10 Krey Boulevard Rensselaer, NY 12144
November 30, 2015
By Electronic Delivery
Honorable Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, NE
Washington, DC 20426
Re: New York Independent System Operator, Inc., Docket No. ER16-___-000;
Proposed Revisions to Services Tariff and OATT to Implement
Improved Scarcity Pricing
Dear Secretary Bose:
In accordance with Section 205 of the Federal Power Act1 and Part 35 of the regulations
of the Federal Energy Regulatory Commission (“Commission”), the New York Independent
System Operator, Inc. (“NYISO”) respectfully submits proposed amendments to its Market
Administration and Control Area Services Tariff (“Services Tariff”) and Open Access
Transmission Tariff (“OATT”) to implement improved scarcity pricing logic in the Real-Time
Market (“Comprehensive Scarcity Pricing”).2 Scarcity pricing refers to the pricing rules utilized
for Energy and certain Ancillary Services in real-time during periods when the NYISO has called
upon Special Case Resources (“SCRs”) and/or the Emergency Demand Response Program
(“EDRP”) to provide load reduction to assist in maintaining system reliability. The purpose of
scarcity pricing is to ensure that real-time prices appropriately reflect the costs associated with
deploying these demand response resources.
The NYISO Management Committee approved the proposed tariff revisions by a show of hands vote, with one vote in opposition, on October 28, 2015. The NYISO requests an Order accepting these tariff revisions by January 29, 2016 (i.e., sixty days from the date of this filing letter). This would allow the NYISO to confidently proceed with developing and deploying the software changes necessary to implement Comprehensive Scarcity Pricing before the proposed effective date of the tariff amendments. The NYISO currently anticipates the proposed revisions will become effective on or before June 30, 2016.
1 16 U.S.C. § 824d.
2 Capitalized terms not otherwise defined herein shall have the meaning specified in Section 2 of the Services Tariff and Section 1 of the OATT.
Honorable Kimberly D. Bose November 30, 2015
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I.Documents Submitted
1.This filing letter;
2.A clean version of the proposed revisions to the NYISO’s Services Tariff
(“Attachment I”);
3.A clean version of the proposed revisions to the NYISO’s OATT (“Attachment II”);
4.A blacklined version of the proposed revisions to the NYISO’s Services Tariff
(“Attachment III”); and
5.A blacklined version of the proposed revisions to the NYISO’s OATT (“Attachment
IV”).
II.Background
Scarcity pricing refers to the manner in which the NYISO seeks to ensure that real-time prices reflect the value of demand response resources when such resources are called upon to
maintain system reliability. The NYISO implemented its current, ex-post scarcity pricing logic on July 8, 2013.3
Under the current, ex post logic, the NYISO may adjust real-time energy prices, after
resource schedules have already been established, in the Load Zone(s) in which EDRP resources
and/or SCRs are activated. The NYISO adjusts real-time prices if it determines that the amount
of EDRP resources and SCRs called upon to provide load reduction is greater than the amount of
unscheduled (or latent) 30-Minute Reserve capability available from eligible resources (i.e., the
“but-for test”). The “but-for test” provides an indication of whether the NYISO would have
likely experienced a shortage of Operating Reserves absent the activation of the EDRP and/or
SCR program.4 This ex post methodology, however, has the potential to cause inconsistencies
between resource schedules and pricing outcomes. Such inconsistencies could result in the
potential for uplift costs.5
3 New York Independent System Operator, Inc., 144 FERC ¶ 61,013 (2013).
4 The NYISO may also revise real-time Operating Reserves and Regulation Services prices, afterthe-fact, to the extent that the “but-for test” indicates that the NYISO would have been short Operating Reserves in the reserve region(s) to which the activated Load Zone(s) belong.
5 The New York Transmission Owners raised these concerns with the Commission in response to
the NYISO’s proposal to implement its current, ex post scarcity pricing logic. See, e.g., Docket No.
ER13-909-000, New York Independent System Operator, Inc., Motion to Intervene and Protest of the New
York Transmission Owners at 3-10 (March 1, 2013); Docket No. ER13-909-000, supra, Motion for
Leave to Answer and Answer of the New York Transmission Owners at 5-8 (March 20, 2013); and
Docket No. ER13-909-001, supra, Comments of the New York Transmission Owners in Response to the
Honorable Kimberly D. Bose November 30, 2015
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The current scarcity pricing methodology also does not apply to the NYISO’s Proxy
Generator Buses. This may result in inefficient scheduling of imports and exports during the
periods when the NYISO is likely to activate the EDRP and/or the SCR program. The NYISO’s Market Monitoring Unit, Potomac Economics, has previously recommended that the NYISO extend scarcity pricing to its external interfaces.6
In approving the NYISO’s current, ex post scarcity pricing methodology, the
Commission encouraged the NYISO to discuss with its stakeholders whether incorporation of
scarcity pricing into the real-time commitment and dispatch software was feasible and
warranted.7 Comprehensive Scarcity Pricing is the result of that effort. The project will replace
the current, ex post methodology by including scarcity pricing in the real-time optimization.
III. Overview of Comprehensive Scarcity Pricing and Justification
Comprehensive Scarcity Pricing will improve on the NYISO’s current scarcity pricing
logic by incorporating scarcity pricing into the real-time optimization. This will: (i) ensure
consistency between resource schedules and pricing outcomes in real-time during EDRP and
SCR program activations, thereby reducing the potential for uplift costs; and (ii) reflect the
impacts of scarcity pricing at Proxy Generator Buses, thereby facilitating more efficient
interchange transactions when EDRP and SCR program activations occur in real-time.
A. Incorporation of Scarcity Pricing in the Real-Time Optimization
Scarcity pricing will be incorporated into the optimization by establishing a supplemental
30-Minute Reserve requirement in real-time during the periods when the NYISO has called upon
EDRP resources and/or SCRs to provide load reduction. The NYISO will seek to procure this
additional 30-Minute Reserve requirement from eligible Suppliers located within the Load
Zone(s) in which EDRP resources and/or SCRs have been activated. Any resulting shortage in
meeting the additional 30-Minute Reserve requirement will be priced at $500 per MW.8
New York Independent System Operator’s Response to the Commission’s Request for Further Information at 15-18 (May 30, 2013).
6 See Potomac Economics, 2013 State of the Market Report for the New York ISO Markets at 68 and 100 (May 2014), available at:
http://www.nyiso.com/public/webdocs/markets_operations/documents/Studies_and_Reports/Reports/Mar
ket_Monitoring_Unit_Reports/2013/2013%20State%20of%20the%20Market%20Report.pdf.
7 New York Independent System Operator, Inc., 144 FERC ¶ 61,013 at P 27 (2013).
8 This represents the same value assigned to EDRP resources and SCRs under the current, ex post
scarcity pricing logic. This price is based on the curtailment strike price value submitted by nearly all
SCRs. Nearly 98 percent of all SCRs submit a strike price at or near $500 per MW. See Docket No.
ER01-3001-000, New York Independent System Operator, Inc., Annual Report at Attachment I, pp. 13-14
(January 15, 2015).
Honorable Kimberly D. Bose November 30, 2015
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The amount of the additional 30-Minute Reserve requirement is based, in part, on the
expected load reduction to be provided by the EDRP resources and/or SCRs that the NYISO has
activated (i.e., the “expected EDRP/SCR MW” value). The expected EDRP/SCR MW value
will be based on historical performance of EDRP resources and SCRs. Separate values will be
established for voluntary activations and mandatory activations.9 The expected EDRP/SCR MW
value is the sum of the applicable value (i.e., voluntary or mandatory) for the Load Zone(s)
activated by the NYISO for the same activation reason (i.e., the “scarcity reserve region”).10
Certain stakeholders raised concerns regarding the use of a 30-Minute Reserve product to
incorporate scarcity pricing into the real-time optimization. These stakeholders contended that
this methodology could result in either: (i) inefficient dispatch of resources; or (ii) triggering of
scarcity pricing during periods when the system may actually have sufficient resources available
to meet all energy and reserve requirements absent the 30-minute ramp constraint imposed by
use of a 30-Minute Reserve product. In response to such concerns, the NYISO proposed to
offset the expected EDRP/SCR MW value by the amount of energy production capability that could be provided by available resources in greater than 30 minutes, but less than or equal to 60 minutes within the same Load Zone(s) as the activated demand response resources (i.e., the “available operating capacity” value).
This offset accounts for the fact that absent the availability of EDRP resources and SCRs, the real-time market software would seek to procure capability from Suppliers with longer
ramping requirements. The use of a 60-minute limitation appropriately aligns the value of the offset with the look-ahead functionality of the Real-Time Dispatch (“RTD”) software.
The NYISO also conducted an assessment of available capability during the most recent mandatory activations of the SCR program in July 2013 (i.e., July 15, 2013 through July 19, 2013). As depicted in the following figures, the NYISO’s assessment demonstrates that during periods in which the EDRP and/or SCR program were activated very little, if any, additional capability is available that cannot be provided within 60 minutes.11
9 Mandatory activations refer to circumstances in which the NYISO has satisfied the notification requirements set forth in Section 5.12.11.1 of the Services Tariff for SCRs. Voluntary activations
encompass all activations of EDRP resources and SCR activations for which the NYISO has not satisfied the notification requirements of Section 5.12.11.1 of the Services Tariff.
10 For purposes of determining this value only, the “mandatory” value for SCRs will be utilized
for all Load Zones as long as the NYISO has satisfied the notification requirements for any hour in any
Load Zone for the day at issue. In all other circumstances, the “voluntary” value for SCRs will be
utilized. The value assigned to EDRP resources will reflect the voluntary nature of the program.
11 On July 15, 2013 through July 17, 2013, the NYISO activated EDRP resources and SCRs in
Southeastern New York (“SENY”) only. On July 18, 2013 and July 19, 2013, the NYISO activated
EDRP resources and SCRs in SENY only for the first hour of each event. For the remaining duration of
the events on these dates, the NYISO activated EDRP resources and SCRs in all Load Zones. The figures
demonstrate that during SENY activations, there was essentially no additional capability available beyond
the amount that could be provided within 60 minutes. During certain intervals of the statewide
Honorable Kimberly D. Bose November 30, 2015
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activations on July 18, 2013 and July 19, 2013, there was a very limited quantity of additional capability that could potentially be provided in greater than 60 minutes.
Honorable Kimberly D. Bose November 30, 2015
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Assuming availability of production capability that cannot be provided in an hour or less may not be reasonable, especially during times of system constraints and high loads when the NYISO is most likely to call upon EDRP resources and/or SCRs. The applicable expected EDRP/SCR
MW value as offset by the applicable available operating capacity value will establish the
additional 30-Minute Reserve requirement that the real-time software will seek to procure (i.e., the “scarcity reserve requirement”).
When the Load Zone(s) in which the NYISO has activated EDRP resources and/or SCRs
are equivalent to the Load Zone(s) encompassed by an existing reserve region, the NYISO will
revise the target level of reserves and the applicable 30-Minute Reserve demand curve for such
region to include the applicable scarcity reserve requirement. Any shortages of this additional
requirement will be priced at $500 per MW.12 In circumstances where the activated Load
Zone(s) are not equivalent to the Load Zone(s) encompassed by an existing reserve region, the
NYISO will establish a separate 30-Minute Reserve requirement within the activated Load
Zone(s) and apply a separate reserve demand curve for such area with any shortages in meeting
the scarcity reserve requirement priced at $500 per MW (i.e., the “scarcity reserve demand
curve”).
12 The NYISO currently establishes Operating Reserves requirements for four reserve regions: (i)
the New York Control Area (“NYCA”) (i.e., all Load Zones); (ii) East of Central-East (i.e., Load Zones
F-K); (iii) Southeastern New York (i.e., Load Zones G-K); and (iv) Long Island (i.e., Load Zone K). The
reserve regions are nested such that Operating Reserves held within a more constrained area
simultaneously meet the needs of the larger area(s) within which it is nested. For example, SENY is
nested within both East of Central-East and NYCA. Thus, Operating Reserves procured in SENY
simultaneously serve to fulfill any applicable reserve requirements in East of Central-East and NYCA.
Honorable Kimberly D. Bose November 30, 2015
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Due to the nested nature of the NYISO’s reserve regions, it is also necessary to reflect the
scarcity reserve requirement in “upstream” reserve regions to ensure appropriate pricing
outcomes. Accordingly, the NYISO will adjust the otherwise applicable 30-Minute Reserve
requirement for the reserve region(s) to which all the Load Zone(s) of a scarcity reserve region
belong to account for the scarcity reserve requirement relating thereto. For example, if the
NYISO activated EDRP resources and/or SCRs in Load Zones G-K (i.e., SENY), the otherwise
applicable 30-Minute Reserve requirement for both the East of Central-East and NYCA regions
would also be increased by an amount equal to the SENY scarcity reserve requirement. If,
however, the NYISO called upon EDRP resources and/or SCRs in Load Zones A-C and G-J to
address the same reliability need, the scarcity reserve requirement for such activation would also
be reflected in the NYCA region (i.e., the only reserve region to which all Load Zones that are
part of the activation belong).
B. Related Adjustments to Shortage Pricing and Operating Reserve Requirements
Incorporation of scarcity pricing into the real-time optimization requires certain
corresponding revisions to ensure efficient market outcomes. The NYISO proposes to increase
the value of SENY 30-Minute Reserves from $25 per MW to $500 per MW, effective at all
times. This increase appropriately recognizes that EDRP resources and SCRs have historically
been called upon to protect reserves in SENY. This proposed change aligns the value of reserves
with the cost of such resources. During an activation of the EDRP and/or SCR program in
SENY, this revised value also prevents the market software from electing to go short of lower-
priced reserves in order to fulfill the scarcity reserve requirement at a lesser cost. Such an
outcome would undermine the historically demonstrated purpose of activating EDRP resources
and/or SCRs (i.e., to ensure the continued ability to hold sufficient reserves in SENY).
The proposed increase to the value of SENY 30-Minute Reserves necessitates a
corresponding adjustment to the value of the middle pricing point of the Regulation Service
Demand Curve (i.e., relating to shortages of Regulation Service greater than 25 MW, but less
than 80 MW). The NYISO proposes to increase this value from $400 per MW to $525 per MW,
effective at all times. This adjustment maintains proper economic trade-offs between scheduling
resources to provide Regulation Service or Operating Reserves. Increasing this value prevents
the market software from electing to go short of Regulation Service in order to provide SENY
30-Minute Reserves.
Increasing the value of the SENY 30-Minute reserve demand curve to $500 per MW also
requires adjustments to the target level for SENY 30-Minute Reserves during Storm Watch
events. Storm Watch events occur during actual or anticipated severe weather conditions.
During these events, specific portions of the transmission system are operated in a more
conservative manner by reducing transmission transfer limits. Maintaining 1,300 MW of
reserves in SENY during Storm Watch operations would result in the NYISO operating the
system to N-1-1-1 criterion. Valuing any shortage of the 1,300 MW SENY reserve requirement
at $500 per MW during Storm Watch events would not accurately reflect system conditions due
to the operating requirements during such events. To ensure proper pricing outcomes, the
NYISO will reduce the SENY 30-Minute Reserve requirement to zero during Storm Watch
Honorable Kimberly D. Bose November 30, 2015
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events. This adjustment reflects the effective conversion of reserves held on facilities in SENY to reliance on reserves from other areas within NYCA by increasing available transfer capability through reduced flows into SENY.
The NYISO is also proposing to increase the NYCA 30-Minute Reserve demand curve
values priced at less than $500 per MW to $500 per MW, effective in real-time during any EDRP and/or SCR program activation. This adjustment provides that, if activating a subset of all Load Zones assists in avoiding a shortage of statewide reserves, the NYCA Operating Reserves prices will appropriately reflect the value of the EDRP resources and/or SCRs.
The shortage pricing enhancements recently implemented by the NYISO included the
application of a limitation on the contribution of reserves held on Long Island toward meeting
the reserve requirements outside Long Island.13 This limitation appropriately recognizes certain
transmission constraints that limit the flow of energy off Long Island. NYISO operators conduct
certain assessments of the transmission system capability prior to calling on EDRP resources
and/or SCRs on Long Island to provide assistance outside Long Island. These assessments
determine whether the expected load reduction of demand response resources on Long Island
will be deliverable off Long Island. Operators only activate demand response resources on Long
Island to provide assistance to other areas of the State if such deliverability is confirmed. If
EDRP resources and/or SCRs on Long Island are activated, the NYISO will increase the
limitation on the contribution of Long Island reserves to the rest of the State by an amount equal
to the applicable expected EDRP/SCR MW value of the demand response resources located on
Long Island. This increase to the limitation will apply for the duration of the EDRP and/or SCR
program activation in real-time.
IV.Description of Tariff Amendments
A. Definitions
The NYISO proposes to add the following definitions to Section 2 of the Services Tariff and Section 1 of the OATT: (i) “Available Operating Capacity;” (ii) “Expected EDRP/SCR
MW;” (iii) “Scarcity Reserve Demand Curve;” (iv) “Scarcity Reserve Region;” and (v) “Scarcity Reserve Requirement.”
The NYISO proposes to define Available Operating Capacity as follows:
Available Operating Capacity: For purposes of determining a
Scarcity Reserve Requirement, the capability of all Suppliers that
are eligible to provide Operating Reserves and have submitted
Energy Bids in the Real-Time Market to provide Energy in greater
than 30 minutes but less than or equal to 60 minutes; provided,
13 See Docket No. ER15-1061-000, New York Independent System Operator, Inc., Proposed Tariff Revisions to Ancillary Service Demand Curves and the Transmission Shortage Cost at 4-5 (February 18, 2015); and Docket No. ER15-1061-000, supra, Letter Order (November 18, 2015).
Honorable Kimberly D. Bose November 30, 2015
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however, that this value shall not include any quantity of Energy
and Operating Reserves scheduled to be provided by all such
Suppliers. The Available Operating Capacity value (in MW) shall
be calculated by the RTD software for each normal RTD run. For
purposes of calculating a Scarcity Reserve Requirement in
accordance with Section 15.4.6.2 of Rate Schedule 4 of this ISO
Services Tariff, each RTD run shall utilize the value of Available
Operating Capacity calculated during the immediately preceding
normal RTD run and each RTC run shall utilize the value of
Available Operating Capacity calculated during the most recently-
completed normal RTD run prior to the RTC run.
Available Operating Capacity represents the quantity of available production capability of
greater than 30 minutes but less than or equal to 60 minutes from Suppliers that have submitted bids in the Real-Time Market. This value will be calculated during each normal RTD run. This value will be subtracted from the expected load reduction from EDRP resources and/or SCRs to determine the quantity of additional 30-Minute Reserves that the NYISO will seek to procure in real-time for the duration of a given EDRP and/or SCR program activation.
The NYISO proposes to add the following new definition for Expected EDRP/SCR MW:
Expected EDRP/SCR MW: The aggregate Load reduction (in
MW) expected to be realized from EDRP and/or SCRs during the
real-time intervals that the ISO has called upon EDRP and/or SCRs
to provide Load reduction in a Scarcity Reserve Region, as
determined based on the ISO’s calculation of the historical
performance of EDRP and SCRs. There will be separate values for
voluntary and mandatory Load reductions. When determining the
historical performance of SCRs, provision of Load reduction shall
be deemed mandatory if the ISO has satisfied the notification
requirements set forth in Section 5.12.11.1 of this ISO Services
Tariff as it relates to the SCRs in the applicable Load Zone,
otherwise provision of such Load reduction shall be deemed
voluntary. When determining the historical performance of the
EDRP, provision of Load reduction by EDRP shall be deemed
voluntary.
The Expected EDRP/SCR MW value represents the quantity of load reduction that the NYISO anticipates to receive in real-time from the activated EDRP resources and/or SCRs. The NYISO will determine separate values for this quantity based on whether a given demand response
activation is deemed mandatory or voluntary. This value is utilized in determining the quantity of additional 30-Minute Reserves that the NYISO will seek to procure in real-time for the
duration of an EDRP and/or SCR program activation.
Honorable Kimberly D. Bose November 30, 2015
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The following definition of Scarcity Reserve Demand Curve is proposed for addition to the Services Tariff and the OATT:
Scarcity Reserve Demand Curve: A series of quantity/price
points that defines the maximum Shadow Price for Operating
Reserves to meet a Scarcity Reserve Requirement for which the
pricing rules established in Section 15.4.6.1.1(b) of Rate Schedule
4 of this ISO Services Tariff apply corresponding to each possible
quantity of Resources that the ISO’s software may schedule to
satisfy that requirement. A single Scarcity Reserve Demand Curve
will apply to the Real-Time Market for each such Scarcity Reserve
Requirement.
In circumstances where the Load Zone(s) in which demand response resources activated by the NYISO do not match the Load Zone(s) encompassed by an existing reserve region, the NYISO will create a separate Scarcity Reserve Demand Curve to apply to the additional 30-Minute Reserve requirement in the activated Load Zone(s).
The NYISO proposes to define Scarcity Reserve Region as follows:
Scarcity Reserve Region: A Load Zone or group of Load Zones containing EDRP and/or SCRs that have been called by the ISO to address the same reliability need, as such reliability need is
determined by the ISO.
A Scarcity Reserve Region is established for the Load Zone(s) in which the NYISO activates
EDRP resources and/or SCRs for the same reliability reason. The Scarcity Reserve Region
defines the geographic area within which resources must be located in order to provide the
additional 30-Minute Reserve requirement that will be utilized to incorporate scarcity pricing
into the real-time optimization. If the NYISO activates EDRP resources and/or SCRs in
different geographic areas in response to different reliability needs, the NYISO may establish
more than one Scarcity Reserve Region in real-time. For example, if the NYISO simultaneously activated Load Zones A-C to meet one reliability need and Load Zones G-K to meet a different
reliability need, the NYISO would establish two separate Scarcity Reserve Regions for the
duration of the respective activations (i.e., one region encompassing Load Zones A-C and a
second region encompassing Load Zones G-K).
The NYISO proposes to add the following new definition for Scarcity Reserve Requirement:
Scarcity Reserve Requirement: A 30-Minute Reserve
requirement established by the ISO for a Scarcity Reserve Region
in accordance with Rate Schedule 4 of this ISO Services Tariff.
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A Scarcity Reserve Requirement represents the amount of additional 30-Minute Reserves
required to be procured within a Scarcity Reserve Region. Section 15.4.6.2 of Rate Schedule 4 of the Services Tariff establishes the methodology for calculating the value of each Scarcity Reserve Requirement.
B. Services Tariff Rate Schedule 3
The NYISO proposes to delete references to the current, ex post scarcity pricing
implementation in Section 15.3.5.1 of Rate Schedule 3 of the Services Tariff. The NYISO also proposes to delete Section 15.3.5.2 of Rate Schedule 3 of the Services Tariff in its entirety
because it describes the current, ex post scarcity pricing methodology that is being replaced by Comprehensive Scarcity Pricing. Deletion of Section 15.3.5.2 requires renumbering of the
subsequent subsections within Section 15.3.5, as well revisions to subsection cross-references therein and within Section 15.3.3(b).
The NYISO also proposes to revise Section 15.3.7 of Rate Schedule 3 of the Services
Tariff to increase the value of the middle pricing point of the Regulation Service Demand Curve from $400 per MW to $525 per MW. As described in Section III.B above, this revision is
required to maintain proper trade-offs within the market software related to the scheduling of Regulation Service and 30-Minute Reserves.
C. Services Tariff Rate Schedule 4
The proposed revisions to Rate Schedule 4 of the Services Tariff provide for: (i)
establishing a requirement to procure additional 30-Minute Reserves in real-time during
activations of the EDRP and/or SCR program (i.e., Scarcity Reserve Requirement); (ii) the
calculation of the applicable Scarcity Reserve Requirement for each EDRP and/or SCR program activation; (iii) inclusion of costs related to procuring Operating Reserves to meet each Scarcity Reserve Requirement in Real-Time Market prices; (iv) establishment of revised 30-Minute
Reserves demand curves to apply in real-time during certain EDRP and/or SCR program
activations; (v) adjustments to the statewide 30-Minute Reserves demand curve values in realtime during all EDRP and/or SCR program activations; (vi) revising the value of the SENY 30-
Minute Reserves demand curve; and (vii) establishment of a Scarcity Reserve Demand Curve to apply in real-time during certain EDRP and/or SCR program activations.
Proposed revisions to Section 15.4.1.1 of Rate Schedule 4 of the Services Tariff provide
for the establishment of Scarcity Reserve Requirements in real-time during EDRP and/or SCR
program activations. These revisions also establish the obligation for the NYISO to procure
Operating Reserves to meet such requirements. Section 15.4.1.1 also establishes the eligibility
criteria for resources to supply Operating Reserves to meet Scarcity Reserve Requirements.
Suppliers eligible to provide 30-Minute Reserves and located within the Scarcity Reserve Region
associated with a Scarcity Reserve Requirement will be eligible to provide reserves to meet such
requirements.
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The NYISO proposes to revise Section 15.4.3.1 of Rate Schedule 4 of the Services Tariff to provide that procurement of Operating Reserves necessary to meet Scarcity Reserve
Requirements will be part of the co-optimized real-time commitment and dispatch processes. The NYISO also proposes to revise Section 15.4.4.1 of Rate Schedule 4 of the Services Tariff to clarify that the real-time prices calculated by the NYISO will, as appropriate, reflect costs related to meeting Scarcity Reserve Requirements.
Section 15.4.4.2 of Rate Schedule 4 of the Services Tariff establishes special settlement
rules for Suppliers of Operating Reserves located on Long Island. The NYISO proposes to
revise these rules to address payments to Long Island Operating Reserves providers during
EDRP and/or SCR program activations. If an activation of the EDRP and/or SCR program
includes Long Island in addition to at least one other Load Zone, the NYISO will pay Suppliers
of Operating Reserves located on Long Island based on the applicable SENY Operating Reserves
prices, as adjusted to account for any costs related to meeting the applicable Scarcity Reserve
Requirement.
Section 15.4.4.3 of Rate Schedule 4 of the Services Tariff provides that the NYISO may substitute higher quality reserves to meet the requirements related to lower quality reserve
products if such substitution results in a lower total, as-bid cost of fulfilling the applicable
reserve requirements.14 The proposed revisions clarify that this same substitution authority applies equally to meeting any Scarcity Reserve Requirements in real-time.
The NYISO proposes revisions to Section 15.4.6 of Rate Schedule 4 of the Services
Tariff to appropriately reflect the costs related to meeting Scarcity Reserve Requirements in realtime prices. The NYISO proposes to add a new subsection 15.4.6.1.1 to address the procedures for incorporating Scarcity Reserve Requirement costs in real-time prices.
Subsection 15.4.6.1.1(a) addresses circumstances where the Load Zone(s) included as
part of an activation of the EDRP and/or SCR program match the Load Zone(s) encompassed by an existing reserve region. In these circumstances, the NYISO will adjust the otherwise
applicable 30-Minute Reserve requirement for the applicable reserve region to reflect the
Scarcity Reserve Requirement. The Shadow Price associated with meeting this revised 30-
Minute Reserve requirement constraint will be reflected in the applicable 30-Minute Reserve requirement constraint Shadow Price for the affected reserve region and utilized in the same manner as described in the formulae set forth in Section 15.4.6.1.
Subsection 15.4.6.1.1(b) relates to situations where the Load Zone(s) included as part of
an activation of the EDRP and/or SCR program do not match the Load Zone(s) encompassed by
an existing reserve region. In these circumstances, the NYISO will reflect the Shadow Price
associated with meeting the Scarcity Reserve Requirement constraint as an addition to the
otherwise applicable Shadow Price of the 30-Minute Reserve requirement constraint for the
reserve region to which all the Load Zone(s) of a Scarcity Reserve Region belong. In such cases,
14 The ordering of Operating Reserves from highest to lowest quality is as follows: (i) Spinning Reserves; (ii) 10-Minute Non-Synchronized Reserves; and (iii) 30-Minute Reserves.
Honorable Kimberly D. Bose November 30, 2015
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the additional cost component related to meeting the Scarcity Reserve Requirement constraint is limited to being included in the calculation of prices for only the Load Zone(s) included as part of the Scarcity Reserve Region.
The NYISO proposes to delete the language in Section 15.4.6.2 of Rate Schedule 4 of the
Services Tariff that describes the current, ex post scarcity pricing methodology. This includes
deletion of subsections 15.4.6.2.1, 15.4.6.2.2 and 15.4.6.2.3 in their entirety. In place of the
existing language, the NYISO proposes to revise Section 15.4.6.2 to describe the methodology
for calculating the value of each Scarcity Reserve Requirement. A Scarcity Reserve
Requirement is calculated as the sum of the applicable Expected EDRP/SCR MW values for the
Load Zone(s) encompassed by an activation of the EDRP and/or SCR program, less the
Available Operating Capacity value for the same Load Zone(s); provided, however, that the
resulting value cannot be less than zero. For example, if the aggregate Expected EDRP/SCR
MW value for a hypothetical activation was 500 MW and the applicable Available Operating
Capacity value for a particular interval was 100 MW, the NYISO would establish a Scarcity
Reserve Requirement of 400 MW.
Section 15.4.6.3 of Rate Schedule 4 of the Services Tariff provides the methodology for calculating balancing payments/charges resulting from deviations between a Supplier’s Day-
Ahead Operating Reserves schedule and its real-time Operating Reserves schedule. The NYISO proposes revisions to Section 15.4.6.3 to clarify that the calculation of any balancing
charges/payments will, as appropriate, account for real-time prices that reflect any applicable
Scarcity Reserve Requirements.
The NYISO proposes several revisions within Section 15.4.7 of Rate Schedule 4 of the
Services Tariff to address the implications of Scarcity Reserve Requirements on the applicable
30-Minute Reserve demand curves in real-time during activations of the EDRP and/or SCR
program. The proposed revisions provide that in circumstances where the Load Zone(s) included
as part of an activation of the EDRP and/or SCR program match the Load Zone(s) encompassed
by an existing reserve region, the NYISO will utilize a revised 30-Minute Reserve demand curve
for the affected reserve region.15 The revised demand curves reflect the addition of the Scarcity
Reserve Requirement to the otherwise applicable 30-Minute Reserve requirement for the
affected reserve region, with any shortage in meeting the Scarcity Reserve Requirement priced at
$500 per MW.
When the Load Zone(s) included as part of an activation of the EDRP and/or SCR
program do not match the Load Zone(s) encompassed by an existing reserve region, the NYISO
will implement a separate Scarcity Reserve Demand Curve for the affected Load Zone(s) in real-
15 The revised 30-Minute Reserve demand curves that will apply in these circumstances are set
forth in the following provisions of Section 15.4.7: (i) Section 15.4.7(i) for statewide activations (i.e., all
Load Zones); (ii) Section 15.4.7(j) for East of Central-East activations (i.e., Load Zones F-K); (iii)
Section 15.4.7(k) for Southeastern New York activations (i.e., Load Zones G-K); and (iv) Section
15.4.7(l) for Long Island activations (i.e., Load Zone K).
Honorable Kimberly D. Bose November 30, 2015
Page 15
time for the duration of the activation. The Scarcity Reserve Demand Curve will price any shortage in meeting the applicable Scarcity Reserve Requirement at $500 per MW.
Due to the nested nature of the NYISO’s existing reserve regions, the NYISO also
proposes revisions to Section 15.4.7 to reflect any Scarcity Reserve Requirements in “upstream”
reserve regions in addition to the inclusion of this additional 30-Minute Reserve requirement in
the Scarcity Reserve Region. As described in Section III.A above, accounting for the Scarcity
Reserve Requirement in “upstream” reserve regions is necessary to provide proper pricing
outcomes. The proposed revisions establish that, in addition to reflecting the Scarcity Reserve
Requirement in the Scarcity Reserve Region, this requirement will also be accounted for in the
existing reserve region(s) to which all of the Load Zone(s) included in the Scarcity Reserve
Region belong.
The NYISO proposes to increase the value of the SENY 30-Minute Reserve demand
curve from $25 per MW to $500 per MW. As described in Section III.B above, this proposal: (i)
appropriately recognizes that EDRP resources and SCRs have historically been called upon to
protect SENY reserves; and (ii) aligns the value of SENY reserves with the cost of such
resources.
The NYISO also proposes to increase the statewide 30-Minute Reserve demand curve prices valued at less than $500 per MW to $500 per MW in real-time for the duration of all
EDRP and/or SCR program activations. As further detailed in Section III.B above, this revision seeks to properly reflect the cost of EDRP resources and/or SCRs in real-time prices to the extent that such resources assist in avoiding a statewide shortage of 30-Minute Reserves.
The NYISO proposes to modify the requirements for periodic reviews of the Operating Reserve Demand Curves in Section 15.4.7. The proposed revisions provide that Comprehensive Scarcity Pricing will be included as part of these periodic reviews.
The NYISO also proposes a ministerial revision to Section 15.4.7 to clarify that the
Operating Reserve Demand Curves and Scarcity Reserve Demand Curves are utilized by both of NYISO’s real-time co-optimization software systems - Real-Time Commitment (“RTC”) and RTD. Reference to RTC was inadvertently omitted from the current language.
D. Additional Tariff Revisions
The NYISO proposes certain other revisions to the following tariff provisions in
connection with Comprehensive Scarcity Pricing: (i) Section 4.4 of the Services Tariff; (ii) Attachment B of the Services Tariff; (iii) Attachment O of the Services Tariff; and (iv) Rate Schedule 3 of the OATT.
The NYISO proposes to delete Section 4.4.2.7 of the Services Tariff in its entirety
because it describes the current, ex post scarcity pricing methodology that is being replaced by
Comprehensive Scarcity Pricing. Deletion of this section requires renumbering of the
subsequent subsection within Section 4.4.2. The NYISO also proposes to revise language in
Honorable Kimberly D. Bose November 30, 2015
Page 16
Sections 4.4.2.5 and 4.4.2.6 of the Services Tariff to replace references to the current, ex post
logic with references to the new scarcity pricing methodology. The NYISO proposes to include a reference to Scarcity Reserve Requirements within Sections 4.4.3.1.1 and 4.4.3.1.2 of the
Services Tariff. These additions clarify that during use of either the reserve pickup or maximum generation pickup modes of the Real-Time Dispatch-Corrective Action Mode (“RTD-CAM”) software, the NYISO will continue to recognize and satisfy any Scarcity Reserve Requirements that may be effective during such periods.
The NYISO proposes to delete Section 17.1.2.2 of Attachment B of the Services Tariff in its entirety. This provision describes the current, ex post scarcity pricing logic that is being
replaced by Comprehensive Scarcity Pricing. The NYISO also proposes to delete language in Sections 17.1.1 and 17.1.2 that refers to the current, ex post scarcity pricing methodology. The NYISO proposes to revise Section 17.1 to include a reference to the potential for establishing a Scarcity Reserve Demand Curve for certain Scarcity Reserve Requirements.
The NYISO proposes to revise Section 30.4.6.4.2 of Attachment O of the Services Tariff
to include reference to the potential establishment of a Scarcity Reserve Demand Curve for
certain Scarcity Reserve Requirements. These revisions provide that the Scarcity Reserve
Demand Curves are subject to the same periodic reviews as all other Operating Reserve Demand
Curves.
The proposed renumbering of subsections within Section 15.3.5 of Rate Schedule 3 of the
Services Tariff requires updates to certain cross-references to the Services Tariff within Rate
Schedule 3 of the OATT. The NYISO proposes to update certain cross-references in Section
6.3.2.2 of Rate Schedule 3 of the OATT to reflect such renumbering.
V.Effective Date
The NYISO respectfully requests Commission action within sixty days from the date of this filing (i.e., January 29, 2016) in order to provide the NYISO and Market Participants with timely notice that the changes proposed herein have been accepted. Such timely action by the Commission will: (a) allow the NYISO to confidently proceed with developing and deploying the software changes necessary to implement Comprehensive Scarcity Pricing; and (b) enable the NYISO to achieve the desired effective date for this proposal.
The NYISO requests a flexible effective date for the tariff revisions proposed in this
filing. The NYISO proposes to submit a compliance filing at least two weeks prior to the
proposed effective date that will specify the date on which these revisions will take effect. The
NYISO currently anticipates the proposed revisions becoming effective on or before June 30,
2016. The NYISO, however, will be unable to propose a precise effective date until the software
changes necessary to implement Comprehensive Scarcity Pricing are ready for deployment and
testing thereof is completed. Consistent with Commission precedent, the compliance filing will
Honorable Kimberly D. Bose November 30, 2015
Page 17
provide adequate notice to the Commission and Market Participants of the implementation date for Comprehensive Scarcity Pricing.16
To the extent necessary, the NYISO requests a waiver of the Commission’s regulations to
allow the NYISO to make this filing more than 120 days prior to the date on which the proposed
service is to become operational.17 No Market Participant will be prejudiced by this request
because the proposed implementation timeframe was developed in consultation with Market
Participants. As such, Market Participants have known for some time that Comprehensive
Scarcity Pricing is not likely to become effective until on or before June 30, 2016. Furthermore,
as noted above, the NYISO will provide at least two weeks prior notice before implementation of
Comprehensive Scarcity Pricing.
VI.Requisite Stakeholder Approval
The proposed amendments were approved by the NYISO Management Committee on October 28, 2015 by a show of hands vote with one vote in opposition. The NYISO’s Board of Directors approved the proposed revisions on November 17, 2015.
VII.Communications and Correspondence
All communications and service in this proceeding should be directed to:
Robert E. Fernandez, General Counsel
Raymond Stalter, Director, Regulatory Affairs *Garrett E. Bissell, Senior Attorney
10 Krey Boulevard
Rensselaer, NY 12144
Tel: (518) 356-6107
Fax: (518) 356-7678
gbissell@nyiso.com
*Person designated for receipt of service.
VIII.Service
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 State 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.
16 See, e.g., New York Independent System Operator, Inc., 106 FERC ¶ 61,111 at P 10 (2004);
Docket No. ER11-2544-000, New York Independent System Operator, Inc., Letter Order at 1 (February
10, 2011); Docket No. ER15-485-000, New York Independent System Operator, Inc., Letter Order at 2
(January 15, 2015); and New York Independent System Operator, Inc., 151 FERC ¶ 61,057 at P 20 (2015).
17 See 18 C.F.R. § 35.3(a)(1).
Honorable Kimberly D. Bose November 30, 2015
Page 18
IX.Conclusion
For the foregoing reasons, the NYISO respectfully requests that the Commission accept for filing the proposed revisions to the Services Tariff and the OATT that are attached hereto within sixty days of the date of this filing (i.e., by January 29, 2016) with a flexible effective date to be provided with two weeks’ notice.
Respectfully submitted,
/s/ Garrett E. Bissell
Garrett E. Bissell
Senior Attorney
New York Independent System Operator, Inc.
10 Krey Blvd.
Rensselaer, New York 12144 (518) 356-6107
gbissell@nyiso.com
cc:Michael Bardee
Anna Cochrane
Kurt Longo
Max Minzner
Daniel Nowak
Larry Parkinson
J. Arnold Quinn
Douglas Roe
Kathleen Schnorf
Jamie Simler
Gary Will
