The NYISO has attempted, unsuccessfully,
9 New York Independent System Operator, Inc., 135 FERC ¶ 61,170 (2011) at PP 82 and 82 (CPI is also the escalation index used for the NYISO ICAP demand curves).
10 New York Independent System Operator, Inc. Filing of Amended Rate Schedule 2 for Market Administration
and Control Area Services Tariff, to Provide Payments for Voltage Support Service, and Request for Expedited
Action, and Request for Clarification of Prior Payments, Docket No. ER02-617, December 27, 2001 at p. 6.
11 Id. at 6-7.
12 New York Independent System Operator, Inc., 117 FERC ¶ 61,002 (2006) at P 11.
Kimberly D. Bose, Secretary February 13, 2015
Page 5
to redesign the VSS compensation structure since 2002; however, the NYISO and Market Participants were previously unable to develop a mutually agreeable compensation
framework.13 The redesign proposed in this filing sets forth a just and reasonable rate to compensate Voltage Support Service providers for both leading and lagging reactive power capability that is supported by a majority of NYISO’s Market Participants.
The NYISO is also proposing to continue compensating Suppliers with automatic
voltage regulator outages when the NYISO receives timely notice of such outages. A fully
functioning AVR is required for full VSS compensation; the same as today. The NYISO’s
proposal creates three categories of Suppliers with AVR outages: (1) Suppliers that
commence AVR repairs within thirty days of the outage; (2) Suppliers that notify the NYISO
of the outage within thirty days but fail to commence repairs during that time; and (3)
Suppliers that fail to notify the NYISO of AVR outages. Each AVR outage category has its
own compensation level. Suppliers that commence AVR repairs within thirty days will
continue to receive full VSS compensation. A Supplier that notifies the NYISO of AVR
outages lasting longer than thirty days, but fails to commence repairs within thirty days, will
receive one-half of its monthly VSS payment. The full monthly VSS payment will be
restored when the AVR returns to full functionality. Suppliers that fail to notify the NYISO
of AVR outages lasting longer than thirty days will be disqualified from the VSS program for
the remainder of the calendar year. This payment structure will allow VSS Suppliers to
remain in the VSS program while repairing an AVR and facilitate the immediate return to full
VSS compensation when an AVR is repaired. VSS Suppliers’ ability to immediately return to
the VSS program will maintain a more stable amount of reactive power available to the
NYISO throughout the year for reliable operation of the bulk power system.
IV. PROPOSED TARIFF REVISIONS
The NYISO proposes the following revisions to Rate Schedule 2, Section 15.2, of its Services Tariff.
Throughout Section 15.2, the NYISO proposes to refer to qualified suppliers of
Voltage Support Service as “Voltage Support Resources.” The standard term for these
resources reduces the need to repeat the cumbersome list of qualified types of resources. The NYISO is not proposing substantive changes to the types of resources that are qualified to provide Voltage Support Service.
• Section 15.2.2.1 - revised to describe the new annual VSS payment structure. The
new annual payment will be based on the VSS Compensation Rate of $2,592/MVAr,
adjusted annually by the annual average CPI, multiplied by the sum of the leading and
lagging MVAr capacity of the resource.
13 See e.g., New York Independent System Operator, Inc. Exigent Circumstances Proposal to Amend Its Tariffs to
Temporarily Deter the Expiration of Voltage Support Service Rates, Docket No. ER06-291, December 5, 2005.
Kimberly D. Bose, Secretary February 13, 2015
Page 6
• Section 15.2.6 - revised to indicate the impacts to a Voltage Support Resource’s
payments if it fails to maintain an automatic voltage regulator (“AVR”) or fails to
commence timely repairs. A Voltage Support Resource will be disqualified as a
supplier of Voltage Support Service if it fails to notify the NYISO of an AVR outage
lasting more than 30 days. Upon disqualification, the Voltage Support Resource will
not receive VSS payments until the supplier complies with the conditions outlined in
Section 15.2. The NYISO is not proposing any substantive changes to the conditions
with this filing. A Voltage Support Resource that notifies the NYISO within thirty
days of an AVR outage lasting longer than thirty days, but that fails to commence
timely and appropriate repairs, will receive one half of its monthly VSS payment until
the AVR returns to full functionality. A Voltage Support Resource will not be eligible
for VSS payment in the next compensation year if it fails to repair its AVR and
perform an acceptable test in accordance with NYISO procedures.
The tariff revisions proposed in this filing are submitted herewith in both clean and blackline versions.
V.PROPOSED IMPLEMENTATION PLAN
The NYISO proposes to implement the tariff revisions described in this filing on
January 1, 2016 in accordance with the effective date requested below, such that the new
compensation structure and accompanying tariff changes are effective for the entire calendar
year.
The NYISO also commits to undertake a comprehensive review of the VSS program in 2020, four years after implementation of the changes proposed in this filing. The NYISO’s review will focus on the impacts of the VSS program compensation changes that are
described in this filing letter and the accompanying proposed tariff modifications. The review will also examine whether any other potential improvements to the VSS program are
appropriate at that time. The NYISO will describe the comprehensive review and its findings to stakeholders at a working group meeting(s).
VI. REQUESTED EFFECTIVE DATE AND REQUEST FOR WAIVER
The NYISO respectfully requests that the tariff revisions proposed in this filing be
permitted to become effective on January 1, 2016. The NYISO respectfully requests that the
Commission issue an order on this filing within 60 days of the date the filing is submitted.
The NYISO requests a waiver of Commission regulations to allow the NYISO to
make this filing more than 120 days prior to the date on which the proposed revisions are to become operational.14 No Market Participant will be prejudiced by NYISO’s request because the proposed implementation timetable was developed in consultation with Market
14 See 18 CFR §35.3(a)(1).
Kimberly D. Bose, Secretary February 13, 2015
Page 7
Participants. Market Participants have known, for some time, that the NYISO will be
prepared to implement the revised compensation structure for the entire 2016 calendar year.
The NYISO seeks acceptance of these tariff revisions now to give VSS Suppliers time to test
and prepare for the revised compensation structure in 2016. Since VSS compensation is an
annual payment, the NYISO also seeks to have one compensation structure in place for each
complete calendar year. Therefore, the existing VSS compensation structure will continue
through the end of 2015 and the VSS compensation structure proposed herein will be in place
for all of 2016.
VII. STAKEHOLDER APPROVAL
The NYISO’s Management Committee approved these tariff amendments on
November 20, 2014, with affirmative votes from almost 80% of stakeholders. The NYISO Board of Directors approved these tariff amendments on January 13, 2015.
VIII. SERVICE LIST
The NYISO will send an electronic link to this filing to the official representative of
each of its customers, to each participant on its stakeholder committees, to the New York
Public Service Commission, and to the New Jersey Board of Public Utilities. In addition, the
complete filing will be posted on the NYISO’s website at www.nyiso.com.
IX.CONCLUSION
WHEREFORE, for the foregoing reasons, the New York Independent System
Operator, Inc. respectfully requests that the Commission accept the proposed tariff changes identified in the Attachments hereto within 60 days of this filing, with an effective date of January 1, 2016.
Respectfully submitted,
/s/ James H. Sweeney
James H. Sweeney, Attorney
New York Independent System Operator, Inc.
cc:Michael Bardee
Gregory Berson
Anna Cochrane
Morris Margolis
David Morenoff
Daniel Nowak
Kathleen Schnorf
Jamie Simler
Kevin Siqveland
