10 Krey Boulevard  Rensselaer, NY 12144

March 29, 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 -
Compliance Filing

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 In doing so, the Commission 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

The NYISO submits this compliance filing to address the Commission’s directive in the March 1 Order. As further described herein, the NYISO proposes certain additional, clarifying revisions to more clearly identify tariff provisions that are controlling only during periods when scarcity pricing is active.

I.Documents Submitted

1.This filing letter;

2.A blacklined version of the proposed compliance revisions to Rate Schedule 4 of the

NYISO’s Services Tariff (“Attachment I”); and

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.

Honorable Kimberly D. Bose March 29, 2016

Page 2

3.A clean version of the proposed compliance revisions to Rate Schedule 4 of the

NYISO’s Services Tariff (“Attachment II”).

II.Background

On November 30, 2015, the NYISO filed proposed revisions to implement its

Comprehensive Scarcity Pricing project.4 Scarcity pricing refers to the pricing rules utilized for
Energy and certain Ancillary Services in the Real-Time Market when the NYISO has called
upon Emergency Demand Response Program (“EDRP”) resources and/or Special Case
Resources (“SCRs”) to provide load reduction to assist with maintaining system reliability. The
purpose of scarcity pricing is to ensure that real-time prices for Energy and certain Ancillary
Services appropriately reflect the costs associated with deploying EDRP resources and SCRs.
The Comprehensive Scarcity Pricing proposal will replace the ex post scarcity pricing
methodology by incorporating scarcity pricing into the real-time optimization.

On March 1, 2016, the Commission issued an order accepting the NYISO’s proposal,

subject to a compliance filing to further clarify the tariff revisions.5 In compliance with Ordering
Paragraph B of the March 1 Order, the NYISO hereby submits proposed revisions to more
clearly delineate provisions that are controlling only during real-time intervals when scarcity
pricing is active. Specifically, the NYISO proposes additional clarifying revisions to various
provisions of Section 15.4.7 of Rate Schedule 4 of the Services Tariff to more clearly identify the
Operating Reserve Demand Curves that will apply during real-time intervals in which scarcity
pricing is active.

III.Description of Compliance Tariff Revisions

The Comprehensive Scarcity Pricing project leverages the NYISO’s existing rules and
procedures for Operating Reserves and co-optimization thereof with Energy and Regulation
Service. The tariff revisions for the Comprehensive Scarcity Pricing project, therefore, rely on
the existing tariff provisions related to Operating Reserves. To the extent that special provisions
were deemed necessary to address the supplemental 30-Minute Reserve requirement proposed by
the NYISO for purposes of incorporating scarcity pricing into the real-time optimization, the
NYISO proposed tariff revisions to clearly identify such rules and limit their application to only
real-time intervals during which scarcity pricing is active. If special rules are not identified as
being applicable during such intervals, the existing provisions of the tariff are controlling.

After further review of the accepted tariff revisions, the NYISO has identified

opportunities to clarify such revisions. The NYISO seeks to further revise various provisions of Section 15.4.7 of Rate Schedule 4 of the Services Tariff. Such additional revisions clearly
delineate the Operating Reserve Demand Curves that apply under various conditions.

4 See Comprehensive Scarcity Pricing Filing.

5 See March 1 Order at P 24.

Honorable Kimberly D. Bose March 29, 2016

Page 3

The NYISO proposes to revise Section 15.4.7 to explicitly set forth certain Operating

Reserve Demand Curves that were implicitly provided for in the revisions accepted by the March

1 Order. The proposed revisions improve clarity in the tariff by identifying the various

Operating Reserve Demand Curves applicable to 30-Minute Reserves only during real-time intervals in which scarcity pricing is active.6 The NYISO also proposes to include language clarifying that any Scarcity Reserve Demand Curves implemented in real-time will apply only during the real-time intervals when the EDRP and/or SCR activation that necessitated the use of the Scarcity Reserve Demand Curves persists.

The NYISO proposes to revise Section 15.4.7(i) to expressly define a separate Operating
Reserve Demand Curve that will apply during all scarcity periods, except for statewide
activations (i.e., all Load Zones) of the EDRP and/or SCR program.7 The revised demand curve:

(i) increases values priced at less than $500 per MW to $500 per MW during such scarcity

periods; and (ii) adjusts the otherwise applicable statewide 30-Minute Reserve requirement by an
amount equal to the established Scarcity Reserve Requirement(s).8 The description of the
parameters of this adjusted demand curve was previously set forth in the first paragraph of
Section 15.4.7(i). Explicitly describing this demand curve within a separate paragraph, however,
provides greater clarity as to the rules that apply only during real-time intervals when scarcity
pricing is active.

In Section 15.4.7(j) and Section 15.4.7(k), the NYISO proposes to add a description of

the Operating Reserve Demand Curves that will apply during certain real-time intervals in which
scarcity pricing is active. The alternative 30-Minute Reserve demand curves provide for
increasing the otherwise applicable locational reserve requirement to account for certain Scarcity
Reserve Requirements.9 Adjusting the otherwise applicable locational reserve requirement in
“upstream” reserve regions is described in the second sentence of the third paragraph of Section

6 The additional Operating Reserve Demand Curve descriptions are set forth in the following

provisions of Section 15.4.7: (i) Section 15.4.7(i) for statewide 30-Minute Reserves; (ii) Section 15.4.7(j) for Eastern 30-Minute Reserves; and (iii) Section 15.4.7(k) for Southeastern 30-Minute Reserves. The additional Operating Reserve Demand Curves address situations in which the NYISO adjusts the
otherwise applicable curves to account for the creation of a Scarcity Reserve Requirement in real-time. Such adjustments are necessary to ensure proper pricing outcomes during real-time intervals in which scarcity pricing is active. See Comprehensive Scarcity Pricing Filing at 8-9 and 15.

7 The applicable NYCA 30-Minute reserve demand curve that applies during real-time intervals in which a statewide activation of the EDRP and/or SCR program occurs is described in the second paragraph of Section 15.4.7(i).

8 This adjusted 30-Minute Reserve demand curve ensures that if the NYISO activates EDRP

resources and/or SCRs in a subset of all Load Zones and such activation 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. See Comprehensive Scarcity Pricing Filing at 9 and 15.

9 Adjusting the otherwise applicable locational 30-Minute Reserve requirement when all the Load Zones associated with a given activation of the EDRP and/or SCR program are encompassed by a reserve region is necessary to ensure proper pricing outcomes given the nested nature of the NYISO’s reserve
regions. See id. at 8 and 15.

Honorable Kimberly D. Bose March 29, 2016

Page 4

15.4.7. The proposal to explicitly describe the reserve demand curves that account for such

adjustments in Section 15.4.7(j) and Section 15.4.7(k) will provide a more clear delineation of the rules that apply only during periods in real-time when scarcity pricing is active.

IV.Effective Date

Consistent with the flexible effective date accepted by the Commission in the March 1 Order,10 the NYISO requests that the Commission permit the tariff revisions submitted herein to become effective on the date to be identified by the NYISO in a subsequent compliance filing. In compliance with Ordering Paragraph C of the March 1 Order, such filing will be submitted to the Commission at least two weeks prior to the proposed effective date for all of the tariff
revisions related to the Comprehensive Scarcity Pricing project.

V.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.

10 March 1 Order at P 25.

Honorable Kimberly D. Bose March 29, 2016

Page 5

VI.Conclusion

The New York Independent System Operator, Inc. respectfully requests that the

Commission accept the proposed tariff revisions submitted as part of this compliance filing to become effective on the date described in Section IV.

Respectfully submitted,

/s/ Garrett E. Bissell
Garrett E. Bissell
Senior Attorney

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, New York 12144 (518) 356-6107

gbissell@nyiso.com

cc:Michael Bardee

Anna Cochrane
Kurt Longo
Max Minzner
Daniel Nowak
Larry Parkinson

J. Arnold Quinn
Douglas Roe

Kathleen Schnorf
Jamie Simler
Gary Will

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 29th day of March 2016.

By:/s/ John C. Cutting

John C. Cutting

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-7521

15.4Rate Schedule 4 - Payments for Supplying Operating Reserves

This Rate Schedule applies to payments to Suppliers that provide Operating Reserves to

the ISO. Transmission Customers will purchase Operating Reserves from the ISO under Rate

Schedule 5 of the ISO OATT.

15.4.1General Responsibilities and Requirements

15.4.1.1 ISO Responsibilities

The ISO shall procure on behalf of its Customers a sufficient quantity of Operating

Reserve products to comply with the Reliability Rules and with other applicable reliability

standards, as well as Scarcity Reserve Requirements. These quantities shall be established under
Section 15.4.7 of this Rate Schedule for locational Operating Reserve requirements and Section

15.4.6.2 of this Rate Schedule for Scarcity Reserve Requirements. To the extent that the ISO enters into Operating Reserve sharing agreements with neighboring Control Areas its Operating Reserves requirements shall be adjusted as, and where, appropriate.

The ISO shall define requirements for Spinning Reserve, which may be met only by
Suppliers that are eligible, under Section 15.4.1.2 of this Rate Schedule, to provide Spinning
Reserve; 10-Minute Reserve, which may be met by Suppliers that are eligible to provide either
Spinning Reserve or 10-Minute Non-Synchronized Reserve; and 30-Minute Reserve, which may
be met by Suppliers that are eligible to provide any Operating Reserve product. The ISO shall
also define locational requirements for Spinning Reserve, 10-Minute Reserve, and 30-Minute
Reserve located East of Central-East, in Southeastern New York and on Long Island. In addition
to being subject to the preceding limitations on Suppliers that can meet each of these
requirements, the requirements for Operating Reserve located East of Central-East may only be
met by eligible Suppliers that are located East of Central-East, requirements for Operating

Reserve located in Southeastern New York may only be met by eligible Suppliers that are

located in Southeastern New York, and requirements for Operating Reserve located on Long
Island may only be met by eligible Suppliers located on Long Island. Each of these Operating Reserve requirements shall be defined consistent with the Reliability Rules and other applicable reliability standards. The ISO shall also establish Scarcity Reserve Requirements in the RealTime Market pursuant to Section 15.4.6.2 of this Rate Schedule, which may be met by Suppliers eligible to provide 30-Minute Reserve. Scarcity Reserve Requirements may only be met by
eligible Suppliers that are located in the Scarcity Reserve Region associated with a given
Scarcity Reserve Requirement. The ISO shall select Suppliers of Operating Reserves products to meet these requirements, including the locational Operating Reserves requirements and Scarcity Reserve Requirements, as part of its overall co-optimization process.

The ISO shall select Operating Reserves Suppliers that are properly located electrically
so that all locational Operating Reserves requirements determined consistently with the
requirements of Section 15.4.7 of this Rate Schedule and Scarcity Reserve Requirements
determined consistently with the requirements of Section 15.4.6.2 of this Rate Schedule are
satisfied, and so that transmission Constraints resulting from either the commitment or dispatch
of Generators do not limit the ISO’s ability to deliver Energy to Loads in the case of a
Contingency. The ISO will ensure that Suppliers that are compensated for using Capacity to
provide one Operating Reserve product are not simultaneously compensated for providing
another Operating Reserve product, or Regulation Service, using the same Capacity (consistent
with the additive market clearing price calculation formulae in Sections 15.4.5.1 and 15.4.6.1 of
this Rate Schedule).

15.4.1.2 Supplier Eligibility Criteria

The ISO shall enforce the following criteria, which define which types of Suppliers are eligible to supply particular Operating Reserve products.

15.4.1.2.1 Spinning Reserve:

Suppliers that are ISO Committed Flexible or Self-Committed Flexible, are operating

within the dispatchable portion of their operating range, are capable of responding to ISO

instructions to change their output level within ten minutes, and that meet the criteria set forth in
the ISO Procedures shall be eligible to supply Spinning Reserve (except for Demand Side
Resources that are Local Generators and Behind-the-Meter Net Generation Resources that are
comprised of more than one generating unit and dispatched as a single aggregate unit).

15.4.1.2.2 10-Minute Non-Synchronized Reserve:

(i) Off-line Generators that are capable of starting, synchronizing, and increasing their
output level within ten (10) minutes, (ii) Behind-the-Meter Net Generation Resources that are
comprised of more than one generating unit and dispatched as a single aggregate unit that are
capable of increasing their output level within ten (10) minutes, and (iii) Demand Side Resources
that are capable of reducing their Energy usage within ten (10) minutes, that meet the criteria set
forth in the ISO Procedures shall be eligible to supply 10-Minute Non-Synchronized Reserve.

15.4.1.2.3 30-Minute Reserve:

Generators, except Behind-the-Meter Net Generation Resources that are comprised of

more than one generating unit and dispatched as a single aggregate unit, that are ISO-Committed
Flexible or Self-Committed Flexible and operating within the dispatchable portion of their
operating range and Demand Side Resources, that are not Local Generators, that are capable of

reducing their Energy usage within thirty (30) minutes shall be eligible to supply synchronized
30-Minute Reserves. (i) Off-line Generators that are capable of starting, synchronizing, and
increasing their output level within thirty (30) minutes, (ii) Behind-the-Meter Net Generation
Resources that are comprised of more than one generating unit and dispatched as a single
aggregate unit that are capable of increasing their output level within thirty (30) minutes, and (iii) Demand Side Resources that are capable of reducing their Energy usage within thirty (30)
minutes, that meet the criteria set forth in the ISO Procedures shall be eligible to supply non-
synchronized 30-Minute Reserves.

15.4.1.2.4 Self-Committed Fixed and ISO-Committed Fixed Generators:

Shall not be eligible to provide any kind of Operating Reserve.

15.4.1.3 Other Supplier Requirements

All Suppliers of Operating Reserve must be located within the NYCA and must be under ISO Operational Control. Each Supplier bidding to supply Operating Reserve or reduce demand must be able to provide Energy or reduce demand consistent with the Reliability Rules and the ISO Procedures when called upon by the ISO.

All Suppliers that are selected to provide Operating Reserves shall ensure that their
Resources maintain and deliver the appropriate quantity of Energy, or reduce the appropriate
quantity of demand, when called upon by the ISO during any interval in which they have been
selected.

Generators or Demand Side Resources that are selected to provide Operating Reserve in
the Day-Ahead Market or any supplemental commitment may increase their Incremental Energy
Bids or Demand Reduction Bids for portions of their Resources that have been scheduled
through those processes; provided however, that they are not otherwise prohibited from doing so

pursuant to other provisions of the ISO’s Tariffs. They may not, however, reduce their Day-
Ahead Market or supplemental commitments in real-time except to the extent that they are
directed to do so by the ISO. Generators and Demand Side Resources may enter into alternate
sales arrangements utilizing any Capacity that has not been scheduled to provide Operating
Reserve.

15.4.2General Day-Ahead Market Rules

15.4.2.1 Bidding and Bid Selection

Resources capable of providing Spinning Reserve, 10-Minute Non-Synchronized Reserve and/or 30-Minute Reserve in the Day-Ahead commitment may submit Availability Bids for each hour of the upcoming day. If a Supplier offers Resources that are capable, based on their
indicated commitment status, of providing Operating Reserves but does not submit an
Availability Bid, its Day-Ahead Bid will be rejected in its entirety. A Supplier may resubmit a complete Day-Ahead Bid, provided that the new bid is timely.

The ISO may schedule Suppliers that make themselves available to provide Operating

Reserves up to the following maximum Operating Reserve levels: (i) for Spinning Reserves, the
Resource’s emergency response rate multiplied by ten; (ii) for 10-Minute Non-Synchronized
Reserves, or for non-synchronized 30-Minute Reserves, the Resource’s UOLN or UOLE,
whichever is applicable at the relevant time (the Resource may offer one product or the other
depending on the time required for it to start-up and synchronize to the grid; and (iii) for
synchronized 30-Minute Reserves, the Resource’s emergency response rate multiplied by
twenty.

However, the sum of the amount of Energy or Demand Reduction each Resource is
scheduled to provide, the amount of Regulation Service it is scheduled to provide, and the

amount of each Operating Reserves product it is scheduled to provide shall not exceed its UOLN or UOLE, whichever is applicable.

The ISO shall select Operating Reserve Suppliers for each hour of the upcoming day
through a co-optimized Day-Ahead commitment process that minimizes the total bid cost of
Energy, Operating Reserves and Regulation Service, using Bids submitted pursuant to
Article 4.2 of, and Attachment D to, this ISO Services Tariff. As part of the co-optimization
process, the ISO shall determine how much of each Operating Reserves product particular
Suppliers will be required to provide in light of the Reliability Rules and other applicable
reliability standards, including the locational Operating Reserves requirements specified above.

15.4.2.2 ISO Notice Requirement

The ISO shall notify each Operating Reserve Supplier that has been selected in the Day-Ahead
Market of the amount of each Operating Reserve product that it has been scheduled to provide.

15.4.2.3 Real-Time Market Responsibilities of Suppliers Scheduled to Provide
Operating Reserves in the Day-Ahead Market

Suppliers that are scheduled Day-Ahead to provide Operating Reserves shall either

provide Operating Reserve, Energy or Demand Reductions in real-time when scheduled by the
ISO in all hours for which they have been selected to provide Operating Reserve and are
physically capable of doing so. However, Suppliers that are scheduled Day-Ahead to provide
Operating Reserves and have startup periods of two hours or less may advise the ISO no later
than three hours prior to the first hour of their Day-Ahead schedule that they will not be available
to provide Operating Reserves or Energy in real-time under normal conditions. Such Suppliers
will be required to settle their Day-Ahead schedule at real-time prices pursuant to Section

15.4.6.3 of this Rate Schedule. The only restriction on Suppliers’ ability to exercise this option

is that all Suppliers with Day-Ahead Operating Reserves schedules must make the scheduled amount of Capacity available to the ISO for dispatch in the RTD if the ISO initiates a
Supplemental Resource Evaluation.

15.4.3General Real-Time Market Rules

15.4.3.1 Bid Selection

The ISO will automatically select Operating Reserves Suppliers in real-time from eligible
Resources, that submit Real-Time Bids pursuant to Section 4.4 of, and Attachment D to, this ISO
Services Tariff. Each Supplier will automatically be assigned a real-time Operating Reserves
Availability bid of $0/MW for the quantity of Capacity that it makes available to the ISO in its
Real-Time Bid. The ISO may schedule Suppliers that make themselves available to provide
Operating Reserves up to the following maximum Operating Reserve levels: (i) for Spinning
Reserves, the Resource’s emergency response rate multiplied by ten; (ii) for 10-Minute Non-
Synchronized Reserves, or for non-synchronized 30-Minute Reserves, the Resource’s UOLN or
UOLE, whichever is applicable at the relevant time (the Resource may offer one product or the
other depending on the time required for it to start-up and synchronize to the grid); and (iii) for
synchronized 30-Minute Reserves, the Resource’s emergency response rate multiplied by
twenty. However, the sum of the amount of Energy or Demand Reduction, that each Resource
is scheduled to provide, the amount of Regulation Service it is scheduled to provide, and the
amount of each Operating Reserves product it is scheduled to provide shall not exceed its UOLN
or UOLE, whichever is applicable.

Suppliers will thus be selected on the basis of their response rates, their applicable upper
operating limits, and their Energy Bids (which will reflect their opportunity costs) through a co-
optimized real-time commitment process that minimizes the total bid cost of Energy, or Demand

Reduction, Regulation Service, and Operating Reserves. As part of the process, the ISO shall

determine how much of each Operating Reserves product particular Suppliers will be required to
provide in light of the Reliability Rules and other applicable reliability standards, including the
locational Operating Reserves requirements and Scarcity Reserve Requirements specified above.

15.4.3.2 ISO Notice Requirement

The ISO shall notify each Supplier of Operating Reserve that has been scheduled by RTD of the amount of Operating Reserve that it must provide.

15.4.3.3 Obligation to Make Resources Available to Provide Operating Reserves

Any Resource that is eligible to supply Operating Reserves and that is made available to
ISO for dispatch in Real-Time must also make itself available to provide Operating Reserves.

15.4.3.4 Activation of Operating Reserves

All Resources that are selected by the ISO to provide Operating Reserves shall respond to the ISO’s directions to activate in real-time.

15.4.3.5 Performance Tracking and Supplier Disqualifications

When a Supplier committed to supply Operating Reserves is activated, the ISO shall
measure and track its actual Energy production or its Demand Reduction against its expected
performance in real-time. The ISO may disqualify Suppliers that consistently fail to provide
Energy or Demand Reduction when called upon to do so in real-time from providing Operating
Reserves in the future. If a Resource has been disqualified, the ISO shall require it to pass a re-
qualification test before accepting any additional Bids to supply Operating Reserves from it.
Disqualification and re-qualification criteria shall be set forth in the ISO Procedures.

15.4.4Operating Reserves Settlements - General Rules

15.4.4.1 Establishing Locational Reserve and Scarcity Reserve Requirement
Prices

Except as noted below, the ISO shall calculate separate Day-Ahead Market and Real-

Time Market prices for each of the products in four locations: (i) West of Central-East (“West” or “Western”); (ii) East of Central-East excluding Southeastern New York (“Eastern”); (iii)
Southeastern New York excluding Long Island (“Southeastern”); and (iv) Long Island (“L.I.”). The ISO will thus calculate twelve different locational Operating Reserve prices in both the DayAhead Market and the Real-Time Market. The ISO will also calculate prices in the Real-Time Market for each of the products in a Scarcity Reserve Region, if applicable. Day-Ahead
locational reserve prices shall be calculated pursuant to Section 15.4.5 of this Rate Schedule.
Real-Time locational Operating Reserves prices and Scarcity Reserve Requirement prices shall be calculated pursuant to Section 15.4.6 of this Rate Schedule

15.4.4.2 Settlements Involving Suppliers of Operating Reserves Located on Long
Island

Suppliers of Operating Reserves located on Long Island shall receive settlement

payments as if they were providing Operating Reserves located in Southeastern New York,

except in the case of a Scarcity Reserve Requirement for a Scarcity Reserve Region that includes
Long Island in addition to one or more other Load Zones. In this instance, suppliers of
Operating Reserves located on Long Island shall receive settlement payments as if they were
providing Operating Reserves located in Southeastern New York and in the applicable Scarcity
Reserve Region. The ISO will calculate separate locational Long Island Operating Reserves
prices and Long Island Scarcity Reserve Requirement prices for Scarcity Reserve Regions that
include Long Island but will not post them or use them for settlement purposes.

15.4.4.3“Cascading” of Operating Reserves

The ISO will deem Spinning Reserve to be the “highest quality” Operating Reserve,

followed by 10-Minute Non-Synchronized Reserve and by 30-Minute Reserve. The ISO shall substitute higher quality Operating Reserves in place of lower quality Operating Reserves, when doing so lowers the total as-bid cost, i.e., when the marginal cost for the higher quality Operating Reserve product is lower than the marginal cost for the lower quality Operating Reserve product, and the substitution of a higher quality for the lower quality product does not cause locational Operating Reserve requirements or Scarcity Reserve Requirements to be violated. To the extent, however, that reliability standards require the use of higher quality Operating Reserves,
substitution cannot be made in the opposite direction.

The market clearing price of higher quality Operating Reserves will not be set at a price below the market clearing price of lower quality Operating Reserves in the same location or Scarcity Reserve Region. Thus, the market clearing price of Spinning Reserves will not be
below the price for 10-Minute Non-Synchronized Reserves or 30-Minute Reserves and the
market clearing price for 10-Minute Non-Synchronized Reserves will not be below the market clearing price for 30-Minute Reserves.

15.4.5 Operating Reserve Settlements - Day-Ahead Market

15.4.5.1 Calculation of Day-Ahead Market Clearing Prices

The ISO shall calculate hourly Day-Ahead Market clearing prices for each Operating

Reserve product at each location. Each Day-Ahead Market clearing price shall equal the sum of the relevant Day-Ahead locational Shadow Prices for that product in that hour, subject to the restriction described in Section 15.4.4.3 of this Rate Schedule.

The Day-Ahead Market clearing price for a particular Operating Reserve product in a particular location shall reflect the Shadow Prices associated with all of the ISO-defined
Operating Reserve requirements, including locational requirements, that a particular Operating Reserves product from a particular location may be used to satisfy in a given hour. The ISO shall calculate Day-Ahead Market clearing prices using the following formulae:

Market clearing price for Western 30-Minute Reserves = SP1

Market clearing price for Western 10-Minute Non-Synchronized Reserves = SP1 + SP2 Market clearing price for Western Spinning Reserves = SP1 + SP2 + SP3
Market clearing price for Eastern 30-Minute Reserves = SP1 + SP4

Market clearing price for Eastern 10-Minute Non-Synchronized Reserves = SP1 + SP2
+ SP4 +

SP5

Market clearing price for Eastern Spinning Reserves = SP1 + SP2 + SP3 + SP4 + SP5 +
SP6

Market clearing price for Southeastern 30-Minute Reserves = SP1 + SP4 + SP7

Market clearing price for Southeastern 10-Minute Non-Synchronized Reserves = SP1 +
SP2 + SP4 + SP5 + SP7 + SP8

Market clearing price for Southeastern Spinning Reserves = SP1 + SP2 + SP3 + SP4 +
SP5 + SP6 + SP7 + SP8 + SP9

Market clearing price for L.I. 30-Minute Reserves = SP1 + SP4 + SP7 + SP10

Market clearing price for L.I. 10-Minute Non-Synchronized Reserves = SP1 + SP2 +
SP4 + SP5 +

SP7 + SP8 +
SP10 + SP11

Market clearing price for L.I. Spinning Reserves = SP1 + SP2 + SP3 + SP4 + SP5 + SP6
+ SP7 + SP8 + SP9 + SP10 + SP11 +

SP12

Where:

SP1 = Shadow Price for total 30-Minute Reserve requirement constraint for the hour

SP2= Shadow Price for total 10-Minute Reserve requirement constraint for the hour

SP3= Shadow Price for total Spinning Reserve requirement constraint for the hour

SP4= Shadow Price for Eastern, Southeastern, or L.I. 30-Minute Reserve requirement

constraint for the hour

SP5= Shadow Price for Eastern, Southeastern, or L.I. 10-Minute Reserve requirement

constraint for the hour

SP6= Shadow Price for Eastern, Southeastern, or L.I. Spinning Reserve requirement

constraint for the hour

SP7= Shadow Price for Southeastern, or L.I. 30-Minute Reserve requirement

constraint for the hour

SP8= Shadow Price for Southeastern, or L.I. 10-Minute Reserve requirement

constraint for the hour

SP9=Shadow Price for Southeastern, or L.I. Spinning Reserve requirement constraint

for the hour

SP10= Shadow Price for Long Island 30-Minute Reserve requirement constraint for the

hour

SP11= Shadow Price for Long Island 10-Minute Reserve requirement constraint for the

hour

SP12= Shadow Price for Long Island Spinning Reserve requirement constraint for the

hour

Day-Ahead locational Shadow Prices will be calculated by SCUC. Each hourly Day-

Ahead Shadow Price for each Operating Reserves requirement shall equal the marginal Bid cost
of scheduling Resources to provide additional Operating Reserves to meet that requirement in
that hour, including any impact on the Bid Production Cost of procuring Energy or Regulation
Service that would result from procuring an increment of Operating Reserve to meet the
requirement in that hour, as calculated during the fifth SCUC pass described in Section 17.1.3 of
Attachment B to this Services Tariff. As a result, the Shadow Price for each Operating Reserves
requirement shall include the Day-Ahead Availability Bid of the marginal Resource selected to
meet that requirement (or the applicable price on the Operating Reserve Demand Curve for that

requirement during shortage conditions), plus any margins on the sale of Energy or Regulation
Service in the Day-Ahead Market that that Resource would forego if scheduling it to provide
additional Operating Reserve to meet that requirement would lead to it being scheduled to
provide less Energy or Regulation Service. Shadow Prices will also be consistent with the
Operating Reserve Demand Curves described in Section 15.4.7 of this Rate Schedule, which will
ensure that Operating Reserves are not scheduled by SCUC at a cost greater than the relevant
Operating Reserve Demand Curve indicates should be paid. If more Operating Reserve of a
particular quality than is needed is scheduled to meet a particular locational Operating Reserve
requirement, the Shadow Price for that Operating Reserve requirement constraint shall be set at
zero.

Each Supplier that is scheduled Day-Ahead to provide Operating Reserve shall be paid the applicable Day-Ahead Market clearing price, based on its location and the quality of
Operating Reserve scheduled, multiplied by the amount of Operating Reserve that the Supplier is scheduled to provide in each hour.

15.4.5.2 Other Day-Ahead Payments

A Supplier that bids on behalf of (i) a Generator that provides Operating Reserves or (ii)
a Demand Side Resource that provides Operating Reserves may be eligible for a Day-Ahead Bid
Production Cost guarantee payment pursuant to Section 4.6.6 and Attachment C of this ISO
Services Tariff.

15.4.6 Operating Reserve Settlements - Real-Time Market

15.4.6.1 Calculation of Real-Time Market Clearing Prices

The ISO shall calculate Real-Time Market clearing prices for each Operating Reserve
product for each location in every interval and Scarcity Reserve Region in each interval for

which a Scarcity Reserve Requirement is established by the ISO. Each real-time market-clearing
price shall equal the sum of the relevant real-time locational Shadow Prices and Scarcity Reserve
Requirement Shadow Prices for a given product, subject to the restriction described in Section

15.4.4.3 of this Rate Schedule.

The Real-Time Market clearing price for a particular Operating Reserve product for a

particular location or Scarcity Reserve Region shall reflect the Shadow Prices associated with all of the ISO-defined Operating Reserve requirements, including locational requirements and
Scarcity Reserve Requirements, that a particular Operating Reserves product from that location or Scarcity Reserve Region may be used to satisfy in a given interval. The ISO shall calculate the Real-Time Market clearing prices using the following formulae:

Market clearing price for Western 30-Minute Reserves = SP1

Market clearing price for Eastern 10-Minute Non-Synchronized Reserves = SP1 + SP2 + SP4 + SP5

Market clearing price for Eastern Spinning Reserves = SP1 + SP2 + SP3 + SP4 + SP5 +
SP6

Market clearing price for Southeastern 30-Minute Reserves = SP1 + SP4 + SP7

Market clearing price for Southeastern 10-Minute Non-Synchronized Reserves = SP1 + SP2 + SP4 + SP5 + SP7 + SP8

Market clearing price for Southeastern Spinning Reserves = SP1 + SP2 + SP3 + SP4 + SP5 + SP6 + SP7 + SP8 + SP9

Market clearing price for L.I. 30-Minute Reserves = SP1 + SP4 + SP7 + SP10

Market clearing price for L.I. 10-Minute Non-Synchronized Reserves = SP1 + SP2 + SP4 + SP5 + SP7 + SP8 + SP10 + SP11

Market clearing price for L.I. Spinning Reserves = SP1 + SP2 + SP3 + SP4 + SP5 + SP6 + SP7 + SP8 + SP9 + SP10 + SP11 +SP12

Where:

SP1 = Shadow Price for total 30-Minute Reserve requirement constraint and, if applicable, Scarcity Reserve Requirement constraint for the interval

SP2= Shadow Price for total 10-Minute Reserve requirement constraint for the

interval

SP3= Shadow Price for total Spinning Reserve requirement constraint for the interval

SP4= Shadow Price for Eastern, Southeastern, or L.I. 30-Minute Reserve requirement

constraint and, if applicable, Scarcity Reserve Requirement constraint for the interval

SP5= Shadow Price for Eastern, Southeastern, or L.I. 10-Minute Reserve requirement

constraint for the interval

SP6= Shadow Price for Eastern, Southeastern, or L.I. Spinning Reserve requirement

constraint for the interval

SP7= Shadow Price for Southeastern, or L.I. 30-Minute Reserve requirement

constraint and, if applicable, Scarcity Reserve Requirement constraint for the interval

SP8= Shadow Price for Southeastern, or L.I. 10-Minute Reserve requirement

constraint for the interval

SP9= Shadow Price for Southeastern, or L.I. Spinning Reserve requirement constraint

for the interval

SP10= Shadow Price for Long Island 30-Minute Reserve requirement constraint and, if

applicable, Scarcity Reserve Requirement constraint for the interval

SP11= Shadow Price for Long Island 10-Minute Reserve requirement constraint for the

interval

SP12= Shadow Price for Long Island Spinning Reserve requirement constraint for the

interval

Real-time locational and Scarcity Reserve Requirement Shadow Prices will be calculated
by the ISO’s RTD. Each Real-Time Shadow Price for each Operating Reserves requirement,
including a Scarcity Reserve Requirement, in each RTD interval shall equal the marginal Bid
cost of scheduling Resources to provide additional Operating Reserves to meet that requirement

in that interval, including any impact on the Bid Production Cost of procuring Energy or

Regulation Service that would result from procuring an increment of Operating Reserve to meet
the requirement in that interval, as calculated during the third RTD pass described in Section

17.1.2.1.2.3 of Attachment B to this ISO Services Tariff. As a result, the Shadow Price for each
Operating Reserves requirement, including a Scarcity Reserve Requirement, shall include the
Real-Time Availability Bid of the marginal Resource selected to meet that requirement (or the
applicable price on the Operating Reserve Demand Curve or Scarcity Reserve Demand Curve for
that requirement during shortage conditions), plus any margins on the sale of Energy or
Regulation Service in the Real-Time Market that that Resource would forego if scheduling it to
provide additional Operating Reserve to meet that requirement would lead to it being scheduled
to provide less Energy or Regulation Service. Shadow Prices will also be consistent with the
Operating Reserve Demand Curves and Scarcity Reserve Demand Curve described in Section

15.4.7 of this Rate Schedule, which will ensure that Operating Reserves are not scheduled by RTC at a cost greater than the relevant Operating Reserve Demand Curve or Scarcity Reserve Demand Curve indicates should be paid. If there is more Operating Reserve of the required quality than is needed to meet a particular locational Operating Reserve requirement or Scarcity Reserve Requirement then the Shadow Price for that Operating Reserve requirement or Scarcity Reserve Requirement constraint shall be zero.

Each Supplier that is scheduled in real-time to provide Operating Reserve shall be paid the applicable Real-Time Market clearing price, based on its location and the quality of
Operating Reserve scheduled, multiplied by the amount of Operating Reserve that the Supplier is scheduled to provide in each interval that was not scheduled Day-Ahead.

15.4.6.1.1The Real-Time Market clearing price shall also reflect the Shadow Price

for any Scarcity Reserve Requirement constraint as part of the applicable 30-

Minute Reserve requirement constraint Shadow Price for the Load Zones included in the Scarcity Reserve Region. The inclusion of Scarcity Reserve Requirement
constraint Shadow Prices in the calculation of Real-Time Market clearing prices is as set forth below:

(a) When the Load Zones included in a Scarcity Reserve Region are identical to the

Load Zones of an existing locational reserve region, the Scarcity Reserve

Requirement will be added to the existing 30-Minute Reserve requirement for the
locational reserve region and the Shadow Price for the Scarcity Reserve
Requirement will be the Shadow Price for the revised 30-Minute Reserve
requirement. The use of Scarcity Reserve Requirement Shadow Prices in
calculating Real-Time Market clearing in such circumstances is as follows:

i. If the Scarcity Reserve Requirement is for a Scarcity Reserve Region that

includes Load Zones A, B, C, D, E, F, G, H, I, J and K (i.e., all Load Zones), then the Shadow Price for the Scarcity Reserve Requirement shall be SP1. SP1 shall be utilized in the same manner as described in the formulae above in calculating Real-Time Market clearing prices;

ii. If the Scarcity Reserve Requirement is for a Scarcity Reserve Region that

includes Load Zones F, G, H, I, J and K (i.e., all East of Central-East Load

Zones), but does not include Load Zones A, B, C, D or E, then the Shadow Price
for the Scarcity Reserve Requirement shall be SP4. SP4 shall be utilized in the

same manner as described in the formulae above in calculating Real-Time Market clearing prices;

iii. If the Scarcity Reserve Requirement is for a Scarcity Reserve Region that

includes Load Zones G, H, I, J and K (i.e., all Southeastern New York Load

Zones), but does not include Load Zones A, B, C, D, E or F, then the Shadow

Price for the Scarcity Reserve Requirement shall be SP7. SP7 shall be utilized in the same manner as described in the formulae above in calculating Real-Time Market clearing prices; or

iv. If the Scarcity Reserve Requirement is for a Scarcity Reserve Region that

includes Load Zone K (i.e., Long Island only), but does not include Load Zones
A, B, C, D, E, F, G, H, I or J, then the Shadow Price for the Scarcity Reserve
Requirement shall be SP10. SP10 shall be utilized in the same manner as

described in the formulae above in calculating Real-Time Market clearing prices.

(b) When the Load Zones included in the Scarcity Reserve Region are not identical to

the Load Zones of an existing locational reserve region, the Shadow Price

attributable to the Scarcity Reserve Requirement will be added to the applicable
Shadow Price for the 30-Minute Reserve requirement for the existing locational
reserve region to which all of the Load Zones included in the Scarcity Reserve
Region belong. The inclusion of the Scarcity Reserve Requirement Shadow
Prices shall apply only to the Load Zones included as part of a Scarcity Reserve
Region. The use of Scarcity Reserve Requirement Shadow Prices in calculating
Real-Time Market clearing in such circumstances is as follows:

i.If the Scarcity Reserve Requirement is for a Scarcity Reserve Region that

includes at least one or more of Load Zones A, B, C, D or E and Section

15.4.6.1.1(a)(i) of this Rate Schedule is not applicable, then the Shadow Price for
the Scarcity Reserve Requirement shall be included in SP1 for each of the Load
Zones included in the Scarcity Reserve Region. This SP1 value shall be utilized
in the same manner as described in the formulae above in calculating Real-Time
Market clearing prices for each of the Load Zones included in the Scarcity
Reserve Region;

ii. If the Scarcity Reserve Requirement is for a Scarcity Reserve Region that

includes at least Load Zone F, but does not include Load Zones A, B, C, D or E
and Section 15.4.6.1.1(a)(ii) of this Rate Schedule is not applicable, then the
Shadow Price for the Scarcity Reserve Requirement shall be included in SP4 for each of the Load Zones included in the Scarcity Reserve Region. This SP4 value shall be utilized in the same manner as described in the formulae above in
calculating Real-Time Market clearing prices for each of the Load Zones included in the Scarcity Reserve Region; or

iii. If the Scarcity Reserve Requirement is for a Scarcity Reserve Region that

includes at least one or more of Load Zones G, H, I or J, but does not include

Load Zones A, B, C, D, E or F and Section 15.4.6.1.1(a)(iii) of this Rate Schedule
is not applicable, then the Shadow Price for the Scarcity Reserve Requirement
shall be included in SP7 for each of the Load Zones included in the Scarcity
Reserve Region. This SP7 value shall be utilized in the same manner as described

in the formulae above in calculating Real-Time Market clearing prices for each of the Load Zones included in the Scarcity Reserve Region.

15.4.6.2 Establishment of Scarcity Reserve Requirements in the Real-Time
Market During EDRP/SCR Activations

The ISO will establish a Scarcity Reserve Requirement for each Scarcity Reserve Region when it has called upon the EDRP and/or SCRs in identified Load Zones to reduce Load to
address a reliability need. The Scarcity Reserve Requirement will be applicable for all real-time intervals during which the ISO has activated EDRP and/or SCRs within the applicable Scarcity Reserve Region to provide Load reduction. The Scarcity Reserve Requirement for each affected real-time interval shall be an amount equal to the sum of the applicable values for the Expected EDRP/SCR MW for all of the Load Zones included in a Scarcity Reserve Region, less the
Available Operating Capacity in the Scarcity Reserve Region; provided, however, that a Scarcity Reserve Requirement shall not have a value less than zero.

The applicable value of the Expected EDRP/SCR MW for each Load Zone included in a
Scarcity Reserve Region to be used in calculating the Scarcity Reserve Requirement is
dependent upon whether the Load reduction for a given interval is deemed voluntary or
mandatory for purposes of calculating the Scarcity Reserve Requirement, as further described
below. If the ISO has satisfied the notification requirements set forth in Section 5.12.11.1 of this
ISO Services Tariff for the SCRs within any Load Zone for any hour encompassed by the
EDRP/SCR activation(s) for the day at issue, the Load reduction for all intervals encompassed
by such activation(s) are deemed to be mandatory for the purposes of calculating any Scarcity
Reserve Requirement only and the corresponding value for a mandatory Load reduction is used
for SCRs in determining any Scarcity Reserve Requirement. In all other circumstances not
encompassed by the preceding sentence, the Load reduction for all intervals encompassed by

such EDRP/SCR activation(s) are deemed to be voluntary for the day at issue and the

corresponding value for a voluntary Load reduction is used for SCRs in determining any Scarcity Reserve Requirement. For EDRP, Load reduction is deemed to be voluntary in all intervals and the value for EDRP included in the Expected EDRP/SCR MW value for each Load Zone reflects the voluntary nature of the Load reduction.

15.4.6.3 Operating Reserve Balancing Payments

Any deviation in performance from a Supplier’s Day-Ahead schedule to provide

Operating Reserves, including deviations that result from schedule modifications made by the ISO, shall be settled pursuant to the following rules.

(a) When the Supplier’s real-time Operating Reserves schedule is less than its Day-

Ahead Operating Reserves schedule, the Supplier shall pay a charge for the

imbalance equal to the product of: (i) the Real-Time Market clearing price for the relevant Operating Reserves Product in the relevant location or Scarcity Reserve Region; and (ii) the difference between the Supplier’s Day-Ahead and real-time Operating Reserves schedules.

(b) When the Supplier’s real-time Operating Reserves schedule is greater than its

Day-Ahead Operating Reserves schedule, the ISO shall pay the Supplier an

amount to compensate it for the imbalance equal to the product of: (i) the

Real-Time Market clearing price for the relevant Operating Reserve product in the relevant location or Scarcity Reserve Region; and (ii) the difference between the Supplier’s Day-Ahead and real-time Operating Reserves schedules.

15.4.6.4 Other Real-Time Payments

The ISO shall pay Generators that are selected to provide Operating Reserves Day-

Ahead, but are directed to convert to Energy production in real-time, the applicable Real-Time

LBMP for all Energy they are directed to produce in excess of their Day-Ahead Energy schedule.
A Supplier that bids on behalf of (i) a Generator that provides Operating Reserves or (ii) a Demand Side Resource that provides Operating Reserves may be eligible for a Bid Production Cost guarantee payment pursuant to Section 4.6.6 and Attachment C of this ISO Services Tariff.

A Supplier that provides Operating Reserves may also be eligible for a Day-Ahead
Margin Assurance Payment pursuant to Section 4.6.5 and Attachment J of this ISO Services
Tariff.

15.4.7 Operating Reserve Demand Curves and Scarcity Reserve Demand Curve

The ISO shall establish twelve Operating Reserve Demand Curves, one for each

locational Operating Reserves requirement. Specifically, there shall be a demand curve for: (i)
Total Spinning Reserves; (ii) Eastern, Southeastern or Long Island Spinning Reserves; (iii)
Southeastern or Long Island Spinning Reserves (iv) Long Island Spinning Reserves; (v) Total
10-Minute Reserves; (vi) Eastern, Southeastern or Long Island 10-Minute Reserves; (vii)
Southeastern or Long Island 10-Minute Reserves; (viii) Long Island 10-Minute Reserves; (ix)
Total 30-Minute Reserves (including a separate demand curves applicable for each real-time
interval the ISO has established a Scarcity Reserve Requirement for which the pricing rules
established in Section 15.4.6.1.1(a)(i) of this Rate Schedule apply); (x) Eastern, Southeastern or
Long Island 30-Minute Reserves (including a separate demand curves applicable for each real-
time interval the ISO has established a certain Scarcity Reserve Requirements for which the
pricing rules established in Section 15.4.6.1.1(a)(ii) of this Rate Schedule apply); (xi)

Southeastern or Long Island 30-Minute Reserves (including a separate demand curves applicable
for each real-time interval the ISO has established acertain Scarcity Reserve Requirements for
which the pricing rules established in Section 15.4.6.1.1(a)(iii) of this Rate Schedule apply); and
(xii) Long Island 30-Minute Reserves (including a separate demand curve applicable for each
real-time interval the ISO has established a Scarcity Reserve Requirement for which the pricing
rules established in Section 15.4.6.1.1(a)(iv) of this Rate Schedule apply). Each Operating
Reserve Demand Curve will apply to both the Day-Ahead Market and the Real-Time Market for
the relevant product and location, except for those demand curves that apply to certain Scarcity
Reserve Requirements which will be applicable only during the real-time intervals that a Scarcity
Reserve Requirement has been established by the ISO. The ISO shall also establish a Scarcity
Reserve Demand Curve for each Scarcity Reserve Requirement established by the ISO in the
Real-Time Market for which the pricing rules established in Section 15.4.6.1.1(b) of this Rate
Schedule apply. A Scarcity Reserve Demand Curve will be applicable only during the real-time
intervals that such a Scarcity Reserve Requirement has been established by the ISO.

The market clearing pricing for Operating Reserves shall be calculated pursuant to

Sections 15.4.5.1 and 15.4.6.1 of this Rate Schedule and in a manner consistent with the demand curves established in this Section so that Operating Reserves are not purchased by SCUC, RTC or RTD at a cost higher than the relevant demand curve indicates should be paid.

adjust the target level for the locational 30-Minute Reserves requirement to account for the

Scarcity Reserve Requirement within the existing locational reserve region(s) to which all the Load Zones included in the Scarcity Reserve Region belong. The ISO will then define an
Operating Reserves demand curve for that hour corresponding to each Operating Reserves
requirement as follows:

(a) Total Spinning Reserves: For quantities of Operating Reserves meeting the total

Spinning Reserves requirement that are less than or equal to the target level for that locational requirement, the price on the total Spinning Reserves demand curve shall be $775/MW. For all other quantities, the price on the total Spinning Reserves demand curve shall be $0/MW.

(b) Eastern, Southeastern or Long Island Spinning Reserves: For quantities of

Operating Reserves meeting the Eastern, Southeastern or Long Island Spinning
Reserves requirement that are less than or equal to the target level for that
locational requirement, the price on the Eastern, Southeastern or Long Island
Spinning Reserves demand curve shall be $25/MW. For all other quantities, the
price on the Eastern, Southeastern or Long Island Spinning Reserves demand
curve shall be $0/MW.

Reserves meeting the Southeastern or Long Island Spinning Reserves requirement that are less than or equal to the target level for that locational requirement, the price on the Southeastern or Long Island Spinning Reserves demand curve shall be $25/MW. For all other quantities, the price on the Southeastern or Long Island Spinning Reserves demand curve shall be $0/MW.

(d)Long Island Spinning Reserves: For quantities of Operating Reserves meeting the

Long Island Spinning Reserves requirement that are less than or equal to the

target level for that locational requirement, the price on the Long Island Spinning Reserves demand curve shall be $25/MW. For all other quantities, the price on the Long Island Spinning Reserves demand curve shall be $0/MW.

(e) Total 10-Minute Reserves: For quantities of Operating Reserves meeting the total

10-minute reserves requirement that are less than or equal to the target level for that locational requirement, the price on the total 10-minute reserves demand
curve shall be $750/MW. For all other quantities, the price on the total 10-minute reserves demand curve shall be $0/MW.

(f) Eastern, Southeastern or Long Island 10-Minute Reserves: For quantities of

Operating Reserves meeting the Eastern, Southeastern or Long Island 10-minute
reserves requirement that are less than or equal to the target level for that
locational requirement, the price on the Eastern, Southeastern or Long Island 10-
minute reserves demand curve shall be $775/MW. For all other quantities, the
price on the Eastern, Southeastern or Long Island 10-minute reserves demand
curve shall be $0/MW.

(g) Southeastern or Long Island 10-Minute Reserves: For quantities of Operating

Reserves meeting the Southeastern or Long Island 10-Minute Reserves

requirement that are less than or equal to the target level for that locational

requirement, the price on the Southeastern or Long Island 10-Minute Reserves
demand curve shall be $25/MW. For all other quantities, the price on the
Southeastern or Long Island 10-Minute Reserves demand curve shall be $0/MW.

(h)Long Island 10-Minute Reserves: For quantities of Operating Reserves meeting

the Long Island 10-minute reserves requirement that are less than or equal to the
target level for that locational requirement, the price on the Long Island 10-
minute reserves demand curve shall be $25/MW. For all other quantities, the
price on the Long Island 10-minute reserves demand curve shall be $0/MW.

(i) Total 30-Minute Reserves: For quantities of Operating Reserves meeting the total

30-Minute Reserves requirement that are less than or equal to the target level for
that locational requirement minus 955 MW, the price on the total 30-Minute
Reserves demand curve shall be $750/MW. For quantities of Operating Reserves
meeting the total 30-Minute Reserves requirement that are less than or equal to
the target level for that locational requirement minus 655 MW but that exceed the
target level for that locational requirement minus 955 MW, the price on the total
30-Minute Reserves demand curve shall be $200/MW; provided, however, that
during each real-time interval in which the ISO has established a Scarcity Reserve
Requirement, the price on the total 30-Minute Reserves demand curve shall be
increased to $500/MW. For quantities of Operating Reserves meeting the total
30-Minute Reserves requirement that are less than or equal to the target level for
that locational requirement minus 300 MW but that exceed the target level for that
locational requirement minus 655 MW, the price on the total 30-Minute Reserves
demand curve shall be $100/MW; provided, however, that during each real-time
interval in which the ISO has established a Scarcity Reserve Requirement, the
price on the total 30-Minute Reserves demand curve shall be increased to
$500/MW. For quantities of Operating Reserves meeting the total 30-Minute

Reserves requirement that are less than or equal to the target level for that

locational requirement but that exceed the target level for that locational

requirement minus 300 MW, the price on the total 30-Minute Reserves demand curve shall be $25/MW; provided, however, that during each real-time interval in which the ISO has established a Scarcity Reserve Requirement, the price on the total 30-Minute Reserves demand curve shall be increased to $500/MW. For all other quantities, the price on the total 30-Minute Reserves demand curve shall be $0/MW. However, the ISO will not schedule more total 30-Minute Reserves than the level defined by the requirement for that hour.

During each real-time interval that the ISO has established a Scarcity Reserve
Requirement in the Real-Time Market for which the pricing rules established in
Section 15.4.6.1.1(a)(i) of this Rate Schedule apply, the applicable Operating
Reserves demand curve for total 30-Minute Reserves shall be as follows: For
quantities of Operating Reserves meeting the total 30-Minute Reserves locational
requirement target level plus the Scarcity Reserve Requirement (“NYCA scarcity
target level”) that are less than or equal to the NYCA scarcity target level minus
an amount equal to the sum of 955 MW and the Scarcity Reserve Requirement,
the price on the total 30-Minute Reserves demand curve shall be $750/MW. For
quantities of Operating Reserves meeting the NYCA scarcity target level that are
less than or equal to the NYCA scarcity target level but that exceed the NYCA
scarcity target level minus an amount equal to the sum of 955 MW and the
Scarcity Reserve Requirement, the price on the total 30-Minute Reserves demand
curve shall be $500/MW. For all other quantities, the price on the total 30-Minute

Reserves demand curve shall be $0/MW. However, the ISO will not schedule
more total 30-Minute Reserves than the level defined by the total 30-Minute
Reserves locational requirement plus the Scarcity Reserve Requirement for that
interval.

During each real-time interval that the ISO has established a Scarcity Reserve
Requirement(s) in the Real-Time Market, other than a Scarcity Reserve
Requirement for which the pricing rules established in Section 15.4.6.1.1(a)(i) of
this Rate Schedule apply, the applicable Operating Reserves demand curve for
total 30-Minute Reserves shall be as follows: For quantities of Operating
Reserves meeting the total 30-Minute Reserves locational requirement target level
plus the applicable Scarcity Reserve Requirement(s) (“adjusted NYCA target
level”) that are less than or equal to the adjusted NYCA target level minus 955
MW, the price on the total 30-Minute Reserves demand curve shall be $750/MW.
For quantities of Operating Reserves meeting the adjusted NYCA target level that
are less than or equal to the adjusted NYCA target level but that exceed the
adjusted NYCA target level minus 955 MW, the price on the total 30-Minute
Reserves demand curve shall be $500/MW. For all other quantities, the price on
the total 30-Minute Reserves demand curve shall be $0/MW. However, the ISO
will not schedule more total 30-Minute Reserves than the level defined by the
total 30-Minute Reserves locational requirement plus the applicable Scarcity
Reserve Requirement(s) for that interval.

(j) Eastern, Southeastern or Long Island 30-Minute Reserves: For quantities of

Operating Reserves meeting the Eastern, Southeastern or Long Island 30-Minute

Reserves requirement that are less than or equal to the target level for that

locational requirement, the price on the Eastern, Southeastern or Long Island 30-
Minute Reserves demand curve shall be $25/MW. For all other quantities, the price on the Eastern, Southeastern or Long Island 30-Minute Reserves demand curve shall be $0/MW.

During each real-time interval that the ISO has established a Scarcity Reserve
Requirement in the Real-Time Market for which the pricing rules established in
Section 15.4.6.1.1(a)(ii) of this Rate Schedule apply, the applicable Operating
Reserves demand curve for Eastern, Southeastern or Long Island 30-Minute
Reserves shall be as follows: For quantities of Operating Reserves meeting the
Eastern, Southeastern or Long Island 30-Minute Reserves locational requirement
target level plus the Scarcity Reserve Requirement (“Eastern scarcity target
level”) that are less than or equal to the Eastern scarcity target level minus an
amount equal to the Eastern, Southeastern or Long Island 30-Minute Reserves
locational requirement target, the price on the Eastern, Southeastern or Long
Island 30-Minute Reserves demand curve shall be $500/MW. For the quantities
of Operating Reserves meeting the Eastern scarcity target level that are less than
or equal to the Eastern scarcity target level but exceed the Eastern scarcity target
level minus an amount equal to the Eastern, Southeastern or Long Island 30-
Minute Reserves locational requirement target level, the price on the Eastern,
Southeastern or Long Island 30-Minute Reserves demand curve shall be $25/MW.
For all other quantities, the price on the Eastern, Southeastern or Long Island 30-
Minute Reserves demand curve shall be $0/MW.

During each real-time interval that the ISO has established a Scarcity Reserve

Requirement(s) in the Real-Time Market for which all the Load Zones

encompassed by such Scarcity Reserve Requirement belong to the East of

Central-East reserve region, other than a Scarcity Reserve Requirement for which
the pricing rules established in Section 15.4.6.1.1(a)(ii) of this Rate Schedule
apply, the applicable Operating Reserves demand curve for Eastern, Southeastern
or Long Island 30-Minute Reserves shall be as follows: For quantities of
Operating Reserves meeting the Eastern, Southeastern or Long Island 30-Minute
Reserves locational requirement target level plus the applicable Scarcity Reserve
Requirement(s) (“adjusted Eastern target level”) that are less than or equal to the
adjusted Eastern target level, the price on the Eastern, Southeastern or Long
Island 30-Minute Reserves demand curve shall be $25/MW. For all other
quantities, the price on the Eastern, Southeastern or Long Island 30-Minute
Reserves demand curve shall be $0/MW.

(k) Southeastern or Long Island 30-Minute Reserves: For quantities of Operating

Reserves meeting the Southeastern or Long Island 30-Minute Reserves

requirement that are less than or equal to the target level for that locational

Reserves demand curve for Southeastern or Long Island 30-Minute Reserves shall be as follows: For quantities of Operating Reserves meeting the Southeastern or Long Island 30-Minute Reserves locational requirement target level plus the
Scarcity Reserve Requirement (“Southeastern scarcity target level”) that are less than or equal to the Southeastern scarcity target level, the price on the
Southeastern or Long Island 30-Minute Reserves demand curve shall be
$500/MW. For all other quantities, the price on the Southeastern or Long Island 30-Minute Reserves demand curve shall be $0/MW.

During each real-time interval that the ISO has established a Scarcity Reserve
Requirement(s) in the Real-Time Market for which all the Load Zones
encompassed by such Scarcity Reserve Requirement belong to the Southeastern
New York reserve region, other than a Scarcity Reserve Requirement for which
the pricing rules established in Section 15.4.6.1.1(a)(iii) of this Rate Schedule
apply, the applicable Operating Reserves demand curve for Southeastern or Long
Island 30-Minute Reserves shall be as follows: For quantities of Operating
Reserves meeting the Southeastern or Long Island 30-Minute Reserves locational
requirement target level plus the applicable Scarcity Reserve Requirement(s)
(“adjusted Southeastern target level”) that are less than or equal to the adjusted
Southeastern target level, the price on the Southeastern or Long Island 30-Minute
Reserves demand curve shall be $500/MW. For all other quantities, the price on
the Southeastern or Long Island 30-Minute Reserves demand curve shall be
$0/MW.

(l)Long Island 30-Minute Reserves: For quantities of Operating Reserves meeting

the Long Island 30-Minute Reserves requirement that are less than or equal to the
target level for that locational requirement, the price on the Long Island 30-
Minute Reserves demand curve shall be $25/MW. For all other quantities, the
price on the Long Island 30-Minute Reserves demand curve shall be $0/MW.
During each real-time interval that the ISO has established a Scarcity Reserve
Requirement in the Real-Time Market for which the pricing rules established in
Section 15.4.6.1.1(a)(iv) of this Rate Schedule apply, the applicable Operating
Reserves demand curve for Long Island 30-Minute Reserves shall be as follows:
For quantities of Operating Reserves meeting the Long Island 30-Minute
Reserves locational requirement target level plus the Scarcity Reserve
Requirement (“Long Island scarcity target level”) that are less than or equal to the
Long Island scarcity target level minus an amount equal to the Long Island 30-
Minute Reserves locational requirement target, the price on the Long Island 30-
Minute Reserves demand curve shall be $500/MW. For the quantities of
Operating Reserves meeting the Long Island scarcity target level that are less than
or equal to the Long Island scarcity target level but exceed the Long Island
scarcity target level minus an amount equal to the Long Island 30-Minute
Reserves locational requirement target level, the price on the Long Island 30-
Minute Reserves demand curve shall be $25/MW. For all other quantities, the
price on the Long Island 30-Minute Reserves demand curve shall be $0/MW.
The ISO will procure additional Operating Reserves to meet each Scarcity Reserve
Requirement established by the ISO in the Real-Time Market for which the pricing rules

established in Section 15.4.6.1.1(b) of this Rate Schedule apply. The Scarcity Reserve Demand Curve for each real-time interval in which the ISO has established such a Scarcity Reserve
Requirement shall be defined as follows: For quantities of Operating Reserves meeting the
Scarcity Reserve Requirement that are less than or equal to the Scarcity Reserve Requirement, the price on the Scarcity Reserve Demand Curve shall be $500/MW. For all other quantities, the price on the Scarcity Reserve Demand Curve shall be $0/MW.

In order to respond to operational or reliability problems that arise in real-time, the ISO
may procure any Operating Reserve product at a quantity and/or price point different than those
specified above. The ISO shall post a notice of any such purchase as soon as reasonably possible
and shall report on the reasons for such purchases at the next meeting of its Business Issues
Committee. The ISO shall also immediately initiate an investigation to determine whether it is
necessary to modify the quantity and price points specified above to avoid future operational or
reliability problems. The ISO will consult with its Market Monitoring Unit when it conducts this
investigation.

If the ISO determines that it is necessary to modify the quantity and/or price points

specified above in order to avoid future operational or reliability problems it may temporarily
modify them for a period of up to ninety days. If circumstances reasonably allow, the ISO will
consult with its Market Monitoring Unit, the Business Issues Committee, the Commission, and
the PSC before implementing any such modification. In all circumstances, the ISO will consult
with those entities as soon as reasonably possible after implementing a temporary modification.

Not later than 90 days after the implementation of the Operating Reserves Demand

Curves the ISO, in consultation with its Market Advisor, shall conduct an initial review of them
in accordance with the ISO Procedures. The scope of the review shall include, but not be limited

to, an analysis of whether any Operating Reserve Demand Curve should be adjusted upward or
downward in order to optimize the economic efficiency of any, or all, of the ISO Administered
Markets. The ISO and the Market Advisor shall perform additional quarterly reviews, subject to
the same scope requirement, during the remainder of the first year that this Section 15.4.7 is in
effect. After the first year, the ISO shall perform periodic reviews, subject to the same scope
requirement, and the Market Monitoring Unit shall be given the opportunity to review and
comment on the ISO’s periodic reviews of the Operating Reserve Demand Curves and Scarcity
Reserve Demand Curve.

The responsibilities of the Market Monitoring Unit that are addressed in the above section of Rate Schedule 4 to the Services Tariff are also addressed in Section 30.4.6.4.2 of Attachment O.

15.4.8Self-Supply

Transactions may be entered into to provide for Self-Supply of Operating Reserves.

Except as noted in the next paragraph, Customers seeking to Self-Supply Operating Reserves

must place the Generator(s) supplying any one of the Operating Reserves under ISO control. The Generator(s) must meet ISO rules for acceptability. The amount that any such Customer will be charged for Operating Reserves will be reduced by the market value of the services provided by the specified Generator(s) as determined in the ISO Services Tariff.

Alternatively, Customers, including LSEs, may enter into Day-Ahead Bilateral financial Transactions, e.g., contracts-for-differences, in order to hedge against price volatility in the Operating Reserves markets.