UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

)

New York Independent System Operator, Inc.)Docket No. ER16-120-003

)

REQUEST FOR LEAVE TO ANSWER AND ANSWER OF
NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

Pursuant to Rule 213 of the Commission’s Rules of Practice and Procedure,1 the New
York Independent System Operator, Inc. (“NYISO”) respectfully submits this request for leave
to answer and answer (“Answer”).2 The Answer responds to the comments and protests of the
NYISO’s second reliability must run (“RMR”) service compliance filing submitted on
September 19, 2016 in the above-captioned proceeding (“Compliance Filing”).3 Comments and
protests were submitted by: (i) the Independent Power Producers of New York, Inc. and Electric
Power Supply Association (collectively, “IPPNY”),4 (ii) Multiple Intervenors and the City of
New York (collectively, “MI/NYC”),5 and (iii) the New York Transmission Owners
(“NYTOs”).6

1 18 C.F.R. § 385.213.

2 Capitalized terms not defined in this Answer shall have the meaning set forth in the NYISO Open
Access Transmission Tariff (“OATT”) and Market Administration and Control Area Services Tariff
(“Services Tariff”), including in the proposed revisions to those tariffs in the NYISO’s compliance filing.

3 N.Y. Indep. Sys. Operator, Inc., Compliance Filing, Docket No. ER16-120-003 (September 20,

2016) (“Compliance Filing”). Due to technical issues in the electronic submission of the Compliance

Filing, the NYISO submitted the compliance filing after 5 PM on September 19, 2016 and requested that the Commission grant any required waivers to accept the compliance filing one day out of time. The Commission noticed the filed date of the compliance filing as September 20, 2016. Combined Notice of Filings #1 (September 20, 2016).

4 Protest of Independent Power Producers of New York, Inc. and Electric Power Supply Association, Docket No. ER16-120-003 (October 25, 2016) (“IPPNY Protest”).

5 Comments and Protest of Multiple Intervenors and the City of New York, Docket No. ER16-120-003 (October 25, 2016) (“MI/NYC Protest”).

6 Comments of the New York Transmission Owners, Docket No. ER16-120-003 (October 25, 2016) (“NYTO Comments”).

The NYISO respectfully requests that the Commission accept its Compliance Filing with
only the limited clarifications described below. The NYISO’s proposed revisions to its Open
Access Transmission Tariff (“OATT”) and its Market Administration and Control Area Services
Tariff (“Services Tariff”) were carefully developed to bring the NYISO into full compliance with
the directives of the Commission’s April 21, 2016, Order on Compliance and Rehearing in this
proceeding (“April Order”)7 and the Commission’s initial February 19, 2015 order directing the
NYISO to establish RMR tariff requirements (“Initial RMR Order”).8 Except as noted below, the
Commission should reject the protests of and proposed changes to the Generator Deactivation
Process. The proposed changes would impede the NYISO’s ability to administer RMR services
in New York in a manner consistent with the directives of the April Order and the Initial RMR
Order. Finally, the Commission should reject as clearly beyond the scope of this proceeding the
proposal to use this proceeding to enact broad changes to the NYISO’s capacity market design.

I. REQUEST FOR LEAVE TO ANSWER

The NYISO may answer pleadings that are styled as comments as a matter of right.9 The
Commission has discretion to, and routinely accepts, answers to protests where, as here, they
help to clarify complex issues, provide additional information, are otherwise helpful in the
development of the record in a proceeding, or assist in the decision-making process.10 The

7 N.Y. Indep. Sys. Operator, Inc., Order on Compliance and Rehearing, 155 FERC ¶ 61,076 (2016) (“April Order”).

8 N.Y. Indep. Sys. Operator, Inc., Order Instituting Section 206 Proceeding and Directing Filing to
Establish Reliability Must Run Tariff Provisions, Docket No. EL15-37-000 (February 19, 2015) (“Initial RMR Order”).

9 See 18 C.F.R. § 385.213(a)(3).

10 See, e.g., Southern California Edison Co., 135 FERC ¶ 61,093 at P 16 (2011) (accepting answers to
protests “because those answers provided information that assisted [the Commission] in [its] decision-
making process”); New York Independent System Operator, Inc., 134 FERC ¶ 61,058 at P 24 (2011)
(accepting the answers to protests and answers because they provided information that aided the
Commission in better understanding the matters at issue in the proceeding); New York Independent

NYISO’s Answer to the protests in this proceeding satisfies those standards and should be

accepted because it addresses inaccurate or misleading statements, and provides clarification and
additional information that will help the Commission fully evaluate the arguments in this
proceeding. The NYISO, therefore, respectfully requests that the Commission accept this
Answer.

II. BACKGROUND

The Commission issued the Initial RMR Order on February 19, 2015. The order

identified the NYISO as the appropriate entity to administer RMR service in New York pursuant
to Commission-jurisdictional tariffs. The Initial RMR Order directed the NYISO to submit
proposed tariff revisions to govern “the retention of and compensation to generating units
required for reliability, including procedures for designating such resources, the rates, terms and
conditions for RMR service, provisions for the allocation of costs of RMR service, and a pro
forma service agreement for RMR service.”11 On October 19, 2015, the NYISO submitted a
compliance filing proposing revisions to its OATT and its Services Tariff to implement the
directives of the Initial RMR Order (“October 2015 Filing”). On April 21, 2016, the
Commission accepted the October 2015 Filing with its Order on Compliance and Rehearing
subject to a number of compliance directives. On September 19, 2016, the NYISO submitted a
second Compliance Filing to address the directives of the April Order.12

System Operator, Inc., 140 FERC ¶ 61,160 at P 13 (2012) and PJM Interconnection, LLC, 132 FERC ¶ 61,217 at P 9 (2010) (accepting answers to answers and protests because they assisted in the
Commission’s decision-making process).

11 Initial RMR Order at P 11.

12 On June 7, 2016, the NYISO submitted a limited compliance filing in Docket No. ER16-120-002 to remove language from its OATT that was rejected by the April Order. The Commission accepted this
filing on July 1, 2016.

III. ANSWER

A.The NYISO’s Proposed Anti-Toggling Measures Address the Directives in the April

Order

MI/NYC argue that the periods of time over which the NYISO proposes to claw-back the
cost of Capital Expenditures and other Above Market Revenues from former RMR Generators
and former Interim Service Providers (“ISPs”) that return to participating in the NYISO’s
markets are too long.13 MI/NYC recommend that the claw-back repayment periods be truncated.
In the April Order, the Commission instructed the NYISO to develop rules to claw-back Capital Expenditures over time in a manner that does not discourage an otherwise efficient
generator from continuing to operate.14 The April Order states that the Commission’s goal is to
balance the competing objectives of (1) ensuring repayment of Capital Expenditures (and also,
presumably, other Above Market Revenues), and (2) giving RMR Loads the opportunity to
receive the full value of service from the upgrades for which they have paid by not discouraging
otherwise efficient generators from continuing to operate. The NYISO’s proposed claw-back
rules were developed to achieve this balance.15

13 MI/NYC Protest at 7-11.

14 April Order at P 127.

15 The NYISO has requested rehearing of certain aspects of the April Order that relate to the

implementation of anti-toggling rules. In its Compliance Filing, the NYISO submitted revisions to its anti-toggling rules that it developed to comply with the Commission’s instructions in PP 122-128 of the April Order. As the NYISO explained on page 45 of its Compliance Filing, its submission of compliance tariff revisions is not intended as, and should not be construed as, a withdrawal or waiver of any argument raised in the NYISO’s May 23, 2016 request for rehearing. See New York Independent System Operator, Inc., Request for Rehearing and Clarification of the New York Independent System Operator, Inc.,
Docket No. ER16-120-001 (May 23, 2016) (“Rehearing Request”). The same is true for this Answer. Because the Commission has not yet ruled on its Rehearing Request, the NYISO finds itself defending proposed rules that it developed and submitted to comply with the April Order.

1.The NYISO’s Proposed Recovery Term for Capital Expenditures

Appropriately Balances the Competing Objectives Identified in the April
Order

In proposed Section 15.8.7.1.1 of Rate Schedule 8 to the Services Tariff, the NYISO

proposes to claw-back the cost of Capital Expenditures16 over the shorter of (a) the major

maintenance cycle, in years, of the Generator, or (b) the Average Remaining Life of the

cumulative Capital Expenditures that RMR Loads paid for. The NYISO used the major

maintenance cycle to time-bound the Capital Expenditure repayment period because it is a point in time at which an owner would have to elect to make a significant additional expenditure in order to continue operating its Generator.17

MI/NYC argue that the cost of Capital Expenditures should instead be clawed-back over “perhaps no more than two or three years.”18 The repayment period MI/NYC propose is likely to be shorter (sometimes significantly shorter) than the repayment period the NYISO’s proposed Tariff revisions will produce. A shorter repayment period increases the amount that must be
repaid to the NYISO on a pro rata basis each month. An extremely short payback period could discourage an otherwise efficient former RMR Generator or former ISP from returning to
participate in the ISO Administered Markets.19

MI/NYC state that a Generator that proposed to deactivate is not likely to continue

operating for very long. MI/NYC further state that the NYISO’s proposed repayment term will
not result in the former RMR Generator or ISP fully repaying the capital investments that were

16 NYISO proposes to apply the same repayment period to the Capital Expenditure component of Above Market Revenues.

17 In implementing Tariff-required processes including the buyer-side and supplier-side capacity
market power mitigation rules and performing withholding analyses, the NYISO has observed major
maintenance cycle vary with use, but typically last no more than 8 years and are usually much shorter.

18 MI/NYC Protest at 8.

19 See April Order at P 127.

funded by consumers before it finally retires. MI/NYC’s protest also suggests that implementing
a shorter repayment period may cause older, less efficient Generators to retire, which it argues is
consistent with the New York State and Federal policy goals of reducing greenhouse gas
emissions.20 On the other hand, implementing a significantly abbreviated claw-back period for
Capital Expenditures that RMR Loads already paid for may prevent the NYISO from recouping
for the benefit of RMR Loads at least some of the funds supplied to purchase the capital asset.
The NYISO’s proposed claw-back rules were developed to achieve the balance described in paragraphs 126 and 127 of the April Order. The rules the NYISO filed are more likely to
permit a former RMR Generator or former ISP to return to, or to continue to operate in, the ISO
Administered Markets after the Generator Deactivation Reliability Need has been addressed,
than the shorter Capital Expenditure repayment period MI/NYC propose. The NYISO requests
that the Commission confirm that it struck the appropriate balance.

2.Response to MI/NYC Concern that NYISO’s Proposed Recovery Term for

Above Market Revenues is Too Long

In proposed Section 15.8.7.2 of Rate Schedule 8 to the Services Tariff, the NYISO
proposes to claw-back the cost of Above Market Revenues that are not Capital Expenditures
from former RMR Generators21 over the shorter of (a) three years, or (b) twice the duration of
the applicable RMR Agreement. MI/NYC argue that the NYISO’s proposed repayment period
for Above Market Revenues that are not Capital Expenditures is too long and should be
truncated to the shorter of (a) two years, or (b) the duration of the applicable RMR Agreement.
MI/NYC express concern that the NYISO’s proposed repayment period for Above Market Revenues that are not Capital Expenditures from former RMR Generators “create a

20 See MI/NYC Protest at 11-13.

21 MI/NYC did not protest the NYISO’s proposed one year period for former ISPs to repay Above Market Revenues that are not Capital Expenditures.

window of opportunity during which a former RMR generator can earn revenue in the

marketplace, make only a partial repayment, and then shut down (or toggle back to RMR

status22) to avoid full repayment.” MI/NYC also argue that it is not equitable to give a former RMR Generator longer to repay its Above Market Revenues (other than Capital Expenditures) than the period over which the revenues were received from consumers.

So long as the change only affects repayment by former RMR Generators of Above Market Revenues that are not Capital Expenditures, the NYISO does not support, but is not strongly opposed to, the shorter repayment period that MI/NYC propose. If the Commission were to direct the NYISO to adopt the shorter repayment period proposed by MI/NYC, the NYISO would implement the change by modifying the proposed definition of “mAMR” that appears in Section 15.8.7.2 of Rate Schedule 8 to the Services Tariff.

3. The Commission Should Reject MI/NYC’s Recommendation that the NYISO

Should Recover the Salvage Value of Former RMR Generators as Impractical and Harmful to Non-RMR Loads

MI/NYC argue that the NYISO should be required to obtain an unspecified type of
security interest in RMR Generators,23 to carefully track what happens to former RMR
Generators after they cease participating in the ISO Administered Markets, and to recover an
unspecified portion of the former RMR Generator’s salvage value for the benefit of RMR Loads
when that Generator is, eventually, dismantled and salvaged.24 In essence, MI/NYC contend that
the NYISO should position itself as a senior secured creditor in these transactions with preferred

22 MI/NYC do not explain in their protest either how a hypothetical Generator would “toggle back to RMR status” or how their proposal prevents this behavior. The NYISO has explained several times in this Docket how its proposed rules prevent or deter toggling. See, e.g., October 2015 Filing at 43-44, Rehearing Request at 11-14.

23 The MI/NYC Protest does not address former ISPs. The NYISO does not negotiate an RMR

Agreement with an ISP, so it would be difficult for the NYISO to obtain a security interest in the salvage value of such a Generator.

24 MI/NYC Protest at 13-14.

access to an RMR Generator’s assets. The NYISO considers this proposal to be commercially unrealistic and impractical. The NYISO also believes that the complexities of such an approach would unfairly shift to all New York Loads a category of transaction costs that (assuming any of this were possible) would benefit only the RMR Loads.

On the commercial side, it seems certain that most RMR Generators will be subject to

significant secured financing. It seems very unlikely that an RMR Generator will hold the assets
to which the protest refers free and clear of liens. Consequently, for the NYISO to occupy the
position MI/NYC describe, the NYISO would first need to undertake a detailed analysis of each
RMR Generator's debt structure. Because this analysis almost certainly would reveal the
existence of preexisting secured debt, the NYISO would need to obtain from the holders of this
debt waivers, exceptions, or subordinations sufficient to put the NYISO in a first-lien position
(which in most cases would be the only position that would carry value given the financial
difficulties to which the RMR Generator presumably already is subject). This would take time -
almost certainly longer than the 60-90 days contemplated for negotiation of an RMR Agreement.
In most cases, this would be unsuccessful, given that a preexisting secured creditor likely would
have little incentive to subordinate its right of recovery when the asset is already troubled and
facing liquidation.

It would also carry significant expense. While the NYISO operates a credit department,
the NYISO’s primary business is not secured credit, or participation in bankruptcy or salvage
proceedings. The NYISO would have to hire and pay outside lawyers and other experts to
manage these matters on its behalf. At the same time, the NYISO’s costs of operation, including
the legal fees it incurs, are paid by all New York Loads, not just by RMR Loads. Accordingly,
the transactional and other costs associated with the approach advocated by MI/NYC - one that,

again, is unlikely to yield real economic value in most cases - would be spread across all New
York loads. The value (if any) actually generated by this approach, on the other hand, (i) would go only to the RMR Loads, and (ii) in the aggregate, very likely would be less than the total costs incurred. This would be unfair to the non-RMR Loads. The Commission should not accept
MI/NYC’s proposed change.

B. The Commission Should Reject, with the Exception of One Limited Clarification,

the NYTOs’ Proposed Changes to the NYISO’s Proposed Solution Selection Process

In paragraph 73 of its April Order, the Commission stated:

While we emphasize that RMR agreements should only be used as a last-resort

measure, we also have an interest in minimizing costs. It would be unreasonable,
as NYISO states, to ask NYISO to ignore uncertainty factors associated with a
non-generation solution and automatically dismiss the generation solution, when
the non-generation solution may turn out to be the more expensive option.

The NYISO’s solution selection process balances the competing concerns that the
Commission recognized in the April Order. The execution of an RMR Agreement with a
Generator should be a last resort. However, the NYISO should not be required to select a
transmission solution when a far less expensive generation solution is available.

The solution selection process the NYISO developed strongly favors selecting market-
based and transmission solutions over executing an RMR Agreement with a Generator. The
NYISO’s proposed rules recognize that selecting a permanent transmission solution may be the
least-cost choice for consumers in the long run. Proposed Section 38.10.1.1 of the OATT states
“If the ISO determines that there is a Viable and Sufficient permanent transmission solution that
completely satisfies the Generator Deactivation Reliability Need, the ISO may select the
solution.” For reliability needs that arise on non-Bulk Power Transmission Facilities due to a
Generator deactivation, the NYISO is required to select a permanent transmission solution, even

if the NYISO has to first execute an RMR Agreement with a Generator as a temporary solution to allow for the implementation of the transmission solution.25

The NYTOs’ comments propose several changes to the NYISO’s resource selection process that might prevent the NYISO from selecting a far less expensive generation solution and instead require the NYISO to select a significantly more expensive transmission solution. Because the NYISO’s proposed resource selection process satisfies the requirements that the Commission specified in paragraph 73 of its April Order and achieves an appropriate balance, the Commission should accept the NYISO’s resource selection process without requiring the NYISO to make the modifications that the NYTOs request, except that the NYISO does not object to the clarification proposed in Section III.B.2 of this Answer.

1. The Proposed Generator Deactivation Process Reasonably Treats RMR

Agreements as a Last Resort while Considering the Cost of Generation and Transmission Alternatives

The NYTOs argue that the NYISO’s tariff does not absolutely require RMR Agreements
to be implemented as temporary solutions and as a last resort.26 They state that “the NYISO’s
compliance filing could be interpreted as allowing for the selection of an RMR agreement as a
permanent solution.”27 The NYTOs further argue that although the NYISO’s filing letter
“repeatedly emphasizes that its selection process is consistent with the principles that RMR
agreements will be used as a temporary, last-resort measure . . . relying on the OATT language
alone, the proposed selection process could be applied such that RMR agreements are not used as

25 See proposed OATT Section 38.10.1.2; Compliance Filing at 28-29.

26 NYTO Comments at 2-3.

27 NYTO Comments at 3.

a temporary measure of last resort but rather as an alternative to permanent transmission solutions.”28

The NYISO’s Generator Deactivation Process establishes that an RMR Agreement will
not be used as a permanent solution to a reliability need. The NYTOs err by ignoring language
in the OATT that explicitly states that the solution selection process “is designed to ensure that
executing an RMR Agreement with a Generator is a last resort to addressing a Generator
Deactivation Reliability Need.”29 The OATT provides that the term of RMR Agreements is
limited by the in-service date of the conceptual permanent solution to the reliability need
provided by the Responsible Transmission Owner and modifications to the scope and timing of
the need arising from state agency action, information on other Transmission Owner projects,
other RMR Agreements and from the entry of market-based solutions into service.30 RMR
Service Offers must limit the term of service to the duration of the time for which the NYISO
determines the Generator is viable and sufficient to meet the reliability need.31 Finally, the pro
forma RMR Agreement provides that the NYISO may unilaterally terminate an RMR Agreement
with an RMR Generator if it determined that it “is no longer or will no longer be needed to meet
a Reliability Need.”32

28 NYTO Comments at 4.

29 Proposed OATT § 38.10.2.1.

30 Proposed OATT § 38.11.2.

31 Proposed OATT § 38.9.3 (term of RMR Service Offers determined by duration of period Generator
is viable and sufficient to meet the Generator Deactivation Reliability Need); proposed OATT § 38.9.4(D)
(RMR Service Offers shall “state the duration for which the Generator is being made available to provide
the RMR service (which shall be no longer than the duration the ISO determined the Generator is a viable
and sufficient solution), and specify whether the offer would be the same for any shorter period of time”) .

32 Proposed OATT § 38.26, Appendix C - Form of Reliability Must Run Agreement, §2.2.1 “Conclusion of Reliability Need.”

The NYTOs further overlook tariff language stating that a Generator operating under an
RMR Agreement will not be included in the base case of the NYISO’s biennial Reliability Needs
Assessment. Specifically, the tariff states that “the ISO shall not include in the RNA Base Case
an RMR Generator . . . selected by the ISO pursuant to Attachment FF of the ISO OATT.”33 As
explained in the Compliance Filing, the NYISO will exclude RMR Generators from inclusion in
its reliability planning process: (i) to allow for the identification of Reliability Needs in the

Reliability Needs Assessment that take into account the Generator Deactivation Reliability Need,
and (ii) provide for the NYISO’s consideration of permanent market-based and, if necessary,
regulated solutions to those needs in its Comprehensive Reliability Plan.34
The NYISO’s proposed solution selection process balances a strong preference for
implementing market-based and transmission solutions, instead of entering into RMR
Agreements, with the Commission’s clear mandate that the NYISO must consider the cost to
consumers in its selection process. The Commission should not instruct the NYISO to revise its
solution selection process in a manner that would require the NYISO to select a Viable and
Sufficient transmission solution even though a far less expensive generation solution is available
based on blind adherence to an absolute requirement that RMR Agreements may only be entered
into as a “last resort.”

2. The NYISO Does Not Object to Language Clarifying the Application of the

Requirement that to be Eligible for Selection a Generator Must Have a

Distinctly Higher Net Present Value than All of the Transmission Solutions under Consideration

The NYTOs further assert that the NYISO’s selection process “narrows the field of

eligible projects by discarding generation options, but only if all of the generation options are

33 Proposed OATT § 31.2.2.3.2.

34 Compliance Filing at 35.

more costly than at least one of the proposed transmission solutions.”35 Although the NYTOs’
interpretation does not align with the NYISO’s intent, the NYISO does not object to making the
following redlined change to the language of proposed Section 38.10.2.1 of the OATT to clarify
that when there are multiple Viable and Sufficient transmission solutions available to address an
identified Generator Deactivation Reliability Need, the NYISO will only continue to evaluate
Viable and Sufficient generation solutions that have a “distinctly” higher net present value than
all the Viable and Sufficient transmission solutions that are being considered. Specifically:

This solution selection process is designed to ensure that executing

an RMR Agreement with a Generator is a last resort to addressing
a Generator Deactivation Reliability Need. The ISO will select a
Viable and Sufficient transmission solution to address the
Generator Deactivation Reliability Need if: (i) there is one or more
Viability and Sufficient transmission solutions, and (ii) none of the
Viable and Sufficient generation solutions have a “distinctly higher
net present value” than a transmission solution. The ISO shall
cease evaluating a Viable and Sufficient generation solution if it
does not have a “distinctly” higher net present value than all of the
Viable and Sufficient transmission solutions that the ISO is
considering. If the ISO is selecting between and among Viable and
Sufficient transmission solutions, the ISO will perform its selection
based on the degree to which each transmission solution satisfies
the metrics set forth in Section 38.10.4.36

This revision is consistent with the method the NYISO intends to use to perform its solution

selection process and should address the NYTOs’ concern.

3. The NYISO’s Solution Selection Proposal Permits it to Consider the Broad

Range of Benefits that Transmission Solutions Can Provide

In Sections II.B and II.C of their comments, the NYTOs argue that the NYISO’s

proposed net present value (“NPV”) calculation does not adequately recognize the economic
benefit of transmission solutions because it does not fully account for benefits, such as reduced

35 NYTO Comments at 3.

36 Proposed OATT § 38.10.2.1.

congestion or improved efficiency of dispatch, that a transmission solution may provide.

Generation solutions can also reduce congestion and improve the efficiency of dispatch. The NYISO’s proposed NPV calculation does not explicitly take all system efficiency benefits into account for generation or transmission solutions.37 This is appropriate given the role that the NPV analysis plays in the NYISO’s resource selection process.

The NYISO’s proposed NPV calculation does not include broad-ranging system benefits of the sort the NYTOs suggest because the NYISO only proposes to use the NPV analysis:

(a) when there is no transmission solution and the NYISO is selecting between and among

competing generation solutions in accordance with proposed Section 38.10.3, (b) as a gateway to determine which generation solutions, if any, the NYISO will consider when it employs the more comprehensive resource selection criteria set forth in proposed Section 38.10.4, or (c) in
conjunction with the more comprehensive resource selection metrics set forth in proposed
Section 38.10.4 of the OATT. The NYISO’s determination that a generation solution has a
“distinctly” higher NPV than a transmission solution does not require the NYISO to select the
generation solution and execute an RMR Agreement. It merely requires the NYISO to consider the generation solution when it applies the broader metrics set forth in Section 38.10.4 to select a solution to an identified Reliability Need.

The NYISO’s NPV analysis is appropriately designed to act as a gateway when

generation solutions are being compared to transmission solutions. Proposed Section 38.10.2.2
explains that a Viable and Sufficient generation solution has a “distinctly” higher net present

37 Proposed OATT Section 38.10.2.2 states that the net present value (“NPV”) of a generation

solution is the present value of the difference between the generation solution’s offered costs and its

expected market revenues for the expected duration of an RMR Agreement. The NPV of a transmission solution is the present value of the difference between the transmission solution’s estimated costs and its expected market revenues (if any).

value than a Viable and Sufficient transmission solution if, after accounting for the accuracy

range of each transmission project cost estimate and generation revenue estimate, the NYISO

determines that the range of net present values of the generation solution is higher than the range
of the net present values of the transmission solution. If there is any overlap between the ranges
of net present values between a generation solution and a transmission solution, then the
generation solution does not have a distinctly higher net present value than the transmission
solution, and the generation solution will be dropped from consideration. If there is no overlap
between the ranges of the net present values of the generation and transmission solution, and the
range of net present values of the generation solution is above those of the transmission solution,
then the NYISO will select from among the generation and transmission solutions in the manner
explained below.

The NPV analysis is also a useful adjunct to the metrics proposed in Section 38.10.4 of
the OATT. The broad set of metrics proposed in Section 38.10.4 allows the NYISO to consider
all of the benefits that the NYTOs state that transmission solutions can provide in choosing a
solution to a Generator Deactivation Reliability Need. The NYTOs state that the NYISO’s
solution selection process will not take into account “the full economic benefits of transmission
solutions on energy and capacity markets”38 including reduced congestion and increased
efficiency of dispatch.39 Proposed Section 38.10.4.5 of the OATT explicitly requires the NYISO
to consider “how the proposed solution may affect the utilization of the transmission system (e.g.
interface flows, percent loading of facilities).” Proposed Section 38.10.4.4 of the OATT requires
the NYISO to consider “how the proposed solution may affect additional flexibility in operating
the system, such as dispatch of generation, access to operating reserves, access to ancillary

38 NYTO Comments at 6.

39 Id. at 5.

services” and “how the proposed solution may affect the cost of operating the system, such as how it may affect the need for operating generation out of merit for reliability needs … or
providing more balance in the system to respond to system conditions that are more severe than design conditions.” The NYISO’s proposed solution selection process already requires the
NYISO to consider a broad range of the economic benefits that transmission solutions (and other solutions) can provide to energy and capacity markets.

The NYISO’s proposed solution selection process does not require it to select an RMR

Agreement over a less costly, permanent transmission solution. The process requires the NYISO
to take a broad range of system-wide and long-term benefits into account when choosing
between a permanent transmission solution and a temporary RMR Agreement. The
modifications to the solution selection process that the NYTOs propose in sections II.B and II.C
of their comments (on pages 5-7) are not necessary or appropriate and should not be adopted.

C.Response to NYTOs Proposed Corrections and Revisions to the Claw-Back

Repayment Obligation Rules

1. The Commission Should Reject the NYTO’s Proposed Change to the

Treatment of Depreciation in the Claw-back Calculation

The NYTOs argue that the NYISO should not consider depreciation that occurs while a
former RMR Generator or former ISP is deactivated when calculating the Generator’s repayment
obligation (claw-back).40 The NYISO disagrees with the NYTOs position for the following
reasons.

It is appropriate to deduct all depreciation that may occur to a Capital Expenditure that is purchased by RMR Loads to enable a Generator to provide service during the term of an RMR Agreement from the claw-back repayment obligation that applies when the former RMR

40 NYTOs Comments at 8-9.

Generator returns to the ISO Administered Markets. If a former RMR Generator enters a

Mothball Outage or an ICAP Ineligible Forced Outage (“IIFO”) following the conclusion of its
RMR Agreement (or if the former RMR Generator becomes Retired and then returns as a new
Generator following the conclusion of its RMR Agreement) and the Capital Expenditure is one
that continues to depreciate even though it is not being used,41 then the fact that the Capital
Expenditure had to be made to permit the Generator to provide RMR Service before the
Generator entered its Mothball Outage or IIFO means that the additional depreciation that occurs
during the Mothball Outage or IIFO was the direct result of the Generator making the Capital
Expenditure earlier than it otherwise would have in order to provide RMR service. If the
Generator had refused to provide RMR service, it could have avoided the depreciation by
purchasing the Capital Expenditure at the end of its Mothball Outage or IIFO instead of prior to
commencing the outage.

The NYTOs’ proposal could require a former RMR Generator that returns to the ISO
Administered Markets following a Mothball Outage to reimburse the cost of a Capital
Expenditure (that was made to permit the Generator to provide RMR service) after that Capital
Expenditure’s useful life has expired. In this case the former RMR Generator would have to re-
incur the same Capital Expenditure to return to service. The NYISO’s proposed rules avoid
charging former RMR Generators for the cost of Capital Expenditures that the Generator could
have avoided by declining the opportunity to execute an RMR Agreement with the NYISO. The
Commission should accept the rules proposed in the NYISO’s compliance filing.

41 Many types of Capital Expenditures only depreciate when they are used. Capital Expenses that

depreciate based on run-hours or the number of times a Generator starts-up are examples of Capital

Expenses that depreciate based on use. The difference in opinion between the NYISO and the NYTOs is
only relevant when considering Capital Expenditures that depreciate even when they are not being used.

2.The NYISO Agrees with Many, But Not All, of the NYTOs’ Proposed

Technical Corrections to the Claw-Back Calculations in Rate Schedule 8 of the Services Tariff

The NYISO agrees with many, but not all, of the technical corrections to the claw-back calculations that the NYTOs propose in Section II.D.2 of their comments.42 Several of the
NYTOs’ proposed changes help to better accomplish the intended purpose of the claw-back
calculation. The NYISO would not object to the Commission directing it to make the changes that it agrees are appropriate.

The NYISO concurs with the proposal on page 10 of the NYTOs’ comments to modify the calculation of the RVi variable that is defined in Section 15.8.7.1.1 of Rate Schedule 8 of the Services Tariff. The NYTOs’ proposed change accurately takes into account the summation of the individual Capital Expenses after depreciation.

The NYISO also agrees with the NYTOs’ proposed changes to clearly explain that the
NYISO will use a proportionate share of the Capital Expenditures and of the Other Revenues
when determining the correct dollar amount an entity must repay each month to satisfy the
“Above Market Revenues” repayment obligation included in Section 15.8.7.2 of Rate Schedule 8
of the Services Tariff. In particular, the NYISO agrees with the high-level explanation on page

10 of the NYTOs’ comments, with the additional language that the NYTOs propose to add to

Section 15.8.7.2 starting at the bottom of page 10 of their comments, and with all of the redlined changes to the equation and defined terms that appear on pages 11 and 12 of the NYTOs’
comments, except the NYTOs’ proposed changes to the term RMRCapExRecoveryg.

42 NYTO Comments at 9-12.

The proposed edits that the NYISO agrees with properly reflect the NYISO’s intent and
are consistent with the NYISO’s presentations to its stakeholders - in particular, the RMR
Capital Expenditure presentation made to working groups on September 1, 2016.43
The NYISO disagrees with the NYTOs’ proposed redlined additions to the variable
RMRCapExRecoveryg that appear on page 11 of their comments. Consistent with paragraph 126
of the April Order, Section 15.8.7 of Rate Schedule 8 of the Services Tariff requires the NYISO
to claw-back the “higher of” two possible repayment obligations, either: (i) the residual value of
the remaining Capital Expenditures at the time the former RMR Generator or former ISP would
return to the market or (ii) the total “above-market payments” the former RMR Generator or
former ISP received.

To calculate AboveMarketRevenueg in Section 15.8.7.2, the NYISO proposes to add the
reimbursed Capital Expenditures to the Other Revenues it paid to the Generator, and then to
subtract the revenues that the Generator would have earned by participating in the NYISO’s
markets. The NYTOs propose to modify the definition of RMRCapExRecoveryg in a manner that would require the NYISO to ignore the depreciation of Capital Expenditures when it calculates
the Generator’s Above Market Revenues. The NYTOs’ proposal is inconsistent with the
Commission’s instruction that Capital Expenditures should be repaid “less depreciation,”44 and it would produce an inequitable result.

Including the NYTOs’ proposed addition “…except that the depreciation term Pik shall
not be subtracted when making this determination…” would require the NYISO to ignore

43 See Revised RMR Clawback Rules: Updated Presentation, NYISO ICAP Working Group (September 1, 2016), available at

http://www.nyiso.com/public/webdocs/markets_operations/committees/bic_icapwg/meeting_materials/20
16-09-01/Clawback%20Presentation%20Updated.pdf.

44 See April Order at P 126.

depreciation expense for Capital Expenditures when the NYISO calculates Above Market
Revenues.45 The proposal is inconsistent with the language the NYISO proposed in Section

15.8.7.1.1, which requires the NYISO to include depreciation expense in its calculation of the
repayment obligation that applies to Capital Expenditures. The NYTOs’ proposal to ignore
depreciation in one of the two “higher of” calculations, even though it is required to be included
in the other calculation, would inequitably over-weight the Above Market Revenue claw-back
calculation. To fairly determine the “higher of” the two values and the total amount of claw-
back owed, the NYISO must use the same value (Capital Expenditures minus depreciation) and
apply it in a consistent manner when calculating both the Capital Expenditure repayment
obligation (Section 15.8.7.1) and the Above Market Revenue repayment obligation (Section

15.8.7.2).

In sum, the NYISO agrees with all of the corrections and revisions the NYTOs propose in Section II.D.2 of their comments (pages 9-12), except the NYTOs’ proposed edits to the
definition of the RMRCapExRecoveryg variable.

E.IPPNY’s Recommendation that NYISO Should Adopt a Forward Capacity Market

Falls Outside the Scope of the Commission’s Orders and the NYISO’s Compliance

Filings

IPPNY’s proposal to have the NYISO implement a Forward Capacity Market (“FCM”) is
beyond the scope of this proceeding.46 The NYISO’s second Compliance Filing properly
focused on implementing the directives of the April Order. IPPNY’s proposal to require the
NYISO to implement a FCM is far broader than both: (a) the Commission’s directives to the
NYISO in the Initial RMR Order and the April Order, and (b) the NYISO’s compliance filings.

45 The term Pik is defined in Section 15.8.7.1 of Services Tariff Rate Schedule 8. It is “the annual depreciation expense, determined by the ISO, for Capital Expenditure i in year k”.

46 See IPPNY Protest at 4-7.

Commission precedent is clear that a protest may not expand the scope of a compliance

proceeding.47 The Commission should reject IPPNY’s proposal for the same reason it rejected
Entergy’s market enhancement proposals in paragraph 133 of its April Order. The NYISO does
not substantively respond in this Answer to the FCM aspects of IPPNY’s protest because they
fall outside the scope of the compliance directives in the Initial RMR Order and the April Order.

If IPPNY wishes to pursue the market design changes that it has proposed in this

proceeding, it should do so through the NYISO stakeholder process in the first instance. The
Commission should not allow consideration of these matters to delay action on the Compliance
Filing.

F. IPPNY’s Proposal to Align the NYISO’s Generator Deactivation Process with its

Gap Solution Process Falls Outside the Scope of the Commission’s Orders and NYISO’s Compliance Filings

IPPNY argues that the Commission should order the NYISO to align the NYISO’s Gap
Solution process with its proposed Generator Deactivation Process.48 It asserts that the NYISO
should be required to modify its Gap Solution process to provide that only the NYISO may select
and provide cost allocation and recovery for a Generator to resolve a Reliability Need in that
process, and only as a last resort.49 The NYISO agrees that consistent treatment of generation
solutions in all of the NYISO’s long term planning processes, including the Gap Solution process
and regular biennial Attachment Y reliability planning process, is logical. Nevertheless,
IPPNY’s argument is beyond the scope of the instant compliance filing because the Commission
did not direct the NYISO to amend the Attachment Y reliability planning process or the Gap

47 See, e.g., Consolidated Edison Company of New York, 97 FERC ¶ 61,241 at 62,092 (2001); Entergy
Services, Inc., 52 FERC ¶ 61,317 (1990); Louisiana Power & Light Co., 50 FERC ¶ 61,040 at 61,062
(1990).

48 IPPNY Protest at 8-13.

49 IPPNY Protest at 11-13.

Solution process in the manner that IPPNY suggests in this proceeding. The NYISO’s

Compliance Filing complies with the Commission’s directives in the April Order that the NYISO address reliability needs arising out of Generator deactivations and provide for cost allocation and recovery for solutions to these needs in its tariff separately from its Gap Solution process and other planning processes.50

G. The Commission Should Reject IPPNY’s Proposed Changes to the Timing of

Generator Deactivation That Do Not Take Into Account the Administrative Actions Necessary to Deactivate a Generator

On pages 15 and 16 of its protest, IPPNY argues that, once the NYISO determines that an Initiating Generator is not needed for reliability and can deactivate, the NYISO should be
required by its Tariff to complete all administrative processes that are necessary to permit the
Generator to deactivate within 10 days of reaching that determination. IPPNY’s request appears to be premised on several inaccurate assumptions about why the NYISO allows itself time to
complete administrative processes.

First, IPPNY’s protest assumes that all Initiating Generators will be asking to leave at the
earliest possible date (91 days). In fact, the NYISO has already received multiple Generator
Deactivation Notices that provided the NYISO far more than 91 days advance notice of a
planned deactivation. It is not possible for the NYISO to complete “all administrative processes”

50 See April Order at P 31 (“we reject NYISO’s proposal to situate the RMR process within the

existing Gap Solution process and require NYISO to submit … a compliance filing with a proposed RMR
process separate from NYISO’s existing Gap Solution process, under which NYISO evaluates and selects
solutions to identified reliability needs caused by generator deactivations.”), P 41 (“we reject the
NYISO’s proposal and require NYISO to establish an RMR process separate from its Gap Solution
process, under which NYISO evaluates and selects solution to identified reliability needs caused by
generator deactivations, whether market-based solutions, generation solutions, or non-generation
solutions. In developing a separate RMR process, NYISO should develop additional tariff revisions to
clarify when its separate RMR process will be triggered, as opposed to its existing Gap Solution
process”); P 112 (“we require NYISO to include in the compliance filing ordered herein a proposed cost
allocation method as part of its RMR process that is separate from its Order No. 1000-compliance
regional transmission cost allocation method”).

to deactivate an Initiating Generator while that Generator is continuing to participate in the ISO Administered Markets.

Second, IPPNY’s protest assumes that all Initiating Generators will actually be prepared to exit the ISO Administered Markets on their requested deactivation date, even though the
NYISO’s proposed rules do not strictly require this. Before the NYISO turns off an Initiating Generator’s bid flags and takes other actions to remove the Generator from its markets, the
NYISO needs to receive a confirming notice from the Generator of the date on which that
Generator actually wants to deactivate. The actual deactivation date may be a different date
from the date specified in the Generator Deactivation Notice. For example, a Generator might have noticed its intent to deactivate by a specific date, but later determines that it needs to remain in service for a few additional days to consume remaining fuel stock.

The time the NYISO requires to deactivate a particular Initiating Generator will depend
on Generator-specific facts and circumstances. The most important criteria are that the
deactivating Generator (1) timely ceases participating in the ISO Administered Markets,

(2) provides sufficient advance notice of its actual deactivation date to the NYISO, and

(3) timely responds to NYISO questions and completes any required tasks. Because the

Initiating Generator’s actions can impact both the NYISO’s ability to permit the Generator to

deactivate and the time the NYISO requires to complete necessary administrative tasks, it is not appropriate to impose a strict time limit on the NYISO’s completion of administrative tasks related to the deactivation of an Initiating Generator.

H.The NYISO’s Proposed 365-Day Notice Period Is the Minimum Period Feasible to

Allow It to Address Bulk Power System and Local Reliability Needs in Coordination with all Market Participants and Stakeholders.

In the Compliance Filing, the NYISO emphasized that the 365 day notice period

“scarcely provides the NYISO with the time necessary to evaluate the reliability impacts of a
Generator deactivation, to solicit and evaluate alternatives to an RMR Agreement that could
address the reliability need, and to select among proposed solutions to address the need.”51
IPPNY counters that “the proposed 365-day notice period is unnecessarily long” for several
reasons.52 First, IPPNY asserts that the notice period does not “account for the time that will be
saved by eliminating the New York State Public Service Commission’s (“NYPSC”) role of
evaluating and selecting potential solutions to Generator Deactivation Reliability Needs from the
process.”53 IPPNY overlooks the fact that functions that were to be carried out by the NYPSC
will now be performed by the NYISO. These additional functions will take the NYISO
considerable time to administer.54 Moreover, as requested by IPPNY and other interested parties
in the stakeholder process, the 365-day period also includes an additional 30 days for interested
parties to propose Generator Deactivation Solutions, increasing the solicitation period from 30 to

60 days.55

51 Compliance Filing at 14; see proposed OATT § 38.3.1 (establishing that a Market Participant must provide the NYISO with a minimum of 365 days prior notice, following the NYISO’s determination that the Generator Deactivation Notice is complete, before its Generator may be Retired or enter into a
Mothball Outage).

52 IPPNY Protest at 18.

53 Id. at 18.

54 Compliance Filing at 14 (“Although the NYPSC’s role in reviewing and identifying non-generation alternatives has been removed, the NYISO needs that time to step into this role itself and to evaluate and select from among the available generation and transmission alternatives.”)

55 Proposed OATT § 38.4.1.

Second, IPPNY argues that the NYISO “should be better equipped to expedite its review than the NYPSC” “[g]iven its greater experience and resources and the fact that it will be
directly familiar with the scope of the need and the state of the system.”56 IPPNY provides no
support for its claim that the NYISO can perform the responsibilities previously assigned to the NYPSC faster than the NYPSC could or the time periods identified by the NYISO’s subject-
matter experts based on their long experience in performing similar studies and responsibilities. As the NYISO states in the Compliance Filing and in Attachment I to this Answer, the affidavit of Zachary G. Smith, NYISO Vice President of System and Resource Planning (“Smith
Affidavit”), it has streamlined process steps where possible, but “will still be compressing into
365 days many of the steps included in its reliability planning process, which in the normal
course requires at least two years to perform.”57

Based on its unsupported assertions, IPPNY concludes that the NYISO “should,

therefore, be able to accommodate a 270-day notice period.”58 IPPNY provides no indication of
the basis for selecting a 270-day period, nor does IPPNY explain how the NYISO will complete
all of the tasks it will be required by its Tariffs to perform in 95 fewer days. One hundred and
fifty days of the deactivation process are taken up by the Generator Deactivation Assessment (90
days) and the NYISO’s solicitation of solutions (which was extended from 30 days to 60 days at
the request of stakeholders).59 IPPNY’s proposal would leave the NYISO a scant 120 days to

56 IPPNY Protest at 18-19.

57 Compliance Filing at 14. See OATT § 31.1.8.2 (stating that the reliability planning process will normally be conducted over a two-year planning cycle.)

58 IPPNY Protest at 19.

59 Proposed OATT Sections 38.3.4.3 (establishing 90 day period for Generator Deactivation

Assessment) and 38.4.1 (establishing 60 day period for interested parties to submit proposed Generator Deactivation Solutions).

complete all of the remaining steps of the Generator Deactivation Process set forth in the NYISO’s Tariffs as described below.

In the Compliance Filing and the accompanying affidavit from Zachary G. Smith, the

NYISO explained that it requires at least 215 days before the Initiating Generator may deactivate to complete all of the following tasks set forth in the tariff:

• Evaluate the Viability and Sufficiency of potential alternative Generator Deactivation

Solutions to satisfy the identified Generator Deactivation Reliability Need (OATT §§

38.1, 38.6.1);

• Coordinate with the Responsible Transmission Owner in performing the evaluation of

solutions to both Bulk Power System and local transmission system reliability needs (OATT § 38.6.1);

• Evaluate the conceptual permanent solution proposed by the Responsible Transmission

Owner to determine that it is viable and sufficient to use as a benchmark for identifying the term of an RMR Agreement (OATT § 38.6.1);

• Review, verify and/or validate cost information provided to the NYISO by proposed

Generator Deactivation Solutions pursuant to OATT §§ 38.3, 38.4, 38.5 and Attachment F, Appendix B (OATT § 38.7);

• Determine the net present values of the Viable and Sufficient Generator Deactivation

Solutions that have been offered to the NYISO, including validating developers’ cost
information and determining an accuracy range for each solution’s costs (OATT §

38.10.2.2);

• Determine whether market based solutions and Transmission Owners’ Local

Transmission Owner Plans will satisfy the Generator Deactivation Reliability Need or whether a regulated solution is needed (OATT § 38.6.2);

• Administer study application and fees and deposits for all Viable and Sufficient

Generator Deactivation Solutions the NYISO evaluates (OATT § 38.4.6);

• Select from among regulated Viable and Sufficient generation and transmission solutions

using the net present value analysis and all of the criteria set forth in the NYISO’s tariff , including cost per MW ratio, expandability, operability, performance, property rights, risk of project delay and impact of other pending Generator Deactivation Reliability
Needs (OATT § 38.10);

• If the Initiating Generator plans to deactivate immediately after the 365th day of the

notice period and the Generator Deactivation Reliability Need arises either immediately
upon deactivation or in a future year, the NYISO must negotiate and enter into a
Development Agreement with a Developer if the NYISO selects a transmission solution

(OATT §§ 38.12.3, 31.7, Appendix C), or negotiate and enter into an RMR Agreement
with the Initiating Generator or another Generator if selected by the NYISO (OATT §

38.11.2 and Attachment F, Appendix C), or enter into several different agreements. The NYISO must also file the necessary RMR Agreements (OATT §§ 38.11.3 - 38.11.5) and or Development Agreements (OATT § 38.12.3) before their effective dates for
acceptance by the Commission; and

• Arrange for service from and compensation to Generators as Interim Service Providers
during the 365 day notice period (OATT §§ 38.1, 38.13).

Many of these tasks are normally associated with the NYISO’s two-year reliability planning

process.60 The Generator Deactivation Process adds further steps to enter into and file necessary agreements to secure solutions to address the Generator Deactivation Reliability Need.61 Given the scope and depth of the requirements of the Generator Deactivation Process, the NYISO’s proposal to complete these tasks in 215 days of the 365 day notice period is reasonable and
IPPNY’s proposal to shorten the 365 day period to 270 days should be rejected.

I. The Commission Should Reject IPPNY’s Proposed Changes to Generator

Compensation During the 365 Day Generator Deactivation Notice Period

IPPNY argues that the NYISO should start paying a Generator that submitted a Generator
Deactivation Notice the Initiating Generator’s choice of an Availability and Performance Rate
including Availability Incentives and Performance Incentives (“APR”) or an Owner Developed
Rate (“ODR”) that the owner files and the Commission accepts, commencing 91 days after the
Generator Deactivation Assessment Start Date.62 IPPNY states “Once the NYISO determines
that a Reliability Need prevents a Generator’s deactivation, that Generator is providing reliability
service. Until such time as the NYISO affirmatively identifies another solution, the deactivating
Generator should be compensated for that service [at the APR or ODR].”63 The Commission

60 Smith Affidavit at ¶¶ 8-9.

61 Smith Affidavit at ¶ 9.

should accept the compensation rules for Interim Service Providers (“ISPs”) that the NYISO

proposed in its Compliance Filing64 and reject IPPNY’s proposed changes.

The NYISO proposes to pay ISPs an APR that does not include Availability Incentives or Performance Incentives commencing 181 days after the Generator Deactivation Assessment Start Date. Implementing a rate that permits ISPs to recover their incremental and avoidable costs
commencing 181 days after the Generator Deactivation Assessment Start Date is appropriate for all of the following reasons:

(a) requiring the NYISO to pay a deactivating Generator a guaranteed rate that may
significantly exceed the Generator’s expected market-based rate compensation as soon as the
Generator Deactivation Assessment is completed, before the NYISO has the opportunity to
solicit or consider alternative solutions, will not encourage owners to submit a Generator
Deactivation Notice sufficiently in advance to permit the NYISO to plan for the Generator’s
orderly deactivation. To the contrary, if an owner knows or expects that its Generator will be
needed for reliability, it will be able to maximize its profits by operating the Generator until it is
no longer expected to be profitable and, only then, submitting a Generator Deactivation Notice.65
If the NYISO is required to immediately begin paying the owner a guaranteed rate that both
covers the Generator’s costs and significantly exceeds expected market-based rate compensation,
the owner will not care that the Generator’s operation is not profitable during the notice period.

62 IPPNY Protests at 19-21.

63 IPPNY Protest at 21.

64 The NYISO had to develop a significant set of new rules to properly implement ISPs because they are Generators that have submitted a Generator Deactivation Notice but that have not executed and RMR Agreement with the NYISO. See, e.g., proposed Services Tariff § 15.8.6, OATT § 38.13 and the other proposed Tariff rules that are cited in those sections.

65 This would potentially delay the submission of a Generator Deactivation Notice by up to 365 days.
The owner of a Generator that is not expected to be needed for reliability will not have the same
incentive.

Instead, under IPPNY’s proposal RMR Loads will absorb the losses that the Generator sustains during the notice period, while the owner receives a rate that may equal the deactivating
Generator’s full cost-of-service. Because IPPNY is proposing to require the NYISO to pay a rate that exceeds market compensation (up to a full cost-of-service rate) before the NYISO has the
opportunity to consider or select an alternative solution, IPPNY’s proposed change would not
produce a just and reasonable result;

(b) IPPNY’s argument does not take into account when the Generator Deactivation

Reliability Need is expected to arise, the circumstances under which the identified Reliability
Need is expected to arise, or even the deactivation date specified in the Generator Deactivation
Notice;

(c) 181 days is the time the NYISO expects it will require to obtain necessary avoidable
cost information from the Initiating Generator and to calculate a rate that complies with Section

15.8.6 of the Services Tariff. Since October 19, 2015, the NYISO has posted “completeness”
determinations for two Generator Deactivation Notices (addressing a total of three Generators)
that were subject to the new Generator Deactivation Notice requirement and to the associated
data submission rules. In both cases the NYISO found it necessary to issue multiple requests for
additional information from the Initiating Generator(s) to obtain the avoidable cost components
that NYISO would use to develop an APR. Based on its experience, the NYISO cannot commit
to have a reasonably accurate APR in place 91 days after a Generator Deactivation Notice is

submitted;

(d) the NYISO’s proposed timeframe is consistent with the timeframe in which the Midcontinent Independent Transmission System Operator begins paying out-of-market compensation66; and

(e) it is consistent with the notice period that the NYPSC already requires for Generators
that are 80MW or larger. Generators that are 80 MW or larger cannot deactivate prior to the
conclusion of the NYPSC’s 180 day notice period unless the NYPSC grants a waiver of the
requirement.67

In its December 21, 2015 Request for Leave to Answer and Answer in this proceeding, the NYISO explained in detail why it does not support paying rates that might significantly
exceed market compensation before it determines which solution to implement to address a
Generator Deactivation Reliability Need.68 An updated response is provided below because
IPPNY modified some of the arguments that were presented to the Commission in protests of the NYISO’s initial October 2015 Filing.

66 The Midcontinent Independent System Operator, Inc.’s (“MISO’s”) tariff rules require a generator
to submit an Attachment Y Notice to MISO at least 26 weeks prior to changing to a Retire or Suspend
status. If its deactivation would result in a reliability need and MISO does not identify an alternative by
the Attachment Y Notice date to Retire or Suspend, the MISO must file an SSR Agreement with the
noticing generator with an effective date as of the Attachment Y Notice date to Retire or Suspend. See
MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff Sections 38.2.7.a and

38.2.7.c.

67 Proceeding on Motion of the Commission to Establish Policies and Procedures Regarding

Generation Unit Retirements, Case 05-E-0889, Order Adopting Notice Requirements for Generation Unit Retirements (issued December 20, 2005).

68 See New York Independent System Operator, Inc., Request for Leave to Answer and Answer of

New York Independent System Operator, Inc., Docket No. ER16-120-000 (December 21, 2015) at 8-11,
14-17.

1.IPPNY’s Proposal to Require the NYISO to Pay RMR Compensation

Immediately After a Generator Deactivation Reliability Need is Identified is Inconsistent with the Requirement that RMR Agreements be a Limited LastResort Measure

The Initial RMR Order requires the NYISO, relevant transmission owners, and interested
parties to consider alternatives to an RMR Agreement before the NYISO enters into an RMR
Agreement with a Generator. The Initial RMR Order states that RMR Agreements should be
used “only as a limited, last-resort measure” and that alternatives to an RMR Agreement should
be considered in order to “mitigate the need for an RMR designation.” Requiring the NYISO to
begin paying compensation to an Initiating Generator as if the Generator is already operating
pursuant to an RMR Agreement one day after the NYISO’s Generator Deactivation Assessment
is completed (i.e., 91 days after the Generator Deactivation Assessment Start Date), would
change RMR service from a “limited, last-resort measure” into a “first resort” requirement that
applies whenever the NYISO identifies a Generator Deactivation Reliability Need. The
Commission should reject IPPNY’s protest and accept the NYISO’s proposed ISP compensation
rules because they provide the necessary time for the NYISO and affected stakeholders to plan
and implement reliability solutions that could avoid the need to enter into an RMR Agreement.
In paragraph 13 of its Initial RMR Order, the Commission instructed the NYISO to
include in its compliance filing:

13. …Provisions establishing a schedule by which a generator must notify

NYISO of deactivation and clear timelines for action will ensure that NYISO, generation owners, all relevant transmission owners, and other concerned parties have sufficient time to plan and implement the reliability solutions necessary to address any identified reliability issue, which may ultimately mitigate the need for an RMR designation….69

In paragraph 16 of the Initial RMR Order, the NYISO was further instructed that:

69 Emphasis added; internal citations removed.

16. …The evaluation of alternatives to an RMR designation is an important
step that deserves the full consideration of NYISO and its stakeholders to
ensure that RMR agreements are used only as a limited, last-resort measure.
To this end, NYISO, in its proposed tariff language, should explain its process for
identifying RMR alternatives in detail, including how the process will ensure a
thorough consideration of all types of RMR alternatives in an open and
transparent manner…. Furthermore, NYISO’s proposal must include the
requirement that any future generation resource-specific RMR filing made with
the Commission should detail the alternative solutions evaluated and justify
the term of the proposed RMR agreement vis-à-vis the timing of alternative
solutions to the identified reliability need. This last requirement reflects our
belief that RMR filings should be made only to temporarily address the need to
retain certain generation until more permanent solutions are in place and that all
alternatives should be considered to ensure that designating a generator for
RMR service is a last resort option for meeting immediate reliability needs.70

The NYISO proposes to perform a Generator Deactivation Assessment71 and, where a

Generator Deactivation Reliability Need is identified, to solicit a broad range of possible

Generator Deactivation Solutions from Responsible Transmission Owners and Developers,72 and
to consider the possible return to service of Generators that are in a Mothball Outage or an ICAP
Ineligible Forced Outage to address the identified Reliability Need.73 The NYISO must next
identify the proposed Generator Deactivation Solutions that are viable and sufficient to satisfy
the identified Reliability Need.74 All viable and sufficient Generator Deactivation Solutions are
considered in determining how to address the identified Generator Deactivation Reliability
Need75 before the NYISO decides that it needs to enter into an RMR Agreement.76 This process

70 Emphasis added; internal citations removed.

71 See proposed OATT Section 38.3.4.

72 See proposed OATT Section 38.4.

73 See proposed OATT Section 38.5.

74 See proposed OATT Section 38.6.

75 See proposed OATT Sections 38.9 and 38.10.

76 See proposed OATT Section 38.11.

ensures that the NYISO only executes an RMR Agreement as a last-resort option, after all

alternatives have been considered, consistent with the Commission’s instructions.

The rules IPPNY proposes in its protest would effectively require the NYISO to begin
paying full RMR compensation to the Initiating Generator as soon as the NYISO identifies a
Generator Deactivation Reliability Need; before the NYISO even receives proposed alternative
solutions to the identified need. IPPNY’s proposal to require the NYISO to begin paying an
APR that includes Availability Incentives and Performance Incentives or an ODR before the
NYISO even has the opportunity to evaluate alternative solutions is not consistent with the

provisions of the Initial Order that require “thorough consideration” of alternative solutions before an RMR Agreement is executed, nor is it consistent with the rules adopted in other ISO/RTO markets.77

Although it would not be appropriate to require the NYISO to begin compensating an
Initiating Generator as if the Generator has already executed an RMR Agreement with the
NYISO78 immediately after a Generator Deactivation Reliability Need is identified, the NYISO
proposes to compensate ISPs that are required to remain in service beyond the 180th day of the
notice period at the Generator’s demonstrated avoidable costs, including its variable operating
costs. Implementing this approach will return New York Control Area (“NYCA”) Generators to

77 As explained previously, the MISO’s tariff rules provide 26 weeks (which is approximately 180 days) for the MISO to identify a reliability need and develop a solution. See MISO Open Access
Transmission, Energy and Operating Reserve Markets Tariff Section 38.2.7. At minimum, the
Commission should give the NYISO the same amount of time it granted the MISO to determine if a
Reliability Need exists and to evaluate alternatives before it requires the NYISO to implement a nonmarket compensation method.

78 The Initiating Generator has not yet agreed to comply with the terms and conditions of service that are required in the NYISO’s Form of Reliability Must Run Agreement.

approximately where they stood before the NYISO proposed its RMR rules.79 Additional

payments under an RMR-like agreement have not generally been available in New York until after the NYPSC’s 180 day notice requirement is satisfied.

2. Paying Generators an APR that Includes Availability and Performance

Incentives or up to Full Cost-of-Service Under an ODR During the Notice Period Would Discourage Generators from Providing Advance Notice or Assisting Efforts to Plan for an Orderly Deactivation

IPPNY argues that if a Generator is not permitted to deactivate immediately after the
NYISO completes a Generator Deactivation Assessment because the assessment indicates that
the Generator’s deactivation presents a Generator Deactivation Reliability Need that the NYISO,
affected Transmission Owners and interested stakeholders must plan to address, then the
Initiating Generator should be paid its choice of either (a) an APR that includes an Availability
Incentive and a Performance Incentive, or (b) an ODR (under which the Generator may seek to
recover its full cost-of-service from the Commission) until the Initiating Generator is permitted
to deactivate.80 The Commission should reject IPPNY’s proposal. Requiring the NYISO to pay
a guaranteed rate that may significantly exceed expected market-based rate compensation to a
deactivating Generator before the NYISO has the opportunity to consider alternatives to
executing an RMR Agreement with that Generator will send the wrong economic signal to
Generators that can reasonably anticipate or know81 that their deactivation will result in a

79 See NYPSC Case No. 05-E-889, Order Adopting Notice Requirements for Generation Unit

Retirements (December 20, 2005), which requires 180 days prior notice before Generators that are 80 MW or larger may deactivate.

80 IPPNY Protest at 21.

81 Generators can pay for the NYISO to perform an additional reliability study before a Generator
Deactivation Notice is submitted. See Reliability Planning Process Manual, Attachment E, Request for
Additional Reliability Study, and Attachment F, Agreements for Additional Reliability Studies; available
at:

http://www.nyiso.com/public/webdocs/markets_operations/documents/Manuals_and_Guides/Manuals/Pla
nning/rpp_mnl.pdf.

Generator Deactivation Reliability Need. Paying these Generators a guaranteed rate that may

significantly exceed their expected market-based rate compensation during the notice period will encourage surprises, and reward the last-minute submission of Generator Deactivation Notices.
Ideally, the NYISO wants Generators that are close to the end of their operating lives to continue operating while they are profitable and to cease operation when they no longer expect to be profitable.82 The NYISO’s Tariff rules are intended to incentivize Generators to submit a Generator Deactivation Notice sufficiently in advance of an expected deactivation to permit the NYISO, affected Transmission Owners and interested stakeholders to plan for the noticed
Generator’s orderly deactivation.83

Requiring the NYISO to pay a deactivating Generator a guaranteed rate that may

significantly exceed the Generator’s expected market-based rate compensation as soon as the
Generator Deactivation Assessment is completed84 will not encourage owners to submit a
Generator Deactivation Notice sufficiently in advance to permit the NYISO, affected
Transmission Owners and interested stakeholders to plan for the Generator’s orderly
deactivation. To the contrary, if an owner knows or expects that its Generator will be needed for
reliability, at least temporarily, it will be able to maximize its profits by operating the Generator
until it is no longer expected to be profitable and, only then, submitting a Generator Deactivation

82 As the NYISO explained on pages 17 to 21 of its December 21, 2015 Request for Leave to Answer
and Answer in this docket, expected revenues from the NYISO’s capacity market are reasonably
predictable, and it is appropriate for generation owners to bear the risk of the business decisions they
make.

83 The NYISO’s proposed rules give the owner up to a full year after the conclusion of the 365 day notice period to decide to deactivate the Generator. See proposed OATT Section 38.14.1.

84 This would require cost-of-service payments to commence before the NYISO has the opportunity
to solicit or consider alternatives to executing an RMR Agreement with the deactivating Generator.

Notice.85 If the NYISO pays the owner a guaranteed rate that may significantly exceed expected
market-based rate compensation, the owner will not care that the Generator’s operation is not
profitable during the notice period. Instead, loads that had no say in when the Generator
Deactivation Notice was submitted will absorb the losses that the Generator sustains during the
notice period, while the owner receives a rate that may equal the deactivating Generator’s full
cost-of-service. The result proposed in IPPNY’s protest would not be just or reasonable.
The owner might even be able to extend the period over which it is paid a guaranteed rate that may significantly exceed expected market-based rate compensation for its Generator by
being dilatory in providing needed information to the NYISO in order to delay the NYISO’s
efforts to determine the least-cost solution to the identified Generator Deactivation Reliability
Need.

The Commission should reject IPPNY’s proposal to require the NYISO to pay

Generators that are required to continue operating after the NYISO completes its Generator

Deactivation Assessment a guaranteed rate that may significantly exceed expected market-based
rate compensation (up to and including the Generator’s full cost-of-service), during the notice
period. Doing so would incentivize inappropriate behavior. The NYISO’s proposed rules for
compensating ISPs provide appropriate financial incentives to deactivating Generators.

The Tariff rules that the NYISO proposed to the Commission in the Compliance Filing

require the owner of an Initiating Generator to bear any losses that may occur during the first 180
days of the 365 day notice period. The proposed ISP compensation rules set forth in Section

15.8.6 of Rate Schedule 8 to the Services Tariff will enable the NYISO to pay ISPs their
avoidable and incremental costs commencing on the 181st day of the notice period. The

85 This would potentially delay the submission of a Generator Deactivation Notice by 365 days. The
owner of a Generator that is not expected to be needed for reliability will not have the same incentive.

proposed compensation structure for ISPs does not include Availability Incentives or

Performance Incentives. The ISP compensation rules were developed to protect an Initiating Generator from sustaining losses during days 181-365 of the notice period, but they should not provide a financial incentive for owners to delay the submission of a Generator Deactivation Notice. The NYISO’s proposed compensation rules give the owner an appropriate financial incentive to submit a Generator Deactivation Notice in advance, and to deactivate the Generator when its operation ceases to be profitable.

J. The Commission Should Reject As Outside the Scope of its Orders IPPNY’s

Proposal that the NYISO Consider Out-of-State Generators as Possible Generator Deactivation Solutions

On pages 21-23 of its protest, IPPNY argues that the NYISO’s Generator Deactivation
Process should include rules to permit out-of-state Generators to participate as Generator
Deactivation Solutions. IPPNY’s protest states (but does not include any supporting evidence) that developing rules to permit Generators located outside New York to be offered as RMR
solutions is of “crucial importance” and that the NYISO should be directed to develop and
submit rules to allow out-of-state Generators to be offered as temporary solutions to a Generator Deactivation Reliability Need.

The NYISO’s proposed rules already permit the NYISO to consider Generators located
outside New York State that participate as Market Participants and respond to dispatch
instructions in the NYCA as Generator Deactivation Solutions.86 The NYISO’s consideration of
all Generators that are capable of following the NYISO’s commitment and dispatch instructions

86 There are Generators located in New Jersey that participate in the NYCA. There are also Generators interconnecting in Pennsylvania that will participate in the NYCA.

as potential Generator Deactivation Solutions is similar to the MISO’s rules.87 The MISO

considers external generators that it can commit and dispatch as potential solutions to identified reliability needs.88

There are a number of constraints that make it difficult or infeasible for Generators located outside the NYCA to participate as Generator Deactivation Solutions to a NYCA reliability need. These include:

1. NYCA Generators that are selected as Generator Deactivation Solutions are required
to offer their full capacity into the NYISO’s Day-Ahead (and Real-Time, if possible) Energy
Market at their ISO-determined reference levels (incremental marginal costs), so that the NYISO
can economically commit the Generator and obtain Energy Market revenues that can reduce the
burden imposed by the RMR Generator on RMR Loads.89 It is not possible for Imports from
Generators located outside the NYCA to be offered to the NYISO on a basis that is as flexible as
the NYISO’s ability to commit and dispatch a NYCA Generator. New rules would need to be
developed to address the scope of services Generators located outside the NYCA would be

87 In footnote 22 of its Initial RMR Order, the Commission stated “In its evaluation of what to include
in its submission, we encourage NYISO to consider the RMR tariff provisions of other RTOs/ISOs.”

88 Section 38.2.7.c of Module C to the MISO Open Access Transmission, Energy, and Operating

Reserve Markets Tariff (“MISO Tariff”) states, in pertinent part, that “A Generator alternative may be a
new Generator, an existing Generator … or an increase to existing Generator capacity … and must be
registered as a Generation Resource that is obligated to offer into the market and respond to instructions
from the Transmission Provider... ” Module A, Section 1 of the MISO Tariff defines a Generation

Resource as “Generator within the MISO Balancing Authority Area or an External Resource that is

Pseudo-tied into the MISO Balancing Authority Area and that (i) is registered to participate in the Energy
and Operating Reserve Markets, (ii) is capable of supplying Energy, Capacity, Operating Reserve, Up
Ramp Capability and/or Down Ramp Capability, (iii) is capable of complying with the Transmission
Provider’s Setpoint Instructions and (iv) has the appropriate metering equipment installed.” The
NYISO’s proposed rules would permit the NYISO to consider all Generators that are able to satisfy
MISO’s stated criteria as possible Generator Deactivation Solutions. The NYISO does not employ
pseudo-ties but, as previously explained, there are Generators located outside New York that participate
in the NYCA.

89 See Services Tariff § 23.6.

required to provide and how Generators located outside the NYCA would be compensated for providing those services.

2. For an external Generator to serve as a capacity resource to New York, its capacity
must be associated with Unforced Capacity Deliverability Rights (“UDRs”),90 or the Generator
would have to obtain import rights into the NYCA (which are only available for periods of up to
six months and are only available on a first come, first serve basis) or have External CRIS
rights.91 The studies that the NYISO performs to identify Generator Deactivation Reliability
Needs assume that all UDRs that are currently contracted will continue to be contracted and will
continue to be used to import Capacity. There are very few existing UDRs that could be used to
address a Generator Deactivation Reliability Need. New UDRs might need to be obtained,
which could require transmission upgrades to be completed in an external control area and could
be subject to cost allocation and other regulatory requirements of that external control area. The
NYISO would need to develop new rules to address how all of these factors would be considered
and how the NYISO would evaluate whether an external Generator is an appropriate solution to
a Generator Deactivation Reliability Need.

3. When the NYISO models firm imports at an external Interface, it gives up the ability to receive emergency assistance at that Interface. This trade-off significantly reduces the
potential reliability benefits external solutions would be expected to provide.

4. It is unlikely that any entity would obtain new or additional Firm Withdrawal Rights in PJM to address a temporary resource adequacy need in New York due to PJM’s Regional Transmission Expansion Plan (“RTEP”) cost allocation rules.

90 See Services Tariff § 2.1.

91 See Services Tariff §§ 5.12.2.1 and 5.12.2.2.

5. New rules would need to be developed to address the claw-back of Capital

Expenditures and Above Market Revenues from Generators located outside the NYCA.

IPPNY’s request falls outside the scope of the NYISO’s compliance obligation in this
proceeding. The NYISO is not aware of any Commission-jurisdictional ISO or RTO that has
developed a comprehensive set of rules to address how Generators that are not subject to that
ISO’s or RTO’s commitment and dispatch will participate as solutions to identified reliability
needs.92 The NYISO would have to develop a unique and complex set of rules to address
consideration of and compensation to external generators that are not dispatched by the NYISO as possible Generator Deactivation Solutions. Even if the NYISO develops IPPNY’s requested rules, there is no guarantee that an external generator will ever be selected as a Generator
Deactivation Solution. The Commission should reject IPPNY’s request and let the NYISO’s
stakeholders determine if IPPNY’s requested additional rules should be given priority over other desired market and planning process enhancements.

K.NYISO is Not Opposed to the Clarifications IPPNY Proposes in Sections VII and

VIII of its Protest

At the conclusion of Section VII of its Protest on page 24 and at the conclusion of

Section VIII of its Protest on page 25, IPPNY states that the NYISO is not opposed to the Tariff addition or further revisions that IPPNY proposes. IPPNY’s statements are accurate. The
NYISO appreciates IPPNY’s effort to work with the NYISO to address these concerns.

92 In addition to the MISO example included in n. 88 above, Part V (“Generation Deactivation”) of

the PJM Interconnection, L.L.C. (“PJM”) Open Access Transmission Tariff (“OATT”) provides solely for
the Generation Owner of the deactivating unit to file with the Commission a cost of service rate to operate
its generating unit when its deactivation would cause reliability concerns. See PJM OATT Part V Section
113.2. A “Generation Owner” is defined in the PJM OATT as “an entity that owns or otherwise controls
and operates one or more operating generating unit in the PJM Region.” PJM OATT Part I (Definitions
G-H) (emphasis added).

IV. CONCLUSION

WHEREFORE, the New York Independent System Operator, Inc. respectfully requests that the Commission accept this Answer and accept the NYISO’s Compliance Filing in the above-referenced docket with only the limited clarifications described above.

Respectfully submitted,

By: /s/ Alex M. Schnell

Karen Georgenson Gach, Deputy General Counsel Alex M. Schnell, Assistant General Counsel/
Registered Corporate Counsel

Carl F. Patka, Assistant General Counsel

New York Independent System Operator, Inc.

10 Krey Boulevard

Rensselaer, NY 12144
Tel: (518) 356-6000
kgach@nyiso.com
cpatka@nyiso.com
aschnell@nyiso.com

Ted J. Murphy

Michael Messonnier

Hunton & Williams LLP

2200 Pennsylvania Ave, NW
Washington, DC 20037
Tel: (202) 955-1500
tmurphy@hunton.com
mmessonnier@hunton.com

November 9, 2016

UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

)

New York Independent System Operator, Inc.)Docket Nos. ER16-120-003

)

AFFIDAVIT OF ZACHARY G. SMITH

Mr. Zachary G. Smith declares:

1.I have personal knowledge of the facts and opinions stated herein.

2.I serve as Vice President, System and Resource Planning for the New York Independent

System Operator, Inc. (“NYISO”). My business address is 10 Krey Boulevard, Rensselaer, New York 12144.

3. I received a B.S. and M.S. in Electrical Engineering from Michigan Technological

University. I joined the Transmission Planning department at the NYISO as an Engineer in 2004. In March 2009 I was promoted to Manager of Transmission Studies and to
Director of Transmission Planning in July 2013. In September 2016, I was promoted to Vice President, System and Resource Planning. I serve as Chair of the Northeast Power Coordinating Council (“NPCC”) Task Force on Coordination on Planning and as Chair of the ISO/RTO Council Planning Committee. I am a member of the Eastern
Interconnection Planning Collaborative (“EIPC”) Technical Committee and the Northeast Joint Interregional Planning Committee.

4. My current responsibilities include oversight and implementation of transmission

planning processes and initiatives for the New York State transmission system, including reliability, economic, and public policy transmission planning, interregional planning,
and reliability compliance studies for the North American Electric Reliability
Corporation (NERC), NPCC, and New York State Reliability Council (NYSRC). As part of my responsibility for reliability compliance, I oversee all reliability analysis of
generator deactivation notices.

5. I participated in the development of the NYISO’s September 19, 2016, compliance filing

(“Compliance Filing”) in response to the Commission’s April 21, 2016, Order on

Compliance and Rehearing in Docket No. ER16-120-000 that directed revisions to the NYISO’s proposed tariff requirements for administering reliability-must-run service in New York that were originally filed on October 19, 2015.

6. Specifically, I participated in the development of the steps and timeframe for the new

Generator Deactivation Process, including the assessment of reliability needs resulting

from a Generator’s deactivation and the solicitation, evaluation, and selection of solutions to address any reliability needs.

7. I make this affidavit to respond to arguments raised by the Independent Power Producers

of New York (“IPPNY”) and the Electric Power Supply Association (“EPSA”)

(hereinafter jointly referred to as “IPPNY”) in their protest of the 365-day notice period proposed in the NYISO’s Compliance Filing.

8. In response to the argument IPPNY raises, that the NYISO should be able to complete its

Generator Deactivation Process with a notice period of 270 days, I hereby attest that 365 days is the minimum time required for the NYISO to complete its requirements.
Although the NYISO has streamlined process steps where possible, it will still be
compressing into 365 days many of the steps included in its reliability planning process, which in the normal course requires at least two years to perform.

9. Given that the tariff dedicates 150 days of the Generator Deactivation Process to

completion of the Generator Deactivation Assessment (90 days) (OATT § 38.3.4.3), and for solicitation of solutions (60 days)(OATT §38.4.1), only 215 days remain for the NYISO to complete the process before the Initiating Generator may deactivate. The NYISO requires at least 215 days to complete all of the following tasks required by the Generator Deactivation Process set forth in the tariff:

• Evaluate the Viability and Sufficiency of potential alternative Generator Deactivation

Solutions to satisfy the identified Generator Deactivation Reliability Need (OATT §§

38.1, 38.6.1), and

o Coordinate with the Responsible TO in performing the evaluation of solutions to
both Bulk Power System and local transmission system reliability needs (OATT §

38.6.1), and

o Evaluate the conceptual permanent solution proposed by the Responsible TO to
determine that it is viable and sufficient to use as a benchmark for identifying the
term of an RMR Agreement (OATT § 38.6.1);

• Review, verify and/or validate cost information provided to the NYISO pursuant to

OATT §§ 38.3, 38.4, 38.5 and Appendix B of Attachment FF (OATT § 38.7);

• Determine the net present values of the Viable and Sufficient Generator Deactivation

Solutions that have been offered to the NYISO, including validating Developers’ cost
information and determining an accuracy range for each solution’s costs (OATT §

38.10.2.2);

• Determine whether market based solutions and TO Local Transmission Owner Plans will

satisfy the Generator Deactivation Reliability Need or whether a regulated solution is needed (OATT § 38.6.2);

o Administer study application fees and deposits for all Viable and Sufficient
Generator Deactivation Solutions the NYISO evaluates (OATT § 38.4.6);

• Select from among regulated Viable and Sufficient generation and transmission solutions

using the net present value analysis and all of the criteria set forth in the NYISO’s tariff, including cost per MW ratio, expandability, operability, performance, property rights, risk of project delay and impact of other pending Generator Deactivation Reliability
Needs (OATT § 38.10);

• If the Initiating Generator plans to deactivate immediately after the 365th day of the

notice period and the a Generator Deactivation Reliability Need arises either immediately upon deactivation or in a future year, the NYISO must negotiate and enter into a
Development Agreement with a Developer if the NYISO selects a transmission solution (OATT §§ 38.12.3, 31.7, Appendix C of Attachment F), or to negotiate and enter into an RMR Agreement with the Initiating Generator or another Generator if selected by the
NYISO (OATT § 38.11.2 and Appendix C of Attachment F), or enter into several
different agreements. The NYISO must also file the necessary RMR Agreements (OATT §§ 38.11.3 - 38.11.5) and or Development Agreements (OATT § 38.12.3) before their effective dates for acceptance by the Commission;

• Arrange for service from and compensation to Generators as Interim Service Providers

during the 365 day notice period (OATT §§ 38.1, 38.13).

10. I have also reviewed Part H of the NYISO’s filing letter. The statements therein are true

and correct to the best of my knowledge, information, and belief.

11.This concludes my affidavit.

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 9th day of November 2016.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207