UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Potomac Economics, Ltd.Docket No. EL17-62-000

PJM Interconnection, LLC

MOTION TO INTERVENE AND COMMENTS OF

THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

Pursuant to Rules 211 and 214 of the Rules of Practice and Procedure of the Federal

Energy Regulatory Commission (“Commission”), 18 C.F.R. §§ 385.211 and 385.214 (2016), the New York Independent System Operator, Inc. (“NYISO”) hereby moves to intervene in this
proceeding and submits comments on the Complaint filed by Potomac Economics, Ltd.
(“Potomac Economics”) alleging that certain provisions of PJM Interconnection, LLC’s
(“PJM’s”) tariffs,1 which Potomac Economics describes as imposing a “Pseudo-Tie
Requirement,”2 are unjust and unreasonable.

The NYISO agrees with many of the concerns Potomac Economics alleges in its

Complaint. The concerns Potomac Economics raises are consistent with concerns that NYISO
raised in its March 31, 2017 Motion to Intervene One Day Out-of-Time and Protest (“NYISO
Protest”) of PJM’s March 9 filing proposing “External Capacity Enhancements” to PJM’s
tariffs.3 To avoid the need to restate arguments the NYISO has already presented to the

1 For convenience, throughout this pleading PJM’s Open Access Transmission Tariff (“PJM OATT”) and its Reliability Assurance Agreement Among Load-Serving Entities in the PJM Region (“RAA”) are referred to collectively as PJM’s “tariffs.”

2 See Potomac Economics Complaint at 5, fn. 6.

3 PJM Interconnection, L.L.C., External Capacity Enhancements, Docket No. ER17-1138-000 (March 9, 2017).

Commission in its Protest, the NYISO Protest is included as Attachment A to this filing and the NYISO hereby incorporates its Protest by reference into these Comments.
Consistent with the relief that Potomac Economics requests on page 49 of its Complaint, the Commission should (a) determine that the Pseudo-Tie Requirements in the PJM tariffs4 are unjust and unreasonable, (b) require PJM to submit tariff rules that do not mandate the use of pseudo-ties to achieve interregional capacity sales and give PJM flexibility to accommodate regional differences at its borders, and (c) instruct PJM to work cooperatively with the NYISO and other external control area operators to develop and file mutually acceptable capacity
delivery procedures and capacity import limits.

I.COMMUNICATIONS

Communications and correspondence regarding this filing should be directed to:

Robert E. Fernandez, General Counsel
*Raymond Stalter, Director of Regulatory Affairs *Alex M. Schnell, Assistant General Counsel

Registered Corporate Counsel

New York Independent System Operator, Inc.

10 Krey Boulevard

Rensselaer, N.Y. 12144 Tel: (518) 356-6000

Fax: (518) 356-4702 rfernandez@nyiso.com rstalter@nyiso.com

aschnell@nyiso.com

* Persons designated for service.5

*Ted J. Murphy

Hunton & Williams LLP
2200 Pennsylvania Avenue, NW Washington, D.C. 20037
Tel: (202) 955-1500

Fax: (202) 778-2201
tmurphy@hunton.com

4 The Pseudo-Tie Requirements include the PJM tariff requirements that generators located

outside of PJM that seek to become PJM Capacity Performance Resources must have confirmed long-

term firm transmission service and must not be subject to NERC tagging as an interchange transaction in order to be excepted from PJM’s Capacity Import Limit.

5 The NYISO respectfully requests waiver of the requirements of Rule 18 C.F.R. § 385.203(b)(3) (2015) to permit service on more than two persons.

II.MOTION TO INTERVENE

The NYISO is the independent, not-for-profit entity responsible for administering
Commission-jurisdictional markets for electricity and capacity, for providing open-access
transmission service, and for maintaining electric reliability in the New York Control Area
(“NYCA”). The NYCA and PJM are neighboring regions. There is substantial interregional
trading between them, including exports and imports of capacity. Changes to one region’s
capacity market rules can have substantial impacts on market outcomes and system operations in
the other.

Allowing a generator that is directly interconnected to the NYCA to be committed and
dispatched by PJM in accordance with PJM’s pseudo-tie rules could threaten the reliable
operation of the NYCA and disrupt the NYISO-administered markets. The NYISO, therefore,
has a direct and substantial interest in the outcome of this proceeding that cannot be adequately
represented by any other party. It is appropriate and in the public interest that the NYISO be
permitted to intervene herein and to participate with full rights as a party. The NYISO
respectfully requests that the Commission grant its motion to intervene in this proceeding.

III.DOCUMENTS SUBMITTED

The NYISO submits the following documents:

1. This Motion to Intervene and Comments of the New York Independent System
Operator, Inc.; and

2. A copy of the Motion to Intervene One Day Out-of-Time and Protest that NYISO
submitted on March 31, 2017 in FERC Docket No. ER17-1138 (Attachment A).

IV.COMMENTS

A.Potomac Economics’ Complaint Demonstrates that PJM’s Pseudo-Tie

Requirement Decreases Efficiency and Increases Costs Incurred to Serve
Load

The concerns that Potomac Economics raises in Section II.B (on pages 18-22) of its
Complaint explain why permitting PJM to commit and dispatch resources that are electrically
interconnected with a neighboring Balancing Authority Area will not produce an economically
efficient dispatch and will tend to degrade reliability in the Balancing Authority Area to which
the pseudo-tied generator is directly interconnected. The NYISO has many of the same concerns
Potomac Economics does. Potomac Economics’ discussion of market efficiency concerns is
consistent with market efficiency concerns NYISO raised on pages 34-36 of the attached NYISO
Protest.

On pages 22-26 and 28-29 of the Potomac Complaint and in paragraphs 12-27 of Dr.
David Patton’s affidavit,6 Potomac Economics uses Midcontinent ISO (“MISO”) data to
demonstrate that PJM’s operation of pseudo-tied generators that are directly interconnected to
the MISO has caused commitment and dispatch inefficiencies on the transmission system that
the MISO operates. The data Potomac Economics provides addresses the operation of twelve
generators that are directly connected to the transmission system that the MISO secures, but are
committed and dispatched by PJM. Potomac Economics’ findings validate the NYISO’s
concerns. Potomac Economics found that real-time transmission congestion rose substantially
on new Market-to Market constraints that were affected by the operation of the pseudo-tied
resources.7

6 Dr. David Patton’s affidavit is Attachment I to the Potomac Complaint.

7 Complaint at 24-25.

The Complaint also confirms NYISO’s determination that Market-to-Market

Coordination is not an adequate substitute for NYISO retaining dispatch control of NYCA
generators.8 It confirms NYISO’s expectation that accommodating PJM’s commitment and
dispatch of pseudo-tied resources will decrease the efficiency of the NYISO’s market solutions
and increase total production costs incurred to serve NYISO’s customers. The Complaint
explains that MISO is forced to commit and dispatch the generators that remain under its
operational control less efficiently because MISO does not know how PJM will dispatch its
pseudo-tied generators.9

On page 28 of its Complaint Potomac Economics raises a concern that pseudo-tying a

resource to PJM might enable a generation owner to mothball or retire a Generator that is located
in New York without being required to comply with NYISO’s Generator Deactivation Process.10
Any agreement permitting a resource to become pseudo-tied to PJM would need to include rules
addressing the deactivation of pseudo-tied resources in its “native” Balancing Authority Area.

B. Potomac Economics’ Proposed Solution Provides an Appropriate Starting

Point for Developing Mutually Acceptable Rules to Govern Cross-Border Capacity Sales

The solution that Potomac Economics proposes on pages 35-46 of its Complaint presents
a good starting point for discussions between neighboring Balancing Authorities and PJM to

8 Complaint at 21-22.

9 See Complaint at 24 (“Inefficiencies caused by MISO committing and dispatching other units

inefficiently because it does not know how the pseudo-tied units will be dispatched”); Complaint at 25-26 (“These analyses represent only some of the potential costs and inefficiencies caused by the pseudo-ties. They do not include … the effects of conservative actions and parameters used by MISO operators to
account for the uncertainties regarding the commitment and dispatch levels of the pseudo-tied resources, … and the inefficient commitment of … MISO generators because the pseudo-tied resources are missing from [MISO’s] day-ahead market”); Complaint at 29 (“There are many other days in which we
understand that MISO has operated more conservatively, increasing the cost to MISO’s customers, to
account for its lack of commitment and dispatch control of the pseudo-tied units and the uncertainty
regarding their commitment and dispatch by PJM.”).

10 See FERC Docket No. ER16-120.

develop a mutually acceptable set of rules to govern cross-border capacity sales. While many
aspects of Potomac Economics’ proposed solution could be applied at the NYISO’s border with
PJM, there are a few provisions that are not consistent with the NYISO’s market rules. For
example, the NYISO is not prepared to permit a PJM Generation Capacity Resource that is
interconnected to the NYCA to schedule an export to PJM “20 minutes prior to real time if the
resource is online.”11 Instead, the PJM Generation Capacity Resource would be required to
comply with the NYISO’s rules for scheduling external transactions as is the case for Generators
in New York participating in the ISO-New England (“ISO-NE”) Forward Capacity Markets.12
The NYISO’s rules will permit PJM to receive the full output of its Generation Capacity
Resource whenever that resource is online, as long as it is scheduled consistent with the
NYISO’s rules.

Consistent with the relief Potomac Economics requested in its Complaint, the NYISO is
prepared to work cooperatively with PJM over a reasonable time horizon to develop and file
mutually acceptable cross-border capacity delivery procedures and capacity import limits.

V.SERVICE

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

11 Complaint at 39.

12 See Section IV.B.1. of the NYISO Protest (“Under the ISO-NE rules, external capacity

resources remain available in the native region’s commitment and dispatch and are permitted to supply energy to their native region if it otherwise is not required by ISO-NE.”).

VI.CONCLUSION

Wherefore, the NYISO respectfully requests that the Commission grant its intervention in the above-captioned proceeding. Consistent with the relief that Potomac Economics requests on page 49 of its Complaint, the NYISO further respectfully requests that the Commission

(a) determine that the Pseudo-Tie Requirements in the PJM tariffs13 are unjust and unreasonable,

(b) require PJM to submit tariff rules that do not mandate the use of pseudo-ties to achieve

interregional capacity sales and that give PJM flexibility to accommodate regional differences at its borders, and (c) instruct PJM to work cooperatively with the NYISO and other external
control area operators to develop and file mutually acceptable capacity delivery procedures and capacity import limits.

At minimum, the Commission should require PJM to make explicit in its tariff that

pseudo-tie arrangements can only occur if the native Balancing Authority agrees and elects to

execute a pseudo-tie agreement with PJM and the applicable generator. This requirement would codify in PJM’s tariff the Commission’s finding in prior proceedings.14

Respectfully submitted,

/s/ Alex M. Schnell

Alex M. Schnell

Assistant General Counsel/

Registered Corporate Counsel

New York Independent System Operator, Inc.

13 The Pseudo-Tie Requirements include the PJM tariff requirements that generators located outside of PJM that seek to become PJM Capacity Performance Resources must have confirmed longterm firm transmission service and must not be subject to NERC tagging as an interchange transaction in order to be excepted from PJM’s Capacity Import Limit.

14 See PJM Interconnection, L.L.C., 151 FERC ¶ 61,208 at PP 96-97 (2015), order on reh’g, 155 FERC ¶ 61,157 (2016).

Dated: May 8, 2017

cc:Michael Bardee

Nicole Buell

Anna Cochrane
Kurt Longo

David Morenoff
Daniel Nowak
Larry Parkinson

J. Arnold Quinn
Douglas Roe

Kathleen Schnorf
Jamie Simler

Gary Will

UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

PJM Interconnection, LLC)Docket No. ER17-1138-000

MOTION TO INTERVENE ONE DAY OUT OF TIME AND PROTEST OF
THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

Pursuant to Rules 211, 212, and 214 of the Rules of Practice and Procedure of the Federal
Energy Regulatory Commission the “Commission”), 18 C.F.R. §§ 385.211 and 385.214 (2016),
the New York Independent System Operator, Inc. (“NYISO”) hereby moves to intervene and to
protest in this proceeding. This filing addresses the PJM Interconnection, LLC’s (“PJM”) March

9 filing (the “PJM Filing”)1 proposing “External Capacity Enhancements” to PJM’s Open Access Transmission Tariff (“PJM OATT”) and Reliability Assurance Agreement Among Load-Serving Entities in the PJM Region (“RAA”).2

The PJM Filing proposes detailed new rules that build upon existing tariff requirements
that resources located outside of PJM that seek to become “Capacity Performance Resources”3
must have confirmed long-term firm transmission service and must not be subject to NERC
tagging as an interchange transaction in order to be excepted from PJM’s “Capacity Import
Limit.”4 The specified transmission service requirements to obtain an exception from PJM’s

1 PJM Interconnection, L.L.C., External Capacity Enhancements, Docket No. ER17-1138-000 (March 9, 2017).

2 For convenience, throughout this pleading the PJM OATT and RAA will be referred to collectively as PJM’s “tariff.”

3 “Capacity Performance Resource” is defined in Article 1 of the RAA and Attachment DD of the PJM OATT.

4 “Capacity Import Limit” is defined in Article 1 of the PJM RAA. The definition also prescribes
the criteria that resources external to PJM must satisfy in order to obtain an exception from the Capacity
Import Limit.

Capacity Import Limit were first accepted by the Commission in its “June 2015 Order.”5 The
instant PJM Filing proposes more detailed rules to address specific “modeling, congestion
management, planning, and operational concerns... ”6 that PJM has identified since 2015.

The PJM Filing is unjust and unreasonable as applied to New York7 and should not be accepted in its current form.8 PJM’s proposed tariff revisions would impose unreasonable
obligations on the New York Control Area (“NYCA”). It would likely cause adverse reliability and market impacts in the NYCA and exacerbate interregional seams. The proposed tariff
revisions also conflict with the established interregional agreement governing the NYISO/PJM interface and with the NYISO’s tariffs.9

As discussed in detail below, PJM’s filing is incomplete because it does not include the
pro forma pseudo-tie agreement that PJM has been developing with its stakeholders and other
necessary implementation rules are either missing or unclear. It is not possible for the
Commission to determine if allowing PJM’s proposed tariff rules to become effective would be

5 See PJM Filing at n. 8; citing PJM Interconnection, L.L.C., 151 FERC ¶ 61,208, at PP 96-97 (2015); order on reh’g, 155 FERC ¶ 61,157, at P 44 (2016).

6 PJM Filing at 2.

7 The NYISO takes no position concerning the justness and reasonableness of the PJM Filing’s proposed revisions as applied to other Balancing Authority Areas.

8 If the Commission has not regained a quorum before the expiration of the statutory sixty day
notice period, the Commission’s staff should exercise its delegated authority, see 18 C.F.R. §375.307(ii) and (v), to either reject the PJM Filing on the ground that its incompleteness and other flaws make it
“patently deficient” or issue a deficiency letter that would require PJM to submit a complete filing and
reset the notice period.

9 PJM’s proposed tariff revisions in this proceeding are fundamentally different from those that the Commission accepted in ISO New England, Inc. and New England Power Pool Participants
Committee, et, al., 157 FERC ¶ 61,025 (2016). In the ISO New England case, the Commission declined to delay the implementation of proposed tariff revisions that the NYISO did not contend were unjust and unreasonable, but that triggered an acknowledged inefficiency in the NYISO’s own market design. See 157 FERC ¶ 61,025 at P 31. By contrast, in this proceeding PJM’s proposed tariff revisions are unjust and unreasonable. There is no underlying flaw in the NYISO’s rules or markets.

just and reasonable because there are significant and substantive gaps in the implementation

rules that PJM will apply based on the new obligations it is requesting permission to impose.

The tariff revisions that are included in the PJM Filing were developed without input

from the NYISO. PJM’s proposed pseudo-tie rules are not workable for New York. The NYISO
does not believe that it would be possible for it to execute a pseudo-tie agreement under the
terms and conditions proposed and described by PJM. The NYISO is not prepared to make
significant substantive changes to its Tariffs and to the fundamental design of its markets in
order to accommodate the requirements PJM seeks to impose on its external Generation Capacity
Resources. The NYISO is, however, willing to work with PJM to develop a mutually acceptable
alternative to pseudo-ties to facilitate sales of capacity between their two Balancing Authority
Areas. PJM and NYISO can work together to develop mutually acceptable rules that take into
account the Phase Angle Regulators (“PAR”) at the A/C interconnections between their
Balancing Authority Areas and that accommodate long-recognized, Commission-accepted
differences between the NYISO and PJM tariffs and market rules. The differences between the
NYCA and other regions, and between the NYISO/PJM interface and other interfaces, are
simply too great to accommodate uniform treatment based on rules that PJM developed at its
other borders.

The Commission should not permit PJM to prescribe generally applicable, one-size-fits-
all, pseudo-tie obligations in its tariffs and force all neighboring Balancing Authorities to
accommodate PJM’s rules. Instead, PJM’s generally applicable tariff rules must not mandate the
use of pseudo-ties in all instances, but should instead be sufficiently flexible to allow for regional
differences. PJM should incorporate more detailed and specific requirements for cross-border
sales of capacity into its interregional agreements with each of its neighbors. At a minimum, the

Commission should require PJM to make explicit in its tariff that pseudo-tie arrangements can
only occur if the native Balancing Authority agrees and elects to execute a pseudo-tie agreement with PJM and the applicable generator. This requirement would codify in PJM’s tariff the
Commission’s finding in prior proceedings10 and, based on discussions with PJM staff, NYISO believes that PJM would be receptive to this element of NYISO’s requested relief. Such a
requirement is essential because PJM’s tariff does not yet incorporate material terms and
conditions, many of which would directly impact the NYISO’s ability to operate the NYCA and to serve NYCA loads at least cost. The NYISO requests that the Commission reject PJM’s filing and require PJM to submit generally applicable tariff rules that give PJM sufficient flexibility to accommodate regional differences at its borders.

I.COMMUNICATIONS

Communications and correspondence regarding this filing should be directed to:

Robert E. Fernandez, General Counsel
*Raymond Stalter, Director of Regulatory Affairs *Alex M. Schnell, Assistant General Counsel

Registered Corporate Counsel

New York Independent System Operator, Inc.

10 Krey Boulevard

Rensselaer, N.Y. 12144 Tel: (518) 356-6000

Fax: (518) 356-4702 rfernandez@nyiso.com rstalter@nyiso.com

aschnell@nyiso.com

* persons designated for service.11

10 See June 2015 Order at P 96.

*Ted J. Murphy

Hunton & Williams LLP
2200 Pennsylvania Avenue, NW Washington, D.C. 20037
Tel: (202) 955-1500

Fax: (202) 778-2201
tmurphy@hunton.com

II.MOTION TO INTERVENE ONE DAY OUT-OF-TIME

The NYISO is the independent, not-for-profit entity responsible for administering

Commission-jurisdictional markets for electricity and capacity, for providing open-access

transmission service, and for maintaining electric reliability in the NYCA. The NYISO and PJM
are neighboring regions. There is substantial interregional trading between them, including
exports and imports of capacity. Changes to one region’s capacity market rules can have
substantial impacts on market outcomes and system operations in the other.
As discussed below, allowing a generator that is directly interconnected to the NYCA to be committed and dispatched by PJM in accordance with PJM’s proposed new pseudo-tie rules could threaten the reliable operation of the NYCA and disrupt the NYISO-administered markets. The NYISO, therefore, has a direct and substantial interest in the outcome of this proceeding that cannot be adequately represented by any other party. It is appropriate and in the public interest that the NYISO be permitted to intervene herein and to participate with full rights as a party.
The NYISO also respectfully requests leave to intervene one day out-of-time. The
Commission routinely grants such motions as long as the proceeding is at an early stage, the
entity seeking to intervene has a significant interest in the proceeding, and the grant of the
motion will not cause undue prejudice to any party, or delay in the resolution of the proceeding.12
In this case, PJM’s proposed pseudo-tie rules will have a significant impact on the manner in
which the NYISO interacts with generators interconnected to its system, and on the NYISO’s
operation of the NYCA. The NYISO’s interest is also unique and cannot be adequately

12 See Midcontinent Independent System Operator, Inc., 158 FERC ¶ 61,128 at P 4 (2017)
(granting “late-filed motions to intervene given the interest in the proceeding, the early stage of the proceeding, and the absence of undue prejudice or delay.”); California Independent System Operator Corporation, 141 FERC ¶ 61,176 at P 25 (2012) (holding same); ISO New England, Inc., 140 FERC ¶ 61,239 at P 19 (2012) (holding same).

represented by any other party. Furthermore, the proceeding itself is still in its early stages, and the NYISO’s motion to intervene, will not cause undue delay or prejudice any party.
Accordingly, the NYISO respectfully requests that the Commission grant its motion to intervene in this proceeding one day out-of-time.

III.BACKGROUND

A.Pseudo-Tie Arrangements Have Never Been Implemented in the NYISO,

PJM’s Proposed Rules Do Not Appear to Be Workable for the NYISO and Attempting to Implement them Would Adversely Impact New York

PJM has had pseudo-tie arrangements with some of its other neighbors for years. In

particular, PJM currently has a number of pseudo-tied generators located inside the Midcontinent Independent Transmission System Operator, Inc. (“MISO”) and it is NYISO’s understanding that more are expected to be established soon.13 In fact, MISO recently submitted a separate Section 205 filing in Docket No. ER17-1061 to establish a pro forma pseudo-tie agreement14 which PJM has protested. There are also multiple pending complaint proceedings concerning the application of PJM and MISO congestion charges to pseudo-tied units.15

The NYISO does not have, and is not currently developing, pseudo-tie rules of its own.
New York generators have never before been pseudo-tied to PJM or to any other region. The
NYISO does not require a pseudo-tie arrangement to accept capacity from external Balancing

13 See Amanda Durish Cook, PJM Filing Renews MISO Monitor’s Call for Pseudo-Tie

Elimination, RTO Insider (March 26, 2017) (noting that there are currently thirteen MISO generators currently pseudo-tied to PJM and that the number is expected to soon rise to eighteen) <

https://www.rtoinsider.com/pjm-miso-pseudo-ties-40680/>.

14 MidContinent Independent System Operator, Inc., Proposed Pro Forma Pseudo-Tie Agreement and Associated Revisions to MISO’s Open Access Transmission, Energy , and Operating Reserves Tariff, Docket No. ER17-1061-000 (February 28, 2017).

15 See Midcontinent Independent System Operator, Inc. and PJM Interconnection L.L.C. Status Update, Docket Nos. EL16-108-000, EL17-29-000, EL17-31-000, EL17-37-000 (March 27, 2017) (providing informational update on efforts by MISO and PJM to resolve “congestion overlap” issue related to pseudo-tied generation in each RTO in four pending complaint dockets).

Authority Areas. Capacity exports from New York to PJM have been less than 200 MW in

recent years. Exports of Federal preference power from the Niagara and St. Lawrence

hydroelectric facilities in New York to municipal entities and cooperatives in PJM occurred

under arrangements that NYISO understands are, and requests be explicitly, excluded from

PJM’s pseudo-tie requirement.16 The PJM Filing has highlighted the difficulties and disruptions that would be imposed on the NYISO if a New York generator were to seek to become a PJM Capacity Performance Resource and to comply with the rules that PJM has proposed.

As discussed in Section IV.C.1 below, issues arise in large part because the NYISO/PJM
border is fundamentally different from PJM’s borders with its other neighbors, including PJM’s
border with MISO. There are currently seven PARs in-service at the NYISO/PJM border that
are operated to achieve specific components of NYCA/PJM interchange. There are also three
scheduled lines that interconnect the NYCA with the PJM Balancing Authority Area that use
direct current technology or variable frequency transformers to control power flows to match the
interchange that is scheduled over those facilities. NYISO is not aware of any other border
between PJM and a neighboring Balancing Authority Area where power flows are as heavily
managed by control technologies.

The NYISO and PJM have developed special rules to manage PAR-controlled flows

across their common interface. These rules are set forth in the Joint Operating Agreement

Among and Between New York Independent System Operator Inc. and PJM Interconnection,

L.L.C. (the “JOA”).17 The JOA does not include pseudo-tie procedures and, as discussed below, the JOA is incompatible with some of the pseudo-tie rules proposed in the PJM Filing.

16 See infra Section IV.B.5.

17 The JOA is formally filed (on behalf of both NYISO and PJM) as Section 35 of the NYISO’s
OATT. Schedule D to the JOA (Section 35.23) sets forth the Market-to-Market (“M2M”) coordination

As further discussed below, PJM’s pseudo-tie requirement also appears to conflict with other features of the NYISO’s Commission-approved tariffs and threatens to create reliability problems and market inefficiencies in New York.

B. The PJM Filing Seeks to Impose New Requirements but Does Not Include

Necessary Rules Explaining How PJM will Implement Them

PJM has been working with its stakeholders to develop a pro forma pseudo-tie

agreement.18 Many important issues that are not addressed in the PJM Filing are, apparently,

being left to that agreement. NYISO has identified other omissions that are not addressed in

PJM’s draft pro forma. For example, PJM’s draft rules do not address whether it, or the

Reliability Coordinator of the transmission system to which an external Generation Capacity

Resource is directly interconnected, will be responsible for outage scheduling. It is unclear when
PJM’s pro forma language will be finalized and filed for the Commission’s consideration.
The latest draft version of PJM’s pro forma pseudo-tie agreement addresses numerous matters that are directly relevant to PJM’s proposals in this proceeding. NYISO has concerns with many of the provisions of the draft pro forma pseudo tie agreement. It is not possible to fully understand how PJM’s pseudo-tie proposals would actually be applied without considering the pro forma language. The Commission should not accept the new requirements in the PJM Filing before it has the opportunity to review PJM’s proposed rules for implementing those
requirements.

rules that apply to NYISO and PJM. The NYISO and PJM recently filed proposed revisions to their JOA (including proposed revisions to the M2M coordination rules) to address the elimination of the 1000 MW wheel that was originally established in the 1970s by the Consolidated Edison Company of New York, Inc. and the Public Service Electric and Gas Company (“Con Edison - PSEG Wheel”). The jointly filed revisions are pending in Docket No. ER17-905-000.

18 The most recent iteration of PJM’s draft pro forma agreement is posted at

http://www.pjm.com/%7E/media/committees-groups/committees/mrc/20170323/20170323-item-04-draft-
pjm-pro-forma-pseudo-tie-agreement.ashx.

C.Contrary to Commission Precedent the PJM Filing Does Not Reflect the

NYISO’s Input on Seams, Market, or Reliability Issues Impacting New York

The Commission first accepted PJM’s Capacity Import Limit rules in its April 2014
Order in Docket No. ER14-503.19 That order rejected recommendations by intervenors that a
pseudo-tie requirement be made applicable to all external resources seeking to participate in
PJM’s forward capacity auctions. The Commission agreed with PJM’s position at the time that
such a mandate would “limit competition from external resources (by making it more difficult
for them to qualify as capacity resources) without providing any offsetting benefits.”20
The June 2015 Order, however, accepted a PJM proposal to require external capacity resources to be pseudo-tied to PJM, even though PJM’s tariffs did not include an explicit pseudo-tie requirement at that time. The Commission’s determination was predicated on a finding that the protestors in that proceeding had not shown that a pseudo-tie requirement would exacerbate seams. The Commission also emphasized that PJM was “required to reach agreement with
External Balancing Authorities regarding all implementation issues associated with a pseudo-tied
resource, including reliability and commercial obligations, and that this process should minimize
any resulting seems issues”21

As discussed below, PJM’s proposed new pseudo-tie rules have not been designed to minimize seams at the NYISO/PJM interface, and do not account for commercial or reliability issues in the NYISO. Nor do they reflect the level of inter-regional coordination that PJM has argued is necessary in the pending MISO proceeding.22

19 PJM Interconnection, L.L.C., 147 FERC ¶ 61,060 (2014) (April 2014 Order).

20 April 2014 Order at P 49.

21 June 2015 Order at P 96 (footnote citing to pertinent NERC and NAESB rules omitted).

22 See Section IV.A, infra.

IV.PROTEST

A.The PJM Filing Seeks to Impose New Requirements but Does Not Include

Necessary Rules Explaining How PJM will Implement Them

The PJM Filing proposes to impose various obligations on external resources that want to
sell capacity to PJM, and on the operators of the Balancing Authority Areas in which such
resources are located. The PJM Filing omits necessary implementation details that are
fundamental to any evaluation of the justness and reasonableness of PJM’s proposed pseudo-tie
rules. Several of these omissions are addressed in Section IV.B below and are themselves
sufficient reason to find PJM’s proposals unjust and unreasonable. The PJM Filing’s most
serious omission is the absence of the pro forma pseudo-tie agreement that PJM has been
drafting with its stakeholders. The pro forma agreement is not mentioned in the PJM Filing, but
it is clear from a review of the latest posted draft that PJM’s pro forma agreement will impose
numerous, substantive pseudo-tie implementation requirements that are not addressed in the PJM
Filing. It is likewise clear from PJM staff presentations that the tariff revisions included in the
PJM Filing and PJM’s pro forma pseudo-tie agreement are integrally related and were, until
recently, being developed in a coordinated fashion.23

Draft, unfiled, pro forma provisions that are of greatest concern to the NYISO include:
language addressing resources that simultaneously sell capacity to PJM and to the Balancing
Authority Area where the Generator is located; proposed rules governing PJM’s obligation to
make pseudo-tied generation available for commitment by the NYISO and the relevant local
Transmission Owner; and proposed rules governing PJM’s obligation to comply with all

23 See, e.g., Proposal for Pro Forma Pseudo-Tie Agreements, Jacqulynn Hugee, PJM Markets and
Reliability Committee, January 2017 at 5. < http://www.pjm.com/~/media/committees-
groups/committees/mrc/20170126/20170126-item-11-pseudo-tie-agreement-presentation.ashx >
(“January MRC Presentation”).

reliability rules that apply in the Balancing Authority to which the pseudo-tied generator is

directly interconnected.24 Responsibility for scheduling and approving planned outages is a

matter that needs to be considered, but that does not appear to be addressed in the latest draft of the PJM pro forma pseudo tie agreement.

PJM itself recently protested MISO’s filing of a pro forma pseudo-tie agreement on the
ground that MISO was allegedly granting itself too much authority.25 PJM contrasted MISO’s
proposal with the draft of its own pro forma pseudo-tie agreement, which PJM asserted provided
for appropriate interregional coordination over matters where NERC Reliability Standards
require it. Specifically, PJM stated that “PJM’s pro forma agreement requires mutual agreement
because PJM wants to ensure that the Native Balancing Authority, native Reliability Coordinator
and native Transmission Operator agree with PJM on how the pseudo-tie will be implemented
and operated since they will be impacted by that pseudo-tie, and to ensure coordination and clear
delineation of roles and responsibilities as between them, consistent with NERC standards.”
PJM emphasized that the relevant NERC standards require coordination between regions, “such

24 See PJM’s most recent draft Form of Pseudo-Tie Agreement (dated March 15, 2017 as of this
writing) which are posted at the location cited at n. 17 above. The draft “Whereas” clauses include
alternative language applicable to generators that seek to pseudo-tie only a defined quantity or a
percentage of dispatched capacity to PJM. Section 2(m) states that “The Native Balancing Authority, . . .
shall have the right to direct that the amount of energy utilizing the Pseudo-Tie be adjusted for local
transmission reliability concerns in emergency conditions, shall have the right to request that the amount
of energy utilizing the Pseudo-Tie be adjusted for local transmission reliability concerns under normal
conditions, and shall be responsible for mitigating the transmission related congestion on the transmission
system where the Pseudo-Tie is connected.” Draft Section 2(p) states that “In accordance with NERC
Standards IRO-001-1.1 and TOP-001-1a and their respective successors, during a local transmission
reliability emergency Company shall comply with [native Reliability Coordinator] [Native Reliability
Coordinator] . . .reliability directives by taking required actions to avoid security limit violations on
closely situated transmission facilities and to ensure that [native Transmission Owner] [Native
Transmission Owner] and [native Reliability Coordinator] [Native Reliability Coordinator] have the
ability to return the transmission system to normal operating conditions, unless such actions would violate
safety, equipment, or regulatory or statutory requirements.”

25 Protest of PJM Interconnection, L.L.C., Docket No. ER17-1061-000 (March 21, 2017) (“PJM Protest”).

as Area Control Error and Frequency Control, congestion management, resource adequacy planning/scheduling, and contingency reserve assessment.”26

PJM’s plans for addressing such critical operational and compliance matters, as well as
other implementation details, are essential to a complete understanding of how its pseudo-tie
proposal would impact the NYISO. The PJM Filing acknowledges that NERC standards
establish “key requirements” governing its “use and implementation” of pseudo-ties. However,
the pro forma agreement provisions addressing relevant NERC standards are not now before the
Commission for review.

It is well-established that that the Commission will reject Section 205 filings if they fail
to provide sufficient information for the Commission to conduct an adequate evaluation of their
justness and reasonableness27 or have been submitted prematurely.28 The PJM Filing should be
rejected for both reasons. As PJM’s recent protest in the MISO pro forma pseudo-tie proceeding
highlights, the terms and conditions set forth in a pro forma pseudo-tie agreements are critically
important. The PJM Filing is incomplete without a draft pro forma agreement, and it will only
be possible for commenters and the Commission to determine if PJM has developed proposed
rules addressing all of the reliability, coordination and market concerns that must be addressed

26 PJM Protest at 2 (footnotes citing NERC Reliability Standards BAL-005-0.2b, INT-00403.1, TOP-001-1a and IRO-001-1-.1, and BAL-002-1 (respectively) were omitted above).

27 See, e.g., Northern Maine Independent Service Administrator, 119 FERC ¶ 61,231 (2007)
(“NMISA has not provided the Commission with sufficient information to determine the effects of its
proposed revisions. We find therefore that NMISA has failed to demonstrate that the proposed tariff
revisions are just and reasonable, and accordingly, has failed to satisfy its burden of proof under section
205 of the FPA. Consequently, we reject NMISA’s proposed revisions without prejudice.”).

28 See, e.g., Public Service Company of Colorado, 156 FERC ¶ 61,187 (2016) (rejecting tariff filing as premature.); PJM Interconnection, L.L.C., 150 FERC ¶ 61,251 at P 30 (2015) (rejecting
proposed tariff revisions as premature where there was a risk that revisions could be withdrawn based on the outcome of a pending court proceeding); Midwest Independent Transmission System Operator, Inc., 142 FERC ¶ 61,182 (2013) (rejecting proposed tariff revision as premature where option set forth in the revision was being addressed in an ongoing proceeding).

when PJM files its entire proposed ruleset. PJM’s submission of an incomplete set of rules

makes it impossible for the NYISO to identify all of the possible implications for New York, or for the Commission to ascertain the overall justness and reasonableness of PJM’s proposed tariff revisions. It would be premature for the Commission to accept the PJM Filing, or for
Commission staff to allow PJM’s incomplete set of proposed tariff revisions to become effective.
The Commission should, at a minimum, issue a deficiency letter directing PJM to submit the missing components of its tariff rules that are intended to govern external Generation
Capacity Resources. These would include a complete pro forma agreement and answers to, or rules addressing, each of the concerns that the NYISO raises in this Protest.

B. The PJM Filing Is Unjust and Unreasonable Because it Raises Serious

Reliability and Market Concerns for New York and Is Not Compatible with Commission-Accepted NYISO Rules

1. The PJM Filing Fails to Address Whether a Pseudo-Tied Generator

May Be Used for Reliability Purposes By its “Native” Balancing Authority at Times When it Is Not Needed by PJM

ISO-New England, Inc. (“ISO-NE”) recently filed tariff changes to facilitate the

participation of external resources in its Forward Capacity Markets while still allowing them,

under certain circumstances, to provide capacity and energy to the Balancing Authority Areas to
which they are physically interconnected. Under the ISO-NE rules, external capacity resources
remain available in the native region’s commitment and dispatch and are permitted to supply
energy to their native region if it otherwise is not required by ISO-NE.29
By contrast, the PJM Filing is silent on the subject of whether, and the circumstances under which, its external Generation Capacity Resources will be available for commitment and

29 See New York Indep. Sys. Operator, Inc., 158 FERC ¶ 61,064 at P 39 (2017) (“Per the ISO-NE Tariff, when an import generator is located in a control area with which the ISO-NE control area has
implemented certain enhanced scheduling procedures (e.g., NYISO), “the resource must comply with all offer, outage scheduling and operating requirements applicable to capacity resources in the native Control Area.”); citing ISO-NE Tariff, Section III.13.6.1.2.3 (b).

dispatch by the “native” Reliability Coordinator of the Balancing Authority Area to which a

pseudo-tied generator is directly interconnected. PJM’s failure to address NYISO’s authority to schedule and dispatch a PJM Generation Capacity Resource when its operation is necessary to protect NYCA reliability might be construed as signifying that NYISO cannot schedule or
dispatch a PJM Generation Capacity Resource in such instances. The NYISO respectfully
submits that it is unjust and unreasonable for PJM to fail to clearly specify that Reliability
Coordinators that are responsible for maintaining reliability in the Balancing Authority Area to which a pseudo-tied Generation Capacity Resource is directly interconnected may commit,
dispatch, and compensate pseudo-tied generators to address reliability concerns when PJM has not scheduled its external Generation Capacity Resource to operate. The Commission should
require PJM to revise its proposal accordingly.30

2. The PJM Filing Is Unjust and Unreasonable Because it Fails to

Address the Impacts of Pseudo-Ties on Local Reliability

The PJM Filing indicates that PJM is still determining how to handle local system issues
that are not addressed by congestion management protocols.31 Local reliability issues are very
significant in New York. The operation of the New York State Transmission System
(“NYSTS”) is governed not only by the Commission’s reliability standards, as enforced by
NERC and the NPCC, but also by a series of local Reliability Rules issued and enforced by the
New York State Reliability Council (“NYSRC”).32 The operation of the NYSTS requires close

30 Paragraph 1(m) of the latest draft of the unfiled PJM pro forma pseudo-tie agreement would
appear to allow the NYISO to commit a New York generator that is pseudo-tied to PJM but only in an
emergency.

31 See PJM Filing at 9-10.

32 Under Section 215(h)(3) of the Federal Power Act (“FPA”), New York State is authorized to have reliability rules that are more stringent than those adopted by the North American Electric
Reliability Organization and the regional reliability entities. Under New York law, the NYSRC is
charged with developing such reliability rules.

coordination between the NYISO, the New York TOs, and individual Generators to ensure that
all applicable standards are satisfied, and that reliability is maintained. Effective coordination is
particularly critical in New York due to New York’s transmission limits, high levels of
congestion and the unique operating and reliability challenges presented by New York City.
The NYISO has concerns about the potential reliability impacts of permitting PJM to commit and dispatch generators that are directly interconnected to the NYCA. Some of the NYISO’s reliability concerns stem from the fact that PJM does not propose to include a detailed representation of the entire NYCA in its network model, so PJM will not have full visibility into the possible reliability impacts of dispatching a pseudo-tied generator that is directly
interconnected with the NYCA. Ceding commitment and dispatch authority over New York
generation to PJM might violate the Agreement Between the New York Independent System
Operator and Transmission Owners (“ISO-TO Agreement”).33 Section 3 of the ISO-TO
Agreement makes NYISO ultimately responsibility for controlling, operating, and maintaining
the reliability of the NYS Power System.

New York State’s special Reliability Rules34 supplement and are more stringent than the
NERC and regional standards. Some of the best known Reliability Rules are the “Thunderstorm
Alert” or “Storm Watch” rules that apply when a thunderstorm threatens the major transmission
lines that serve New York City. When a Thunderstorm Alert is in effect, NYISO is required to
commit and dispatch additional generation in New York City and to reduce the output of

33 The ISO-TO Agreement is one of the NYISO’s foundational documents, and is subject to the
public interest standard of review under the Mobile-Sierra Doctrine. The agreement can be found at
http://www.nyiso.com/public/markets_operations/documents/legal_regulatory/index.jsp.

34 OATT Section 1.18 and Services Tariff Section 2.18 define “Reliability Rules” as “Those rules, standards, procedures and protocols developed and promulgated by the NYSRC, including Local Reliability Rules, in accordance with NERC, NPCC, FERC, PSC and NRC standards, rules and
regulations, and other criteria and pursuant to the NYSRC Agreement.”

generators that must rely on the at-risk transmission facilities to supply energy to New York City. It is essential that all generators comply with NYISO’s instructions when the NYISO issues a Thunderstorm Alert.

The NYSRC establishes, maintains, assures compliance with, and updates the Reliability Rules. The NYISO and all entities engaging in electric power transactions on the New York State Power System must adhere to the Reliability Rules.35 If PJM assumes responsibility for scheduling and dispatching a generator that is directly interconnected to the NYCA, it will also have to comply with the Reliability Rules.

The NYISO’s Tariffs implement certain Reliability Rules directly;36 while

implementation of other Reliability Rules requires close coordination between the Transmission
Owners and the NYISO.37 The Transmission Owners also coordinate with the NYISO on the
implementation of Applications of the Reliability Rules (“ARRs”) for those portions of the
NYSTS not included in the NYISO Controlled Transmission System.38 Coordination among the

35 See NYISO Transmission and Dispatching Operations Manual at Section 2.1.5, available at

http://www.nyiso.com/public/webdocs/markets_operations/documents/Manuals_and_Guides/Manuals/Op
erations/trans_disp.pdf. The NYS Power System is defined as “All facilities of the New York State
Transmission System, and all those generators located within New York State or outside New York State, some of which may be from time-to-time subject to operational control by the NYISO. See Reliability Rules & Compliance Manual at Glossary, available at

http://www.nysrc.org/pdf/Reliability%20Rules%20Manuals/RRC%20Manual%20V39%2012-6-16.pdf.

36 See e.g., Services Tariff Section 4.1.9 (“Generating units designated pursuant to the New York State Reliability Council’s Local Reliability Rule I-R3 -- Loss of Generator Gas Supply (New York City) or I-R5 -- Loss of Generator Gas Supply (Long Island), as being required either to burn an alternate fuel at designated minimum levels, or to activate their auto-swap capability, based on forecast Load levels in Load Zones J and K (for purposes of this Section 4.1.9, “Eligible Units”), shall be eligible to recover costs associated with burning the required alternate fuel when Local Reliability Rule I-R-3 or I-R5 is invoked pursuant to the provisions of this Section 4.1.9.”).

37 See Applications of the NYSRC Reliability Rules, available at

http://www.nysrc.org/pdf/NYSRCReliabilityRulesComplianceMonitoring/apprulesintro.pdf.

38 See TO Applications of NYSRC Reliability Rules, available at

http://www.nyiso.com/public/webdocs/markets_operations/committees/councils/nysrc/reliability_rules_2
_2003.pdf.

NYISO, NYCA generators and the Transmission Owners is critical to protecting NYSTS

reliability, especially during emergencies or other operating contingencies when time is of the

essence. Comprehensive training on and intimate familiarity with the Reliability Rules and all of the ARRs that could apply to a particular NYCA generator are necessary to coordinate
effectively during these events.

PJM’s assumption of operational control of pseudo-tied NYCA generators could

jeopardizes compliance with these Reliability Rules. Specifically, allowing PJM to control

Generators in the NYCA may introduce reliability issues when a pseudo-tied generator is needed to respond to a local system issues. Allowing an entity that is not as familiar with the Reliability Rules and ARRs to direct the output of a NYCA generator, especially during emergencies or other contingencies, could jeopardize NYSTS reliability.

PJM itself expressly acknowledges that it still must determine how to address local

reliability issues not otherwise addressed in market-to-market congestion management protocols. These are critically important issues for New York, and without concrete rules in place to ensure local reliability in New York, the PJM proposal is incomplete, unjust and unreasonable.

3. The PJM Filing is Incomplete and Unjust and Unreasonable Because

it Does Not Address how the Existence of a Pseudo-Tied Generator
Would Impact ATC/TTC Determinations at the NYISO/PJM Border

PJM’s proposed tariff revisions are incomplete, and may be unjust and unreasonable,

because they do not address how pseudo-tied Generation Capacity Resources will impact Total
Transfer Capability (“TTC”) and Available Transfer Capability (“ATC”) determinations at
PJM’s borders with the Balancing Authority Area to which a pseudo-tied Generation Capacity
Resource is directly interconnected. PJM’s requirements that external Generation Capacity
Resources (a) obtain long-term firm transmission service, but (b) are not permitted to use NERC

tagged interchange, complicates TTC and ATC determinations. NYISO would have concerns if
PJM intends to reserve transfer capability for use by a pseudo-tied Generation Capacity Resource
even when PJM is not receiving power from that Generation Capacity Resource. Such a result
would constitute an inefficient restriction on the use of transfer capability between the two
regions.

It is also unclear how PJM’s proposal would impact the NYISO’s ability to schedule economic interchange as counter-flow when a pseudo-tied Generation Capacity Resource is providing its energy to PJM. The Commission recently clarified that system operators must recognize the potential availability of a counterflow in conjunction with the operation of a pseudo-tied generator.39 An approach that fails to allow the NYISO to schedule a counterflow transaction in this circumstance would appear to contravene the Commission’s directive and could prevent the scheduling of economically efficient interchange.

4. PJM’s Proposed Redispatch Requirements Do Not Appear to Reflect

the Ability of PARs to Hold Flows on the NYISO/PJM Interface

The PJM Filing proposes to only permit an external generator to become a Generation
Capacity Resource that is pseudo-tied to PJM if PJM is able to redispatch resources located in
the PJM Control Area to reduce PJM’s market flow on any coordinated redispatch flowgates that
are associated with the pseudo tied Generator. Said more simply, PJM wants to have congestion
management options available to it other than reducing the output of a pseudo-tied Generation
Capacity Resource.

39 Public Citizen, Inc. v. Midcontinent Indep. Sys. Operator, Inc., 153 FERC ¶ 61,385 (2015),
reh’g denied, 154 FERC ¶ 61,224 (2016) (finding that the Midcontinent Independent System Operator
Inc.’s (“MISO’s”) tariff provisions were unjust and unreasonable because they did not properly account
for counter-flows resulting from capacity exports to neighboring regions when determining Capacity
Import Limits).

There are currently seven PARs in-service at the NYISO/PJM border that are operated to
achieve specific components of scheduled interchange in accordance with the requirements of
the “JOA”,40 and in accordance with Section 17.1.1.1.2 of the NYISO’s Services Tariff. There
are also three scheduled lines located at NYISO’s border with PJM that use direct current
technology or variable frequency transformers to control power flows to match the interchange
that is scheduled over those facilities. At the NYCA/PJM border there will almost always be one
or more NY/NJ PARs the operation of which will significantly impact the ability to redispatch
generators located in PJM to relieve congestion on a NYCA redispatch flowgate that reflects the
congestion impacts of a Generation Capacity Resource that is pseudo-tied to PJM.
To determine whether the redispatch of generators located in the PJM Control Area is an effective option to reduce congestion on redispatch flowgates that are developed to address a potential pseudo tied generator’s congestion impacts in New York, PJM should perform its test based on the expectation that the NY/NJ PARs will be actively operated to hold flow. This is appropriate because the mission of the NY/NJ PARs is to achieve scheduled interchange and to reduce congestion at M2M PAR coordinated flowgates consistent with the M2M PAR
coordination settlement rules. As explained in Section IV.C.1 of this Protest, the PARs at the
NYCA/PJM border are not operated to facilitate untagged interchange or to relieve transmission
congestion on congestion management redispatch flowgates.

40 The NYISO is the designated entity that is responsible for filing the JOA on behalf of both

itself and PJM. The Commission-accepted JOA is Section 35 of the NYISO’s OATT. Schedule D to the
JOA (Section 35.23) sets forth the M2M coordination rules that apply to NYISO and PJM. The NYISO
and PJM recently filed proposed revisions to their JOA (including proposed revisions to the M2M
coordination rules) to address the elimination of the 1000 MW Con Edison - PSEG Wheel. The jointly
filed revisions are pending in Commission Docket No. ER17-905-000. In that filing the NYISO also
proposed changes to Section 17.1.1.1.2 of its Services Tariff to address the elimination of the Con Edison

- PSEG Wheel.

NYISO is prepared to work with PJM to develop a mutually acceptable solution for

capacity sales between their respective regions. If PJM determines that it is able to permit its

Generation Capacity Resources located in the NYCA to participate in the NYISO’s commitment and dispatch, then the NYISO’s Day-Ahead Security Constrained Unit Commitment (“SCUC”) or Real-Time Commitment (“RTC”) software will develop a least-cost solution to serve all
NYCA system load, including the scheduled export to PJM.

5. PJM Must Clearly Identify Any Exceptions or Exemptions from the

Pseudo-Tie Requirement; Including the Apparent Exception for Grandfathered Niagara Preference Power Exports

PJM’s proposed tariff revisions do not expressly address exports from the Niagara Power Project under the Niagara Redevelopment Act of 1957 (“1957 Act”).41 That law directed that the Niagara Power Project, which is located in New York State: (i) “make at least 50 percent of the
project power available to public bodies and non-profit cooperatives for the purpose of ensuring
that the power is sold to consumers at the lowest rates reasonably possible (referred to as
“preference power”)”; and (2) allocated up to twenty percent of that preference power for use
within neighboring states.42 The New York Power Authority (“NYPA”), which owns and
operates the Niagara Power Project, was exporting preference power to municipal and co-
operative customers located within PJM’s footprint decades before the NYISO was formed.
They currently amount to roughly 163.2 MWs per year. NYPA also delivers 30.7 MW of
preference power to municipal and cooperative customers located in PJM from its St. Lawrence
hydroelectric facility that began operating in 1958.

41 16 U.S.C. § 836-836a (2010).

42 See New York Power Authority, 118 FERC ¶ 61,206 at PP 30-31 (2007) (describing the preference power requirements under Section 836 of the 1957 Act).

The PJM Filing is silent on the treatment of preference power exports. This silence could
not reasonably be interpreted as implying that the Niagara Power Project or St. Lawrence would
have to be pseudo-tied to PJM, since that would conflict with statutory and treaty provisions
governing the project’s operation (and would seemingly be beyond the Commission’s Federal
Power Act jurisdiction). PJM has informally indicated to the NYISO that preference power
exports are treated as “grandfathered” in PJM and thus are not subject to the Capacity Import
Limit (and thus to the need to be pseudo-tied). But this is nowhere stated in the PJM Filing and
there is no binding assurance that PJM will continue to permit preference power exports in the
absence of a pseudo-tie.

The Commission should therefore instruct PJM to revise its tariffs to clearly address the treatment of preference power exports and any other “grandfathered” arrangements that it may intend to support without requiring a pseudo-tie arrangement. Failing to identify such exceptions is inconsistent with the filing requirements of Section 205 of the FPA.

6.PJM’s Proposed Deliverability Study Requirement Is Unjust and

Unreasonable in its Current Form

Under the PJM proposal, not only must a generator arrange for long-term firm point-to-
point service from the Balancing Authority Area to which it is interconnected,43 but it also must ensure that such service “is evaluated for deliverability from the unit-specific physical location of the resource to PJM load.”44 Furthermore, although PJM’s proposal suggests that the study would be performed by the Balancing Authority Area to which the generator is interconnected, the PJM proposal “requires that such deliverability evaluation must be in accordance with PJM deliverability criteria, and must be . . . reviewed and approved by PJM.” Id.

43 As discussed below in Section IV.C.2, this transmission service requirement would be highly
problematic if applied to New York given the NYISO’s use of a financial reservation transmission model.

44 PJM Filing at 16.

As with other aspects of the PJM proposal, the NYISO objects to the unilateral

imposition of PJM’s rules on system evaluations and operations conducted by the NYISO. As
explained in detail below, the NYISO system relies almost completely on financial transmission
reservations to allocate the economic benefit of transmission capacity, and therefore is able to
honor almost all submitted schedules as long as they are consistent with security-constrained
dispatch and the transmission customer is willing to bear the congestion costs associated with
such schedules. However, because it relies on financial rights rather than physical rights, the
NYISO does not provide firm point-to-point service, at least in the traditional sense reflected in
the PJM proposal. Thus, it is not clear how a deliverability study performed in accordance with
PJM standards, and subject to PJM’s review, would be implemented in the context of the

NYISO’s system.

The NYISO has similar concerns with respect to PJM’s apparent intention to apply PJM, and ReliabilityFirst Corporation (“ReliabilityFirst”), planning standards on the NYISO. The
NYISO is located within the Northeast Power Coordinating Council, Inc. (“NPCC”), which has its own set of planning requirements. Furthermore, the NYISO is concerned that, in some
respects, the NPCC standards applicable to a deliverability evaluation may be more stringent
than comparable PJM and ReliabilityFirst standards. A rule allowing for the imposition of PJM and ReliabilityFirst standards under these circumstances would contravene the basic structure of reliability regulation adopted by the Commission.

Under the ISO Agreement the NYISO is required to “develop, maintain and promulgate a
NYS Transmission System expansion and reliability assessment process to be performed in
compliance with the [NYSRC] Reliability Rules.”45 The NYISO’s responsibility for conducting

45 See ISO-TO Agreement, which is one of the NYISO’s foundational documents.
22

reliability studies on its system in accordance with NYSRC rules is at odds with PJM’s proposal to make deliverability studies subject to PJM standards.

The Commission should reject PJM’s imposition on the NYISO of deliverability

standards that are different from the standards NYISO normally uses, and that may be less

stringent than the corresponding NPCC standards. Without a mutual agreement between the

NYISO and PJM regarding these evaluations, the PJM proposal is unjust and unreasonable. The NYISO respectfully submits that, at the very least, PJM should be required to amend proposed Section 5.5A(b)(ii) of its OATT (and any other PJM tariff provisions that repeat the cited
requirement) to: (a) also require the Balancing Authority for the External Balancing Authority Area to which the Generation Capacity Resource is directly interconnected to review and
approve deliverability study results, and (b) state that the criteria that will apply are PJM
deliverability criteria or any more stringent criteria that may apply in the Balancing Authority Area where the Generation Capacity Resource is located.

7. PJM’s Proposal that it be Granted a Firm Flow Entitlement to Use

the Transmission System of an External Balancing Authority Area Is Unjust and Unreasonable and Should be Rejected

The PJM Filing states that PJM should receive a “firm flow entitlement” on any

coordinated redispatch flowgates associated with an external Generation Capacity Resource.46 Proposed Section 5.5A(b)(i)(D) of PJM’s Tariff requires a Capacity Market Seller to secure “written acknowledgement from the external Balancing Authority Area” that “firm allocations associated with any coordinated flowgate applicable to the external Generation Capacity
Resource … will be allocated to PJM.”

46 PJM Filing at 9-10.

55430.000001 EMF_US 64528808v1

PJM argues that its proposal is appropriate because “a pseudo-tied resource is capacity committed to PJM load, and therefore, PJM load should be assigned the firm flow allocation from that coordinated flowgate.”47 PJM’s position is unjust and unreasonable, and should be rejected by the Commission for the reasons explained below.

A firm flow entitlement is, in essence, a right to use a portion of another Balancing

Authority’s transmission system without paying for that use. PJM and NYISO have granted

entitlements to use each other’s transmission system in a carefully studied and negotiated,

mutually agreed, “swap” of rights in accordance with rules set forth in their JOA. Each

ISO/RTO was granted rights to use specifically identified slices of the other entity’s transmission
system. There is no “swap” proposed in Section 5.5A(b)(i)(D) of PJM’s OATT. It simply
requires that PJM be allocated entitlements to use another Balancing Authority Area’s
transmission system without paying for that use or providing any other form of compensation in
return.

PJM’s proposed requirement is unjust and unreasonable because it ignores the fact that any use PJM makes of an external Balancing Authority Area’s transmission system is an
incremental addition to the native Balancing Authority Area’s own use of its transmission system to serve that external Balancing Authority’s native load customers (who paid for the construction of the transmission system). It appears to NYISO that Section 5.5A(b)(i)(D) of PJM’s OATT
requires that PJM be given transmission rights without paying for them.
Illustrative Example of NYISO’s Concern

Generator G has been a NYCA Generator for 5 years. When Generator G is operating,

approximately 100 MW of its output ordinarily flows over Transmission Line T—a

transmission line that can become significantly congested when the NYCA is experiencing
peak or near-peak load conditions. When Transmission Line T becomes congested, the

47 PJM Filing at 15-16.

LBMP at Generator G’s proxy bus incorporates the congestion that Generator G is causing on Transmission Line T, which results in an increased LBMP at Generator G’s location, and may result in NYISO reducing its dispatch of Generator G.

Now, assume that (a) Generator G elects to leave the NYCA and to become a PJM

Generation Capacity Resource that is pseudo-tied to PJM, and (b) NYISO is required to grant
PJM a firm flow entitlement to use 100 MW on Transmission Line T whenever Generator G
is operating, and (c) PJM has the right to schedule and dispatch pseudo-tied Generator G.

When a hot summer day arrives, PJM will be able to commit and dispatch Generator G and
use its firm flow entitlement to flow up to 100 MW of energy on Transmission Line T
without paying NYISO, or the Transmission Owner that owns Transmission Line T, or the
native load customers who paid to build Transmission Line T, a dime. Instead, the NYISO
would have to redispatch NYCA resources that are under its dispatch control to limit
congestion (prevent thermal overloads) on Transmission Line T. NYCA loads would bear
the cost of NYISO’s redispatch to make Generator G’s power deliverable to PJM.

PJM’s requested “firm flow entitlement” to use the New York State Transmission System
would be superior to the rights that NYISO offers to its own Transmission Customers in its
Tariffs, and to the rights that Generator G possessed before it became pseudo-tied to PJM.

For the reasons explained above, PJM’s proposal that it should receive “firm allocations

associated with any coordinated flowgates applicable to the external generator under an agreed
congestion management process” is unjust and unreasonable, and should be rejected.
Section 6.2.1.1 of Schedule D to the NYISO/PJM JOA states “External Capacity
Resources may be included in the M2M Entitlement calculation to the extent the Parties mutually agree to their inclusion” and “Inclusion of PJM External Capacity Resources that exceed the net M2M Entitlement impact of the PJM External Capacity Resources that were used for the initial implementation of the M2M coordination process must be mutually agreed to by the Parties.”
The NYISO cannot agree to grant PJM a “firm flow entitlement” to use its transmission system unless PJM provides fair compensation in return.

8.PJM’s Proposed Requirement Regarding the Operations of Other

Balancing Authorities’ Network Models is Unjust and Unreasonable

PJM proposes that “coordinating entities with an agreed congestion management process . . . must maintain network models that produce results for such flowgates that are within two percent of one another.”48 Under this rule, NYISO’s network model addressing redispatch
flowgates in New York would be required to conform to the results produced by PJM’s network model for those same flowgates.

This requirement is problematic for several reasons. First, it requires the external (non-
PJM) Balancing Authority Area to conform its network model to produce the same results as
PJM’s, without regard to quality of the output from PJM’s network model. Thus, it would be the NYISO’s obligation to conform its network model to the results produced by the PJM network
model for flowgates located in and representing transmission constraints on the transmission
system operated by the NYISO, and even if the PJM network model produces results that are less accurate than, or inaccurate as compared to, the results of the NYISO model.
This result is inequitable and it misplaces the applicable burdens. For coordinated
flowgates that represent NYCA transmission constraints, it is the NYISO that has the most up-to-
date information, and the most experience in modeling them. Thus, it should be PJM’s
obligation to ensure that its network model produces results that match those produced by the
NYISO’s network model, and not the other way around.

The plus or minus two percent threshold PJM proposes is far more prescriptive than the
threshold that NYISO and PJM used to benchmark their respective models. Achieving PJM’s
proposed plus or minus two percent threshold would be especially difficult for the NYISO

48 See PJM Filing transmittal letter at 15. See also proposed Section 5.5A(b)(i)(C) of Attachment DD of the PJM OATT.

because PJM and NYISO employ different treatment of PARs in their EMS models during real-
time operations. This can yield very different results in real-time operations.
PJM’s proposed tariff rules do not explain what the consequences would be if the results of the two network models deviated by more than two percent after PJM approves a Generation Capacity Resource. PJM should be required to specify in its tariff that this requirement is only intended as an eligibility threshold that might prevent an external generator from becoming an External Capacity Resource. If PJM intends some other consequence when an external entity’s network model produces a result that diverges by more than two percent from the result
produced by PJM’s network model, then PJM must to modify the tariff revisions it filed
accordingly.

9. The PJM Filing is Unjust and Unreasonable Because it Does Not

Address Pseudo-Tied Generators That Make Sales to Both PJM and their Native Balancing Authorities

The NYISO anticipates that, if a NYCA generator became an external Generation
Capacity Resource that is pseudo-tied to PJM, there would be circumstances in which that
generator sold only part of its capacity to PJM, and sold the remainder in the NYISO-
administered markets. Partial capacity sales are not uncommon in both New York or in
neighboring regions. The PJM Filing does not specify how such bifurcated sales will be
addressed.

This omission is significant because of the pseudo-tie requirement, and the potential
impact that it has on generators that commit only a portion of their capacity to PJM. The
pseudo-tie requirement mandates that dispatch control over such a generator be given to PJM,
and that PJM treat the generator as part of its Balancing Authority Area. However, if some of
the MWs are being used to satisfy capacity obligations in the NYISO, then PJM’s dispatch

control over the unit raises a host of issues that are not addressed by the PJM Filing. For

example, if PJM has dispatch control over the unit, but part of the unit is committed to the

NYISO markets, it is unclear how the part of the unit committed to New York would bid into the
NYISO Day Ahead Market, how the unit would clear in the NYISO markets, and how NYISO
dispatch of the portion of the unit committed to New York would work. It also is unclear how
this arrangement would function in circumstances where the two markets seek to dispatch the
unit in ways that are inconsistent with one another, or that are inconsistent with the operating
capabilities of the unit. Without rules in place to address these issues, the PJM proposal leaves
the door open to scenarios in which a generator would have to frequently run at a loss in the
market to which it is physically interconnected in order to satisfy obligations imposed by PJM.
None of these issues are addressed by the PJM Filing. Granting generators flexibility to participate in more than one market should promote efficient market outcomes. But without rules negotiated and agreed to by both participating regions to govern bifurcated capacity sales, the PJM Filing is unjust and unreasonable.

C. PJM’s Pseudo Tie Requirement Presents Serious Reliability, Market, and

Seams Issues that Would Preclude the NYISO from Ever Voluntarily Entering into a Pseudo-Tie Arrangement with PJM

1.Physical and Regulatory Differences Necessitate Having Different

Rules at the NYISO/PJM Interface

As explained above, the NYISO/PJM border is fundamentally different from PJM’s

borders with its other neighbors, particularly PJM’s border with MISO where most of the

generators that are presently pseudo-tied to PJM are located. There are currently seven PARs in-
service at the NYISO/PJM border that are operated to achieve specific components of scheduled
interchange in accordance with the requirements of the JOA and Section 17.1.1.1.2 of the

NYISO’s Market Services Tariff. There are also three scheduled lines located at NYISO’s

border with PJM that use direct current technology or variable frequency transformers to control
power flows to match the interchange that is scheduled over those facilities.
The Ramapo, ABC and EFO PARs that are located in New York or New Jersey at the NYISO’s border with PJM (collectively, the “NY/NJ PARs”) have historically been operated to achieve scheduled interchange, including the Con Edison - PSEG 1000 MW wheel. Since 2013 the Ramapo PARs have also been operated to achieve M2M PAR coordination in accordance with Schedule D to the JOA. Proposed tariff revisions pending in Docket No. ER17-905-000 were developed to permit NYISO and PJM to use all of the NY/NJ PARs to achieve scheduled interchange and to perform M2M PAR coordination commencing May 1, 2017, after the 1000 MW wheel ends.

PJM’s tariffs state that any resource that seeks an exception to PJM’s Capacity Import
Limit cannot be subject to NERC tagging as an interchange transaction.49 PJM has stated that
the reasons it does not permit resources that seek exceptions to PJM’s Capacity Import Limit to
use tagged interchange are (1) the interchange schedule is subject to interruption by a
Transmission Loading Relief (“TLR”) 5, and (2) PJM is not able to monitor the performance of a
specific resource if its power is delivered as one component of a broader interchange schedule.
The Commission has stated that the concerns PJM annunciated are valid concerns.50 However,
these concerns do not present significant risks at PJM’s border with the NYISO. Over the past
five years TLR 5s affecting export transactions scheduled from the NYISO to PJM across their

49 See Section 5.14D of Attachment DD to PJM’s Reliability Assurance Agreement.

50 See PJM Interconnection, L.L.C., 147 FERC ¶ 61,060 at P 27 (2014); PJM Interconnection, L.L.C. v. Essential Power Rock Springs, LLC, et al., 151 FERC ¶ 61,208 at PP 96-97 (2015), order on reh’g, 155 FERC ¶ 61,157 at P 44 (2016).

common border have been exceedingly rare.51 With regard to PJM’s ability to determine how a
specific external Generation Capacity Resource performed, NYISO is willing to work with PJM
to ensure PJM receives the metered output of the Generation Capacity Resource and the
interchange MWs that were scheduled to PJM from the NYCA using a “capacity” priority. PJM
is already aware of any deviations from the net interchange schedule between the NYISO and
PJM.52 PJM can develop tariff rules to address when it will assign partial or full responsibility
for any deviation from the net interchange schedule to a PJM Generation Capacity Resource that
is located in New York.

The NYISO and PJM have proposed to operate the NY/NJ PARs to “facilitate

interchange schedules while minimizing regional congestion costs,”53 which is consistent with
how the NYISO and PJM have operated the Ramapo PARs since 2013. The proposed “Target
Values” for the NY/NJ PARs incorporate the net interchange schedule between PJM and the
NYISO over the AC tie lines, distributed across the various NY/NJ PARs using allocations that
NYISO and PJM developed with input from the affected transmission owners.54 Section 5.5 of
Schedule D to the JOA makes clear that the interchange schedules it addresses are imports,

exports and wheels-through the NYCA and PJM that are scheduled to flow over a proxy bus or a scheduled line. PJM’s use of the NYISO’s transmission system to serve PJM’s Rockland
Electric load is also explicitly addressed in Schedule D to the JOA.

51 The NYISO reviewed its operator logs from 2013 to the present and identified only seven

instances of TLR 5s resulting in transaction curtailments at the NYCA/PJM border since January 1, 2013.
No curtailments were identified after 2014. None of the curtailments involved exports from the NYCA to
PJM.

52 NYISO and PJM report inadvertent energy (the difference between scheduled power flows and actual power flows) to NERC on a monthly basis.

53 See Section 7.2 of Schedule D to the proposed JOA revisions that were jointly filed by PJM and NYISO in Docket No. ER17-905-000.

54 See “Table x.x” in Section 7.2.1 Schedule D to the proposed JOA revisions that were jointly filed by PJM and NYISO in Docket No. ER17-905-000.

Other than PJM service to its Rockland Electric load, Schedule D to the JOA does not

allow for the use of untagged transmission service to deliver power across the NYISO/PJM

border. PJM’s unwillingness to permit external Generation Capacity Resources to use scheduled interchange to deliver energy to PJM across its border with the NYISO is inconsistent with the market rules that NYISO and PJM jointly developed for operating the NY/NJ PARs.55 The
inconsistency between PJM’s requirements for how external Generation Capacity Resources
must deliver energy to PJM and the rules NYISO and PJM jointly developed addressing the
scheduling of transactions and operation of PARs at their common border could cause significant market inefficiencies and reliability concerns.

Failure to meet interchange flow targets can result in financial settlement obligations
being assigned to PJM or to NYISO under the M2M PAR coordination rules in the JOA.56
NYISO and PJM will use NY/NJ PAR taps to prevent energy produced by a pseudo-tied
generator from flowing into PJM over any NY/NJ PAR-controlled interface when power flows
fall outside of the targets specified in Schedule D to the JOA. When the NY/NJ PARs are
operated to block untagged power flows, energy produced by an external Generation Capacity
Resource would be expected to flow into PJM over the uncontrolled 230 kV interconnections
between Pennsylvania and Western New York. These untagged power flows would have a
different value than power flows over the NY/NJ PAR controlled facilities, would require the

55 PJM’s requirements for energy deliveries from external Generation Capacity Resources is also inconsistent with the jointly developed rules that were in Schedule D to the JOA from January 15, 2013 to April 31, 2017.

56 See Schedule D to the JOA, Sections 7.2.2, 7.2.3, 8.1 and 8.3.
31

NYISO and PJM to consume NY/NJ PAR taps (a limited resource57) to block untagged flows,
and could present reliability concerns that are described in this Protest.
The efficiency and reliability concerns NYISO identifies in this section of its Protest could be avoided if PJM were to instead require external Generation Capacity Resources to use scheduled interchange to deliver capacity to PJM at PJM’s border with the NYCA. As stated above, NYISO is prepared to work with PJM to ensure PJM has access to the information it requires to monitor the delivery of energy from external Generation Capacity Resources located in New York.

2. PJM’s Pseudo-Tie Rules Appear to Require a Form of Transmission

Service That Does Not Exist Within the NYISO

PJM would require that External Generation Capacity Resources obtain long-term firm
point-to-point transmission service in order to bid into the PJM capacity market. This aspect of
the PJM proposal is based on the traditional concept of physical reservation of transmission
service as reflected in the pro forma OATT, and the Commission’s rules under Order Nos. 888
and 890.

This concept, however, is fundamentally different from the manner in which the NYISO
provides transmission service to its customers. In the NYISO, there are no express physical
reservations of transmission capacity in the manner contemplated by traditional firm point-to-
point service. Rather, in the NYISO, customers are entitled to schedule transactions between any
two points on the system as long as such transactions are consistent with a security-constrained
economic dispatch (as they will be in most circumstances). Essentially, any desired use of the
transmission system can be accommodated as long as the transmission customer is willing to pay

57 See Section 7.2 of Schedule D to the proposed JOA revisions that were jointly filed by PJM and NYISO in Docket No. ER17-905-000.

for the cost of congestion. The economic value of limited transmission capacity is allocated through the use of financial rights (Transmission Congestion Contracts) rather than through physical reservations on the NYISO’s system. Customers holding such rights are thus able to hedge against congestion costs associated with transactions between specified points on the NYISO system. Under this approach, the NYISO makes the entire capacity of the New York State Transmission System available to customers, and most desired transactions are able to be accommodated, subject to payment of congestion costs.

The NYISO’s financial reservation model has been in place since the NYISO

commenced operations in 1999. The Commission has repeatedly found it to be just and

reasonable.58 Indeed, it facilitates the efficient operation of competitive markets by ensuring that
all available transmission capacity is able to be used, and by preventing the hoarding of scarce
capacity by market participants.59 At the same time, however, it does not fit readily with the firm
point-to-point requirement embodied in the PJM proposal. The NYISO does not provide firm
point-to-point transmission service in the manner contemplated by the PJM proposal. The
NYISO believes that it is possible for the concerns underlying the firm point-to-point
requirement in the PJM proposal to be addressed, and for the NYISO and PJM to come up with a
mutually-acceptable solution that ensures the deliverability of capacity to the PJM system, but

58 See New York Independent System Operator, Inc., 125 FERC ¶ 61,274 (2008) (Confirming that NYISO's financial reservation model was consistent with or superior to the physical reservation requirements of Order No. 890's pro forma OATT.); New York Independent System Operator, Inc., 123 FERC ¶ 61,134 (2008) (stating same).

59 See Regional Transmission Organizations, Order No. 2000, 65 Fed. Reg. 809 (Jan. 6, 2000),
FERC Stats. & Regs. ¶ 31,089 at pg. 31,126 (2000) (holding that systems based on locational prices and
financial rights “provide a sound framework for efficient congestion management”), order on reh'g,
Order No. 2000-A, 65 Fed. Reg. 12,088 (Feb. 25, 2000), FERC Stats. & Regs. ¶ 31,092 (2000), aff'd,
Public Utility District No. 1 of Snohomish County, Washington v. FERC, 272 F.3d 607 (D.C. Cir. 2001).

that is consistent within the NYISO’s financial reservation model. Such a solution, however,
will require discussions and coordination between the NYISO and PJM.
The implementation of firm point-to-point service, as reflected in the pro forma OATT and the PJM proposal, is fundamentally incompatible with the NYISO’s existing market rules, would cause needless delay and confusion among NYISO market participants and, perhaps most importantly, is unnecessary to accommodate the efficient export of NYCA capacity to PJM. It would be highly burdensome, and unjust and unreasonable, to require the NYISO to modify its rules simply to accommodate PJM’s unilateral imposition of the point-to-point requirement on its external Generation Capacity Resources.

3. PJM’s Commitment and Dispatch of a Pseudo-Tied New York

Generator Would Cause Significant Day-Ahead and Real-Time Market Inefficiencies in New York

PJM’s commitment and dispatch of pseudo-tied Generation Capacity Resources that are interconnected to the NYCA would cause significant inefficiencies in the NYISO’s Day-Ahead and Real-Time Markets that would reduce the quality of NYISO’s market solutions and could increase the costs incurred to serve NYCA loads.

If a Generation Capacity Resource that is directly interconnected to the NYCA but

pseudo-tied to PJM does not participate in the NYISO’s Day-Ahead Market (“DAM”), the

NYISO will not be able to develop a least-cost Day-Ahead solution that incorporates the

congestion that the operation of the pseudo-tied PJM Generation Capacity Resource is expected
to cause in the NYCA. Unless PJM provides Day-Ahead schedules in advance of NYISO
running its DAM NYISO Day-Ahead assumptions about the pseudo-tied generator’s probable
operation will introduce material uncertainties into the NYISO’s Day-Ahead solution that could
increase the total cost incurred to serve NYCA load in the DAM and/or in the Real-Time Market.

PJM has suggested that it may use Day-Ahead congestion management to reduce its

expected impact on congestion management flowgates associated with PJM’s external Generator Capacity Resources. NYISO and PJM have not developed a Day-Ahead congestion
management process and there are only two redispatch flowgates active in NYISO’s real-time congestion management process with PJM. The existence of PARs and other control devices at the NYISO’s border with PJM limits the potential benefits of redispatching PJM generation to manage congestion on flowgates located inside the NYCA.

The NYISO schedules and dispatches generation in its real-time market using a 2.5 hour
look-ahead RTC that achieves a least-cost commitment by anticipating changes in load, system
configuration, and generator output. In order for NYISO’s RTC to produce a least-cost solution,
it must accurately reflect the expected congestion impacts caused by the operation of all
generation. The inability to incorporate the expected future operation of PJM’s pseudo-tied
Generation Capacity Resources that are located in the NYCA will compromise efficiency.
The PJM Filing indicates60 that redispatch coordination would be used to address
transmission congestion on NYCA flowgates that is caused by PJM’s scheduling and dispatch of
a pseudo-tied Generation Capacity Resource. Redispatch coordination by PJM may present a
less efficient solution to transmission congestion that is occurring in the NYCA than NYISO’s
RTC look-ahead commitment can produce for the following reasons:

M2M redispatch coordination is only engaged after congestion develops and the NYCA
experiences congestion costs. RTC’s look-ahead process proactively develops a least-cost
solution to anticipated congestion and redispatches resources before congestion occurs. This
permits RTC to incorporate generator commitment time and ramp constraints into its least-cost

60 PJM Filing at 4, 14-15.

solution. In addition, the NYCA generators that are available for commitment or redispatch by RTC may have significantly higher shift factors on the NYCA transmission constraints that are represented by congestion management flowgates than generators located in PJM’s Balancing Authority Area do.

The Day-Ahead and real-time market efficiency concerns that the NYISO identifies in

this section of its Protest will not arise if PJM allows its external Generation Capacity Resources that are directly interconnected to the NYCA to be scheduled and dispatched by the NYISO, in accordance with the NYISO’s market rules.

V. THE COMMISSION SHOULD DIRECT PJM TO WORK WITH THE NYISO TO

DEVELOP MUTUALLY ACCEPTABLE ALTERNATIVE MEANS OF ADDRESSING PJM’S OBJECTIVES

For the reasons set forth in Section IV above, the PJM Filing is unjust and unreasonable,
at least as applied to generation that is directly interconnected to the NYCA, and should not be
accepted in its current form. PJM has neither made a complete filing nor demonstrated that its
proposed tariff revisions are just and reasonable. Nor has PJM justified requiring the NYISO to
make the sweeping changes to its Tariffs, market rules and software that would seem to be
necessary to accommodate PJM’s proposals without compromising reliability or market
efficiency in New York.

PJM has indicated that it does not intend to enter into pseudo-tie arrangements that have
not been agreed to by all affected parties, including native Balancing Authorities such as the
NYISO.61 If this is true then there is no prospect that the PJM Filing’s proposals would ever be
implemented for generators that are directly interconnected to the NYCA because PJM’s

61 See, e.g., January MRC Presentation at 5 (“PJM will not approve any Pseudo-Ties that do not have sign-off by all affected entities.”).

proposed prerequisites cannot be satisfied and NYISO could not voluntarily agree to support a
pseudo-tie to PJM under the terms and conditions included in the PJM Filing (or the, as of yet
unfiled draft, PJM pro forma pseudo-tie agreement). The NYISO is willing to work with PJM to develop a method of selling capacity across their common border that would be acceptable to
both PJM and the NYISO.

Accordingly, the Commission should reject PJM’s filing and require PJM to submit
generally applicable tariff rules that do not require PJM to use pseudo-ties at all of its borders
and give PJM sufficient flexibility to accommodate regional differences.62 NYISO’s requested relief will require PJM to abandon its stated goal of having one-size-fits-all uniform pseudo-tie arrangements in place with all of its neighbors.63 As NYISO’s Protest makes clear, PJM’s goal is unrealistic because PJM’s proposal is not compatible with the NYISO’s Tariffs, Agreements and market rules, because the interface between the NYCA and the PJM Control Area is
different from PJM’s border with its other neighbors, and because PJM is required to address all implementation issues associated with implementing pseudo-ties, including reliability and
commercial obligations and other seams issues.

VI.CONCLUSION

Wherefore, NYISO respectfully requests that the Commission grant its intervention in the
above-captioned proceeding, find that the PJM Filing’s proposals are not just and reasonable, at
least as applied to generators that are directly interconnected to the NYCA, and require PJM to
submit generally applicable tariff rules that do not mandate the use of pseudo-ties and give PJM
sufficient flexibility to accommodate regional differences at its borders. At minimum, the

62 See supra n. 8 regarding how Commission staff should address the PJM Filing if the

Commission has not regained a quorum before the expiration of the statutory sixty day notice period.

63 See PJM Filing at 4-5.

Respectfully submitted,

/s/ Alex M. Schnell

Alex M. Schnell

Assistant General Counsel/

Registered Corporate Counsel

New York Independent System Operator, Inc.

Dated: March 31, 2017

cc:Michael Bardee

Nicole Buell

Anna Cochrane
Kurt Longo

David Morenoff
Daniel Nowak
Larry Parkinson

J. Arnold Quinn
Douglas Roe

Kathleen Schnorf
Jamie Simler

Gary Will

64 See June 2015 Order at P 96.

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 8th day of May 2017.

By:/s/ John C. Cutting

John C. Cutting

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-7521