10 Krey Boulevard  Rensselaer, NY 12144

May 26, 2016

By Electronic Delivery

Honorable Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, NE

Washington, DC 20426

Re: Docket No. ER16-425-000, New York Independent System Operator -
Response to Data Request

Dear Secretary Bose:

On November 30, 2015, the New York Independent System Operator, Inc. (“NYISO”)
filed proposed tariff revisions to improve its scarcity pricing logic (“Comprehensive Scarcity
Pricing”).1 On March 1, 2016, the Federal Energy Regulatory Commission (“Commission”)
accepted the proposed revisions (“March 1 Order”).2 The Commission also directed the NYISO
to “submit a compliance filing within 30 days of the date of this order clarifying its proposed
Services Tariff and OATT provisions to clearly identify and state where they apply to shortage
events versus scarcity events.”3 On March 29, 2016, the NYISO submitted a compliance filing
in response to the Commission’s directive in the March 1 Order (“March 29 Compliance
Filing”).4

On May 19, 2016, the Commission issued a data request regarding the March 29

Compliance Filing (“Data Request”).5 The Data Request directed the NYISO to respond to two enumerated questions. Responses to each question are provided in Section II below.

1 Docket No. ER16-425-000, New York Independent System Operator, Inc., Proposed Revisions
to Services Tariff and OATT to Implement Improved Scarcity Pricing (November 30, 2015)
(“Comprehensive Scarcity Pricing Filing”). Capitalized terms not otherwise defined herein shall have the
meaning specified in Section 2 of the NYISO Market Administration and Control Area Services Tariff
(“Services Tariff”) and Section 1 of the NYISO Open Access Transmission Tariff (“OATT”).

2 New York Independent System Operator, Inc., 154 FERC ¶ 61,152 (2016).

3 Id. at P 24.

4 Docket No. ER16-425-001, New York Independent System Operator, Inc., Compliance Filing (March 29, 2016).

5 Docket No. ER16-425-001, supra, Data Request Regarding Compliance Filing (May 19, 2016).

Honorable Kimberly D. Bose May 26, 2016

Page 2

I.Implementation Timeline

The NYISO respectfully submits this response to the Data Request, which is intended to
fully address questions raised by the Commission regarding the Comprehensive Scarcity Pricing
Filing and the March 29 Compliance Filing. In response to Question No. 1, the NYISO provides
detailed examples of the Comprehensive Scarcity Pricing logic for a wide range of Emergency
Demand Response Program (“EDRP”) and Special Case Resource (“SCR”) program activation
scenarios. The examples are intended to illustrate the operation of the tariff revisions associated
with Comprehensive Scarcity Pricing, specifically as it relates to the 30-minute reserve demand
curves that are utilized to price shortages during scarcity and non-scarcity periods.

As noted in the response to Question No. 2 below, the NYISO is aware of the concern raised in the comments submitted by the New York Transmission Owners in response to the March 29 Compliance Filing.6 The NYISO has committed to further discuss this concern with its stakeholders to determine whether any additional, future revisions to the Comprehensive Scarcity Pricing logic are warranted. The New York Transmission Owners agree that such pending stakeholder review should not delay the planned implementation of the tariff revisions accepted by the March 1 Order for the upcoming summer.7

As indicated in the Comprehensive Scarcity Pricing Filing, the NYISO intends to

implement the enhancements to its scarcity pricing logic on in June 2016.8 Implementation in June is important from a market perspective to ensure that the Commission-approved
enhancements are in place prior to the peak load periods of the summer when the NYISO is most likely to activate the EDRP and SCR program.

In addition to the need to deploy the software to implement Comprehensive Scarcity

Pricing prior to the summer peak load periods, the NYISO also requires certain software changes to ensure compliance with the Bulk Electric System (“BES”) definition of the North American Electric Reliability Corporation (“NERC”) and requirements relating thereto. These
requirements must be complied with commencing on July 1, 2016.

Due to the common implementation timeframes of the Comprehensive Scarcity Pricing
and BES projects, as well as the technical demands of testing and deploying software associated
with both of these important initiatives, the software to implement both projects was developed
as a single, integrated set of code for deployment purposes. Such joint software development
allows for increased efficiency and reliability of the software associated with both initiatives, as
well as better management of the costs and resources needed for development and deployment.

6 Docket No. ER16-425-001, supra, Comments of the New York Transmission Owners at 2-3

(April 19, 2016). The New York Transmission Owners are Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New York, Inc., New York Power Authority, New York State Electric & Gas Corporation, Niagara Mohawk Power Corporation d/b/a National Grid, Orange and Rockland Utilities, Inc., Power Supply Long Island and Rochester Gas and Electric Corporation.

7 Id. at 3.

8 Comprehensive Scarcity Pricing Filing at 16-17.

Honorable Kimberly D. Bose May 26, 2016

Page 3

Accordingly, the deployment and activation of this software package provides for the simultaneous implementation of both Comprehensive Scarcity Pricing and the revisions necessary to ensure compliance with the NERC BES requirements.

In light of the Data Request and the concern it raised regarding the potential for a delayed issuance of an order in response to the March 29 Compliance Filing, the NYISO has assessed the feasibility of developing new software that would independently address Comprehensive
Scarcity Pricing and compliance with NERC’s BES requirements. Such independent software
would, if feasible, allow the NYISO to delay implementation of the Comprehensive Scarcity
Pricing project pending issuance of a Commission order in response to the March 29 Compliance Filing, while allowing the NYISO to proceed with implementing the software necessary to
timely comply with the BES requirements.

This assessment has indicated that there is insufficient time available to develop and test new, independent software for the Comprehensive Scarcity Pricing and BES projects, while ensuring that the NYISO is able to comply with the BES requirements on July 1, 2016, as
required by NERC. A time frame of at least three to four months would be required in order to reasonably complete development and testing of such independent software. Even if sufficient time were available, the NYISO estimates that such unplanned software development would require it to incur significant, additional expense.

To ensure the NYISO’s ability to remain compliant with NERC reliability requirements,
the NYISO must proceed with implementing the Comprehensive Scarcity Pricing design
approved by the March 1 Order in June 2016.9 Absent implementation of these enhancements,
the NYISO would become out-of-compliance with certain NERC requirements beginning on
July 1, 2016.

Based on the foregoing, the NYISO is maintaining its initially contemplated schedule for
implementing Comprehensive Scarcity Pricing. The NYISO intends to submit the two week
notice required by the March 1 Order in the near future. This notice will specify the date in June
on which the NYISO intends to implement the proposed tariff revisions accepted by the March 1
Order.

9 The software to implement Comprehensive Scarcity Pricing replaces the NYISO’s existing
scarcity pricing logic. Therefore, once activated, the NYISO will only be able to effectuate scarcity
pricing consistent with the design reflected in the tariff revisions accepted by the March 1 Order.

Honorable Kimberly D. Bose May 26, 2016

Page 4

II.Response to Data Request

Question No. 1

Although section 15.4.7(i) of the Services Tariff applies to Total 30-Minute

Reserves, the new proposed language seems to establish pricing for scarcity

events where NYISO has activated the EDRP or SCR program in part but not all
of the New York Control Area. In addition, sections 15.4.7(j), (k), and (l) apply to
scarcity events in certain zones. Please explain under what circumstances NYISO
expects to apply each of its 30-Minute Reserves provisions (sections 15.4.7(i), (j),

(k), and (l)). To the extent useful, please include examples, flow-charts, or tables.

Response

As described in the Comprehensive Scarcity Pricing Filing, the NYISO’s proposed

enhancements to its scarcity pricing logic are designed to incorporate scarcity pricing into the real-time optimization.10 This will be accomplished by establishing supplemental 30-minute reserve requirements in real-time during the periods when the NYISO has called upon EDRP resources and/or SCRs to provide load reduction (“scarcity reserves”). To address pricing of these scarcity reserve requirements, the NYISO established certain alternative Operating Reserve Demand Curves, as well as a new scarcity reserve demand curve which may be utilized during real-time intervals in which an activation of the EDRP and/or SCR program occurs.11 This
construct extends the NYISO’s current shortage pricing logic to scarcity periods and the
supplemental 30-minute reserves to be established during these periods.

A. Periods without EDRP or SCR Program Activations

For the Day-Ahead Market and all real-time intervals in which the NYISO has not

activated the EDRP and/or SCR program, the standard Operating Reserve Demand Curves for
30-Minute Reserves will be applicable.12 The descriptions of these Operating Reserve Demand
Curves are set forth in the first paragraph of each of the relevant tariff sections (i.e., Sections

10 Id. at 3-9.

11 The scarcity reserve requirement for a Load Zone or set of Load Zones in which the NYISO

has activated EDRP resources and/or SCRs for the same activation reason is set at an amount equal to the expected load reduction to be provided by the activated EDRP resources and/or SCRs (as determined by the NYISO based on historical resource performance), less 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. The Load Zone or set of Load Zones in which the NYISO has activated EDRP resources and/or SCRs for the same activation reason is referred to as a scarcity reserve region. Id. at 3-8 and 9-15.

12 The 30-minute reserve demand curves are specified in the following sections of the Services
Tariff: (i) Section 15.4.7(i) for New York Control Area (“NYCA”) 30-Minute Reserves; (ii) Section

15.4.7(j) for Eastern 30-Minute Reserves; (iii) Section 15.4.7(k) for Southeastern New York (“SENY”) 30-Minute Reserves and (iv) Section 15.4.7(l) for Long Island 30-Minute Reserves.

Honorable Kimberly D. Bose May 26, 2016

Page 5

15.4.7(i), 15.4.7(j), 15.4.7(k) and 15.4.7(l)), as reflected in the tariff sections filed with the March 29 Compliance Filing.

Table 1 below provides the 30-minute reserve demand curves that would be effective during all periods in which the NYISO has not activated the EDRP or SCR program.

Table 1. 30-Minute Reserve Demand Curves with No EDRP or SCR Program Activations

30-Minute Reserve Demand Curves

Locational 30-

ReserveMinute

RegionReserve

Requirement

NYCA2620

EAST1200

SENY1300
LI 270-54014

Scarcity
Reserve

Requirement

Total 30-
Minute

Reserve

Requirement

2620

1200

1300

270-540

MW113

≤2620

and >955

≤1200 and
>0

≤1300 and
>0

≤270-540
and >0

Value1MW2Value2

≤955

$750and$200

>655

$25N/AN/A

$500N/AN/A
$25 N/A N/A

MW3Value3MW4Value4

≤655≤300

and$100and$25

>300>0

N/AN/AN/AN/A

N/AN/AN/AN/A
N/A N/A N/A N/A

B. EDRP and/or SCR Program Activations Matching the Load Zones Encompassed by
a Locational Reserve Region

In cases where the Load Zone(s) in which the NYISO has activated EDRP resources

and/or SCRs for the same activation reason are identical to the Load Zone(s) included in a

locational reserve region, the NYISO will utilize a revised Operating Reserve Demand Curve for 30-Minute Reserves in the affected locational reserve region.15 The revised 30-minute reserve
demand curves: (i) account for the scarcity reserve requirement; and (ii) apply a value of $500
per MWh to any shortages of the scarcity reserve requirement. These revised Operating Reserve Demand Curves are described in the second paragraph of each of the relevant tariff sections (i.e., Sections 15.4.7(i), 15.4.7(j), 15.4.7(k) and 15.4.7(l)), as reflected in the tariff sections filed with the March 29 Compliance Filing.

13 The MW amounts listed in each table represent a given level of shortage in meeting the
applicable 30-minute reserve requirement, together with the value assigned to that shortage level.

14 The 30-minute reserve requirement for Long Island varies between 270 MW and 540 MW depending on the hour. For purposes of Table 2 through Table 8, the Long Island 30-minute reserve requirement is assumed to be 540 MW for all real-time intervals encompassed by each hypothetical EDRP and/or SCR program activation.

15 The NYISO currently establishes Operating Reserves requirements for four locational reserve regions: (i) NYCA (i.e., all Load Zones; Load Zones A, B, C, D, E, F, G, H, I, J and K); (ii) East of
Central-East (i.e., Load Zones F, G, H, I, J and K); (iii) Southeastern New York (i.e., Load Zones G, H, I, J and K); and (iv) Long Island (i.e., Load Zone K).

Honorable Kimberly D. Bose May 26, 2016

Page 6

If the NYISO were to activate EDRP resources and/or SCRs in all Load Zones (i.e., Load
Zones A, B, C, D, E, F, G, H, I, J and K) for the same activation reason on a given day, the
NYISO would apply the Operating Reserve Demand Curve described in the second paragraph of
Section 15.4.7(i) during only the real-time intervals encompassed by the EDRP and/or SCR
program activation.

Table 2 below provides the 30-minute reserve demand curves that would be effective

during real-time intervals in which the NYISO has activated EDRP resources and/or SCRs in all Load Zones for the same activation reason.16

Table 2. 30-Minute Reserve Demand Curves during Real-Time Intervals with an EDRP and/or SCR Program Activation in All Load Zones for the Same Activation Reason

30-Minute Reserve Demand Curves

Reserve
Region

NYCA

EAST
SENY

Locational 30-ScarcityTotal 30-Minute

Minute ReserveReserveReserve

RequirementRequirementRequirement

26201002720

120001200
1300 0 1300

MW1

≤2720
and

>1055
≤1200
and >0

≤1300
and >0

Value1

$750

$25

$500

MW2

≤1055
and >0

N/A
N/A

Value2

$500

N/A
N/A

If the NYISO were to activate EDRP resources and/or SCRs in all East of Central-East Load Zones (i.e., Load Zones F, G, H, I, J and K) for the same activation reason on a given day, the NYISO would apply the Operating Reserve Demand Curve described in the second
paragraph of Section 15.4.7(j) during only the real-time intervals encompassed by the EDRP and/or SCR program activation.17

Table 3 below provides the 30-minute reserve demand curves that would be effective

during real-time intervals in which the NYISO has activated EDRP resources and/or SCRs in all East of Central-East Load Zones for the same activation reason.

16 For the purposes of the simplified examples that are set forth in Table 2 through Table 8, it is assumed that each case results in a scarcity reserve requirement of 100 MW for all real-time intervals during the period covered by each hypothetical EDRP and/or SCR program activation.

17 As described in Part D of the response to Question No. 1, the NYISO would also utilize the 30-
minute reserve demand curve described in the third paragraph of Section 15.4.7(i) for purposes of NYCA
30-Minute Reserves during only the real-time intervals encompassed by the EDRP and/or SCR program
activation.

Reserve
Region

NYCA

EAST

SENY

Locational 30-Scarcity

Minute ReserveReserve

RequirementRequirement

26200

1200100

13000

5400

Total 30-Minute

ReserveMW1Value1 Requirement

≤2720

2720 (2620+100)18and$750

>955
≤1300

1300and$500

>1200
≤1300

1300and$500

≤540

540and$25

MW2

≤955

and >0

≤1200
and >0

N/A

Value2

$500

$25

N/A

If the NYISO were to activate EDRP resources and/or SCRs in all SENY Load Zones

(i.e., Load Zones G, H, I, J and K) for the same activation reason on a given day, the NYISO

would apply the Operating Reserve Demand Curve described in the second paragraph of Section

15.4.7(k) during only the real-time intervals encompassed by the EDRP and/or SCR program activation.19

Table 4 below provides the 30-minute reserve demand curves that would be effective

during real-time intervals in which the NYISO has activated EDRP resources and/or SCRs in all Southeastern New York Load Zones for the same activation reason.

18 The parenthetical indicates adjustment of the 30-minute reserve requirement for the upstream
locational reserve region(s) to which all the Load Zone(s) included in the scarcity reserve region belong. This adjustment accounts for the MW amount of the scarcity reserve requirement as part of the 30-minute reserve requirement for each affected upstream location reserve region(s), as described in Part D of the
response to Question No. 1.

19 As described in Part D of the response to Question No. 1, the NYISO would also utilize the 30-
minute reserve demand curves described in the third paragraph of each of Sections 15.4.7(j) and 15.4.7(i) for purposes of Eastern and NYCA 30-Minute Reserves during only the real-time intervals encompassed by the EDRP and/or SCR program activation.

Reserve
Region

NYCA

EAST
SENY

Locational 30-ScarcityTotal 30-Minute

Minute ReserveReserveReserve

RequirementRequirementRequirement

262002720 (2620+100)

120001300 (1200+100)
1300 100 1400

MW1

≤2720
and

>955
≤1300
and >0

≤1400
and >0

Value1MW2Value2

≤955

$750$500

and >0

$25N/AN/A
$500 N/A N/A

If the NYISO were to activate EDRP resources and/or SCRs on Long Island only (i.e., Load Zone K) on a given day, the NYISO would apply the Operating Reserve Demand Curve described in the second paragraph of Section 15.4.7(l) during only the real-time intervals
encompassed by the EDRP and/or SCR program activation.20

Table 5 below provides the 30-minute reserve demand curves that would be effective

during real-time intervals in which the NYISO has activated EDRP resources and/or SCRs only on Long Island.

Table 5. 30-Minute Reserve Demand Curves during Real-Time Intervals with an EDRP and/or SCR Program Activation in Only Load Zone K

30-Minute Reserve Demand Curves

Reserve
Region

NYCA

EAST
SENY

Locational 30-ScarcityTotal 30-Minute

Minute ReserveReserveReserve

RequirementRequirementRequirement

262002720 (2620+100)

120001300 (1200+100)

130001400 (1300+100)

540100640

MW1

≤2720
and

>955
≤1300
and >0

≤1400
and >0

≤640
and

>540

Value1MW2Value2

≤955

$750$500

and >0

$25N/AN/A

$500N/AN/A

≤540

$500$25

and >0

Honorable Kimberly D. Bose May 26, 2016

Page 9

C. EDRP and/or SCR Program Activations that Do Not Match the Load Zones
Encompassed by a Locational Reserve Region

In cases where the Load Zone(s) included in a scarcity reserve region are not identical to
the Load Zones included in a locational reserve region, the NYISO will utilize a scarcity reserve
demand curve for the scarcity reserve region. The scarcity reserve demand curve establishes a
value of $500 per MWh for any shortage in meeting the scarcity reserve requirement. The
scarcity reserve demand curve is described in the paragraph that immediately follows Section

15.4.7(l), as reflected in the tariff sections filed with the March 29 Compliance Filing.

If, for example, the NYISO were to activate EDRP resources and/or SCRs in New York City and Long Island (i.e., Load Zones J and K) for the same activation reason on a given day, the NYISO would apply a scarcity reserve demand curve during only the real-time intervals
encompassed by the EDRP and/or SCR program activation.21 This scarcity reserve demand
curve would apply only to Load Zones J and K (i.e., the scarcity reserve region associated with the EDRP and/or SCR program activation) with a 30-minute reserve requirement equal to the scarcity reserve requirement for Load Zones J and K. Any shortage of the scarcity reserve
requirement would be valued at $500 per MWh.

Table 6 below provides the 30-minute reserve demand curves that would be effective during real-time intervals in which the NYISO has activated EDRP resources and/or SCRs in Load Zones J and K for the same activation reason.

21 As described in Part D of the response to Question No. 1, the NYISO would also utilize the 30-
minute reserve demand curves described in the third paragraph of each of Sections 15.4.7(k), 15.4.7(j) and 15.4.7(i) for purposes of SENY, Eastern and NYCA 30-Minute Reserves during only the real-time intervals encompassed by the EDRP and/or SCR program activation.

Reserve
Region

NYCA

EAST
SENY

Locational 30-ScarcityTotal 30-Minute

Minute ReserveReserveReserve

RequirementRequirementRequirement

262002720 (2620+100)

120001300 (1200+100)
1300 0 1400 (1300+100)

MW1

≤2720
and

>955
≤1300
and >0

≤1400
and >0

Value1MW2Value2

≤955

$750$500

and >0

$25N/AN/A
$500 N/A N/A

As an additional example, if the NYISO were to activate EDRP resources and/or SCRs in only Load Zone F on a given day, the NYISO would apply a scarcity reserve demand curve
during only the real-time intervals encompassed by the EDRP and/or SCR program activation.23 This scarcity reserve demand curve would apply only to Load Zone F (i.e., the scarcity reserve region associated with the EDRP and/or SCR program activation) with a 30-minute reserve
requirement equal to the scarcity reserve requirement for Load Zone F. Any shortage of the
scarcity reserve requirement would be valued at $500 per MWh.

Table 7 below provides the 30-minute reserve demand curves that would be effective during real-time intervals in which the NYISO has activated EDRP resources and/or SCRs in only Load Zone F.

22 Activation of EDRP resources and/or SCRs in Load Zones J and K for the same activation

reason was selected as an example to demonstrate a scenario in which the NYISO would simultaneously utilize: (i) a scarcity reserve demand curve; and (ii) the 30-minute reserve demand curves described in the third paragraph of each of Sections 15.4.7(i), 15.4.7(j) and 15.4.7(k).

23 As described in Part D of the response to Question No. 1, the NYISO would also utilize the 30-
minute reserve demand curves described in the third paragraph of each of Sections 15.4.7(j) and 15.4.7(i) for purposes of Eastern and NYCA 30-Minute Reserves during only the real-time intervals encompassed by the EDRP and/or SCR program activation.

Reserve
Region

NYCA

EAST

Locational 30-ScarcityTotal 30-Minute

Minute ReserveReserveReserve

RequirementRequirementRequirement

262002720 (2620+100)

120001300 (1200+100)

MW1

≤2720
and

>955
≤1300
and >0

Value1MW2Value2

≤955

$750$500

and >0
$25 N/A N/A

Furthermore, if, as a final example, the NYISO were to activate EDRP resources and/or
SCRs in Load Zones A, B and C for the same activation reason on a given day, the NYISO
would apply a scarcity reserve demand curve during only the real-time intervals encompassed by
the EDRP and/or SCR program activation.25 This scarcity reserve demand curve would apply
only to Load Zones A, B and C (i.e., the scarcity reserve region associated with the EDRP and/or
SCR program activation) with a 30-minute reserve requirement equal to the scarcity reserve
requirement for Load Zones A, B and C. Any shortage of the scarcity reserve requirement would
be valued at $500 per MWh.

Table 8 below provides the 30-minute reserve demand curves that would be effective during real-time intervals in which the NYISO has activated EDRP resources and/or SCRs in Load Zones A, B and C for the same activation reason.

24 Activation of EDRP resources and/or SCRs in only Load Zone F was selected as an example to
demonstrate a scenario in which the NYISO would simultaneously utilize: (i) a scarcity reserve demand
curve; and (ii) the 30-minute reserve demand curves described in the third paragraph of each of Sections

15.4.7(i) and 15.4.7(j).

25 As described in Part D of the response to Question No. 1, the NYISO would also utilize the 30-
minute reserve demand curve described in the third paragraph of 15.4.7(i) for purposes of NYCA 30-
Minute Reserves during only the real-time intervals encompassed by the EDRP and/or SCR program
activation.

Reserve
Region

NYCA

Locational 30-Scarcity

Minute ReserveReserve

RequirementRequirement

26200

Total 30-Minute

ReserveMW1 Requirement

≤2720

2720 (2620+100)and

>955

Value1MW2Value2

≤955

$750$500

and >0

D. Reflection of a Scarcity Reserve Requirement in the 30-Minute Reserve
Requirement of “Upstream” Locational Reserve Regions

The locational reserve regions utilized by the NYISO are nested such that Operating

Reserves held within a more constrained area simultaneously meet the needs of the larger area(s) within which the more constrained area is nested.27 Due to the nested nature of the NYISO’s locational reserve regions, it is necessary to reflect the MW value of any scarcity reserve
requirement established in real-time in the 30-minute reserve requirement of the “upstream”
locational reserve region(s) to which all the Loads included in a scarcity reserve region belong. Adjustment of the 30-minute reserve requirement in upstream locational reserve regions is
intended to facilitate appropriate pricing outcomes.

The adjustment of the 30-minute reserve requirement for upstream locational reserve

regions and the allocation of such requirement across the pricing points of the 30-minute reserve
demand curves of such upstream regions is described in the third paragraph of each of Sections

15.4.7(i), 15.4.7(j) and 15.4.7(k). Tables 3 through 8 above demonstrate the application of this
adjustment for the applicable upstream locational reserve region(s) for each of the hypothetical
EDRP and/or SCR activations.28 The adjusted reserve requirements in the affected upstream

26 Activation of EDRP resources and/or SCRs in Load Zones A, B and C for the same activation reason was selected as an example to demonstrate a scenario in which the NYISO would simultaneously utilize a scarcity reserve demand curve and the 30-minute reserve demand curve described in the third paragraph of Section 15.4.7(i).

27 For example, SENY is nested within both the East of Central-East and NYCA locational reserve regions. Thus, Operating Reserves procured in SENY simultaneously serve to fulfill the applicable requirements in East of Central-East and NYCA.

28 The application of this adjustment and the resulting 30-minute reserve demand curves for the
affected upstream locational reserve region(s) can be identified by review of the column labeled “Total
30-Minute Reserve Requirement” within each table. In cases where this adjustment would apply, the

Honorable Kimberly D. Bose May 26, 2016

Page 13

locational reserve region(s) would apply during only the real-time intervals encompassed by the EDRP and/or SCR program activation at issue.

Question No. 2

In addition, NYISO stated in its original filing that 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.” [footnote omitted] Please explain how the $750/MW price point is
consistent with this statement in the original filing and the tariff revisions
proposed in the original filing.

Response

Scarcity reserves requirements established in real-time as a result of activating the EDRP and/or SCR program are in addition to the locational 30-minute reserve requirements that remain in effect at all times and the shortage pricing associated therewith. The $750 per MWh price
point referred to in the question relates solely to a shortage pricing value on the NYCA 30-
minute reserve demand curve.

In the case of NYCA, the otherwise applicable locational 30-minute reserve requirement (i.e., 2,620 MW) remains in effect during EDRP and/or SCR program activations, as well as pricing for any shortages in meeting this underlying requirement. Any shortages in excess of 955 MW with respect to meeting the locational 30-minute reserve requirement are valued at $750 per MWh.29 Retention of the $750 per MWh price point on the NYCA 30-minute reserve demand curve during real-time intervals in which the NYISO has activated the EDRP and/or SCR program is intended to provide for the continued application of this value to certain,
significant shortages of the locational 30-minute reserve requirement.

As shown in Table 2, during real-time intervals in which a statewide activation of EDRP
resources and/or SCRs occurs, the NYISO will utilize a revised NYCA 30-minute reserve
demand curve that extends the MW amount of shortages valued at $500 per MWh to encompass
shortages of up to 955 MW, plus the scarcity reserve requirement. Consistent with the
statements in the Comprehensive Scarcity Pricing Filing,30 this provides for valuing any shortage
in meeting the scarcity reserve requirement for a statewide demand response activation at $500

column reflects a parenthetical to indicate the addition of the MW amount of the scarcity reserve requirement to the otherwise applicable locational 30-minute reserve requirement for the affected upstream location reserve region(s).

29 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 7-9 and 16-17
(February 18, 2015); and New York Independent System Operator, Inc., 151 FERC ¶ 61,057 at P 5 and 19
(April 20, 2015).

30 Comprehensive Scarcity Pricing Filing at 7 and 14.

Honorable Kimberly D. Bose May 26, 2016

Page 14

per MWh. Shortages in excess of this amount (i.e., 955 MW, plus the scarcity reserve requirement) will continue to be valued at $750 per MWh.

As shown in Tables 3 through 8, during real-time intervals in which the NYISO activates
EDRP resources and/or SCRs within a subset of all Load Zones, the NYISO will utilize an
adjusted 30-minute reserve requirement for NYCA that accounts for the applicable MW amount
of any scarcity reserve requirement.31 In these cases, shortages of less than 955 MW of the total
NYCA 30-minute reserve requirement are valued at $500 per MWh.32 Shortages in excess of
955 MW continued to be valued at $750 per MWh. Tables 3 through 8 further demonstrate that
any shortage in meeting the actual scarcity reserve requirement for the Load Zone(s) in which
the NYISO has activated EDRP resources and/or SCRs is valued at $500 per MWh in
accordance with the applicable reserve demand curve established for pricing this requirement for
the affected scarcity reserve region.

In comments filed in response to the March 29 Compliance Filing, the New York

Transmission Owners raised a concern regarding the NYCA 30-minute reserve demand curve
that applies during real-time intervals in which the NYISO has activated a subset of all Load
Zones.33 Specifically, the New York Transmission Owners’ concern relates to the manner in
which the adjusted 30-minute reserve requirement is allocated across the two pricing points of
the reserve demand curve.34 As indicated in New York Transmission Owners’ comments, the
NYISO has been apprised of this concern. Although this design feature is contemplated in the
tariff revisions previously reviewed and approved by stakeholders, filed as part of the

Comprehensive Scarcity Pricing Filing and accepted by the March 1 Order, the NYISO has

committed to further discuss this concern with its stakeholders to determine whether any

additional, future revisions to the Comprehensive Scarcity Pricing logic are warranted. The New
York Transmission Owners agree that implementation of Comprehensive Scarcity Pricing for

31 As described in Part D of the response to Question No. 1, this adjustment to the 30-minute

reserve requirement for NYCA is intended to facilitate proper pricing outcomes accounting for the nested nature of the NYISO’s locational reserve regions.

32 During real-time intervals encompassed by any activation of the EDRP and/or SCR program for a subset of all Load Zones, the NYISO will increase the value of all points of the NYCA 30-minute reserve demand curve priced below $500 per MWh to $500 per MWh. Increasing the value of these
pricing points is intended to provide 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.

33 Docket No. ER16-425-001, supra, Comments of the New York Transmission Owners at 2-3 (April 19, 2016).

34 Id. The New York Transmission Owners contend that the manner in which the adjusted 30-
minute reserve requirement is allocated among the pricing points of the reserve demand curve has the
potential to result in circumstances in which certain shortages of the underlying locational 30-minute
reserve requirement (i.e., 2,620 MW) that would otherwise be valued at $500 per MWh in the absence of
activating the EDRP and/or SCR program instead being valued at $750 per MWh. Although theoretically
possible, the NYISO believes that a shortage of the magnitude necessary to cause this situation is unlikely
to arise.

Honorable Kimberly D. Bose May 26, 2016

Page 15

this summer “should not be delayed pending [the NYISO’s further review of the New York Transmission Owners’ concern through its stakeholder process].”35

III.Service

The NYISO will send an electronic link to this filing to the official representative of each
party to this proceeding, the official representative of each of its customers, each participant on
its stakeholder committees, the New York Public Service Commission, and the New Jersey
Board of Public Utilities. In addition, the complete filing will be posted on the NYISO’s website
at www.nyiso.com.

IV.Conclusion

In light of timing considerations described in Section I above, the New York Independent System Operator, Inc. respectfully requests that the Commission accept the proposed tariff
revisions submitted as part of the March 29 Compliance Filing as expeditiously as practicable with an effective date consistent with the effective date to be established for the tariff revisions accepted by the March 1 Order.

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
Scotiana Collins
Kurt Longo

Max Minzner
Daniel Nowak
Larry Parkinson

J. Arnold Quinn
Douglas Roe

Kathleen Schnorf
Jamie Simler
Gary Will

35 Id. at 3.

CERTIFICATE OF SERVICE

I hereby certify that I have this day served the foregoing document upon each person

designated on the official service list compiled by the Secretary in this proceeding in accordance with the requirements of Rule 2010 of the Rules of Practice and Procedure, 18 C.F.R. §385.2010.
Dated at Rensselaer, NY this 26th day of May 2016.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207