June 21, 2017

By Electronic Delivery

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

Washington, DC 20426

Re:    New York Independent System Operator, Inc.’s Proposed Tariff

Amendments to Open Access Transmission Tariff Rate Schedule 1 for

Ramapo Phase Angle Regulator Cost Recovery; Docket No. ER17-___-000

Dear Secretary Bose:

The New York Independent System Operator, Inc. (“NYISO”) submits this filing

pursuant to Section 205 of the Federal Power Act1 to propose amendments to Rate Schedule 1 of the NYISO Open Access Transmission Tariff (“OATT”).  The proposed Rate Schedule 1
revisions will require NYISO Transmission Customers, on a going-forward basis, to pay up to 100% of Consolidated Edison Co. of New York’s (“Con Edison’s”) cost of owning, maintaining, and operating two phase angle regulators (“PARs”) at the Ramapo Substation (the “Ramapo
PARs Charge”).2  NYISO Transmission Customers currently pay 50% of Con Edison’s Ramapo PARs Charge, while certain PJM Interconnection, LLC (“PJM”) transmission owners pay the
other 50%.  The proposed change to the NYISO Transmission Customer allocation is necessary to facilitate Con Edison’s installation of a replacement PAR at the Ramapo Substation while
NYISO, PJM and their stakeholders continue discussing the potential allocation of the Ramapo PARs Charge between and among NYISO and PJM customers.

I.Documents Submitted

1.This filing letter;

1 16 U.S.C. §824d.

2 Capitalized terms not otherwise defined herein shall have the meaning specified Section 1 of the Open Access Transmission Tariff (“OATT”).

Honorable Kimberly D. Bose June 21, 2017

Page 2

2.A clean version of the proposed revisions to the NYISO’s OATT (“Attachment I”);

and

3.A blacklined version of the proposed revisions to the NYISO’s OATT

(“Attachment II”).

II.Background

In 1993, members of the New York Power Pool (“NYPP”) and the PJM Group (i.e.,

identified “PJM classic” transmission owners) executed a PARs Facilities Agreement requiring
Con Edison to purchase, install, own, and maintain two PARs at the Con Edison Ramapo
Substation for the purposes of controlling power flows on the 500 kV Branchburg-Ramapo 5018
transmission line (the “1993 Agreement”).3  The 1993 Agreement provides for the NYPP
members and PJM Group to reimburse Con Edison for the annual carrying charges on the plant
in service and for the expenses incurred in the installation, operation and maintenance of the
Ramapo PARs.

Con Edison calculates a monthly charge for the Ramapo PARs pursuant to the 1993

Agreement, which identifies the reimbursable costs.  The 1993 Agreement then allocates 50% of
the Ramapo PARs Charge to the NYPP members and 50% to the PJM Group.  The NYISO has
stepped into the role that the NYPP used to perform and collects the New York portion of the
Ramapo PARs Charge and remits the funds to Con Edison.  The NYISO also sends a monthly
bill to PJM and/or to a designated PJM transmission owner.  Rate Schedule 1 of the NYISO
OATT currently allocates the New York 50% share to all of its Transmission Customers.4

On June 24, 2016, one of the Ramapo PARs was destroyed during a fire at the Ramapo Substation.  There has only been one PAR in operation at the Ramapo Substation since that fire. Con Edison is waiting for certainty on cost recovery before it incurs the cost of installing a
replacement Ramapo PAR.  The PJM Group has stated that it is not willing to contribute to the cost of replacing the destroyed PAR under the terms of the 1993 Agreement.

Con Edison projects a total annual cost of approximately $5.5 million to purchase, install,
own and maintain two PARs at the Ramapo Substation; including the cost of purchasing and
installing a replacement PAR.  The NYISO believes that maintaining two Ramapo PARs
provides significant benefits to the New York Control Area and to the PJM Control Area.
NYISO and PJM have commenced a joint stakeholder initiative to consider cost allocation and
cost recovery for the expenses Con Edison incurs to purchase, install, operate and maintain two
Ramapo PARs.  At this point, the time required to complete and the ultimate outcome of the joint
NYISO/PJM stakeholder initiative remain unclear.  After comparing the expected annual cost of

3 The 1993 PARs Facilities Agreement was accepted for filing by FERC in Docket No. ER93-640-000 on May 10, 1993.

4 See OATT Section 6.1.6.1.1 (prior to the modifications proposed herein).

Honorable Kimberly D. Bose June 21, 2017

Page 3

two Ramapo PARs to the expected benefits to New York, discussed below, the NYISO and its
stakeholders elected to submit proposed OATT revisions that will permit NYISO to allocate up
to 100% of the Ramapo PARs Charge to its Transmission Customers.  Assuring Con Edison that
it will be able to recover its costs of installing and placing in-service a second Ramapo PAR will
allow accelerate the installation of the replacement PAR.  While PJM or its transmission
customers may ultimately agree to pay a portion of the annual costs in the future, the cost of
delaying replacement of the destroyed Ramapo PAR until the joint stakeholder process is
complete is outweighed by the economic and reliability benefits New York expects to achieve
from having two Ramapo PARs in-service as soon as possible, independent of the benefits PJM
may receive.

A. Economic Benefits of Two Ramapo PARs

Having two PARs in-service at the Ramapo Substation provide substantial economic

benefits to New York.  The NYISO’s summer import scheduling limit from PJM is

approximately 1,000 MW with no Ramapo PARs in-service, approximately 1,400 MW with one
Ramapo PAR in-service and approximately 1,750 MW with two Ramapo PARs in-service.
NYISO estimates, based on its Congestion Assessment and Resource Integration Study
(“CARIS”) model, that having two Ramapo PARs in-service produces $25 million in production
cost benefits per year and $100 million in New York load payment benefit per year compared to
having no PARs in-service at the Ramapo Substation.5  Having two Ramapo PARs in-service
also reduces the cost New York incurs to satisfy the minimum Installed Reserve Margin (“IRM”)
and Locational Capacity Requirements (“LCRs”).  Based on the 2017 IRM Study Report, the
NYISO estimates that a reduction from two in-service Ramapo PARs to one Ramapo PAR could
increase the total cost of procuring capacity by $75 million across Rest of State, Zone J, and
Zone K.

In order to focus this filing on the NYISO’s proposed OATT revisions and avoid

extraneous controversy related to whether and how much PJM market participants should

contribute toward the cost of the Ramapo PARs, the NYISO has not attempted to quantify the
benefits that PJM receives from the Ramapo PARs in this filing.  Accurately quantifying the
benefits to PJM will be addressed in the ongoing discussions among PJM, NYISO and their
stakeholders.

5 See NYISO’s Ramapo Phase Angle Regulator Cost Recovery presentation to the Management Committee at slides 9-13 (May 31, 2017), available at

http://www.nyiso.com/public/webdocs/markets_operations/committees/mc/meeting_materials/20
17-05-31/04_Ramapo%20PAR%20Cost%20Allcoation.pdf.  The study compared two Ramapo
PARs in-service to zero Ramapo PARs because the proposed OATT revisions will permit
NYISO to charge its Transmission Customers for up to 100% of the cost of installing and
maintaining two PARs at Ramapo on a going-forward basis.

Honorable Kimberly D. Bose June 21, 2017

Page 4

B. Reliability Benefits of Two Ramapo PARs

Two Ramapo PARs increase the overall reliability of the transmission system; however,
the Ramapo PARs are not currently required to meet the minimum NERC Planning Standards.
During a blackout in either southeastern New York or northern New Jersey, having two Ramapo
PARs in-service increases the support available from the 500 kV Hopatcong-Ramapo 5018
transmission line.6  Once the line is energized, the second PAR increases the transfer capability
from approximately 450 MW (one PAR) to approximately 900 MW (two PARs), depending on
system conditions during the restoration efforts.  When the 500 kV Hopatcong-Ramapo 5018
transmission line was closed in-service following the August 14, 2003 blackout, it transmitted
power that was vital to restoring the New York State Transmission System.

The control capability of the 500 kV Hopatcong-Ramapo 5018 transmission line is

increased with two Ramapo PARs.  The additional control capability increases the operational
flexibility available to the NYISO and PJM, and can reduce the risk of sustained customer
outages during extreme contingencies caused by severe weather, such as ice storms, hurricanes,
tornadoes, severe thunderstorms, or other significant events.  Two Ramapo PARs provide
valuable control capability near the southeastern New York and northern New Jersey load
centers.

III. Description and Justification of Proposed Revisions to Rate Schedule 1

NYISO proposes to modify Rate Schedule 1 of the OATT, Section 6.1.6.1, such that
NYISO Transmission Customers will, on a going-forward basis, pay up to 100% of Con
Edison’s cost of owning, maintaining, and operating two Ramapo PARs, including up to 100%
of the costs associated with installing a second PAR at the Ramapo Substation.  As discussed
above, NYISO Transmission Customers currently pay 50% of the Ramapo PARs Charge.

The proposed OATT revisions will require Con Edison to continue to calculate the
Ramapo PARs Charge using the procedures set forth in the 1993 Agreement.  The proposed
OATT revisions will require Con Edison to continue using the procedures set forth in the 1993 Agreement to calculate the Ramapo PARs Charge even if the 1993 Agreement is terminated by the parties to that agreement.

Con Edison is engaged in an ongoing dispute with certain PJM transmission owners

about their obligation to pay a portion of the cost of the Ramapo PARs under the 1993

Agreement.  When that dispute is resolved, or when PJM or its customers assume an obligation
to pay a portion of the Ramapo PARs Charge, then the New York portion of the Ramapo PARs
charge may be reduced and NYISO Transmission Customers may receive a partial refund of
prior payments.  Under the described circumstances PJM or the PJM transmission owners may

6 The Branchburg-Ramapo transmission line is now the Hopatcong-Ramapo transmission line due to the addition of the Hopatcong Substation in New Jersey.  The Ramapo Substation is connected to the 5018 Hopatcong-Ramapo transmission line.

Honorable Kimberly D. Bose June 21, 2017

Page 5

pay the NYISO or they may pay Con Edison.  The proposed OATT revisions are designed to

ensure that, under either circumstance, the NYISO Transmission Customers’ payment obligation
will be reduced by the amount Con Edison recovers in excess of the full, allowed Ramapo PARs
Charge.

Section 6.1.6.3 of the proposed OATT revisions requires Con Edison to remit a refund to the NYISO that will in turn be distributed by NYISO to its Transmission Customers if

(a) Transmission Customers paid more than 50% of the Ramapo PAR Charge for a particular Billing Period, and (b) Con Edison’s Ramapo PAR cost recovery for that Billing Period
exceeded 100% of the Ramapo PARs Charge.  The proposed rules also require the NYISO to remit a refund to Transmission Customers if the described circumstances are met and NYISO is paid directly by PJM or PJM’s customers.  Any refunds will be allocated to NYISO
Transmission Customers based on their market participation during the Billing Period in which the refund is paid using the same load ratio share basis used to allocate the
NonISOFacilitiesCosts charges to Transmission Customers.

On a going-forward basis, the last sentence of proposed Section 6.1.6.1 states that

payments by NYISO Transmission Customers will be reduced consistent with any obligation that PJM assumes on behalf of its customers.

Proposed OATT Section 6.1.6.2 includes a number of provisions to improve the

transparency of the Ramapo PARs Charge for all NYISO Transmission Customers.  Under the
proposed rules Con Edison will develop and submit to the NYISO an itemized monthly invoice
for the Ramapo PARs Charge in accordance with Section 2.4 of the 1993 Agreement.  Each
month, the NYISO will post the itemized monthly invoice for the preceding month on its
website.  By August 1 of each year, Con Edison will prepare and the NYISO will post on its
website an estimate of the monthly costs and expenses associated with the Ramapo PARs for the
next calendar year and for each of the four subsequent years.  Con Edison will maintain books
and records related to its calculation of the Ramapo PARs Charge, including the costs incurred.
Each NYISO Transmission Customer will have the right to review Con Edison’s books and
records related to the calculation of the Ramapo PARs Charge.  The NYISO is not equipped to,
and does not propose to assume the role of auditing the monthly bills issued by Con Edison that
are used to develop the Ramapo PARs Charge.

Proposed OATT Section 6.1.6.4 provides that Con Edison will include a lump sum

charge in a monthly invoice if a Ramapo PAR fails and is not reparable, or if a Ramapo PAR is
retired with the consent of the NYISO.  In the event that either of the Ramapo PARs described in
proposed OATT Section 6.1.6.1 fail and are not reparable, or are retired with the consent of the
NYISO, then the original cost of the facilities retired will be deducted from the gross plant in
service and any unrecovered book cost will be increased by the cost of removal and reduced by
any salvage value, tax benefits, and insurance proceeds.  Con Edison will bill the net balance to
the NYISO for payment in a lump sum in accordance with the Rate Schedule 1 calculation,
transparency, and cost allocation provisions applicable to the Ramapo PARs Charge.

Honorable Kimberly D. Bose June 21, 2017

Page 6

Proposed OATT Section 6.1.6.4 also allows the NYISO to direct Con Edison to repair or
replace a damaged or condemned Ramapo PAR, provided that: (1) the costs of such repair or
replacement, net of any insurance proceeds, will be reimbursable to Con Edison in accordance
with the calculation, transparency, and cost allocation provisions applicable to the Ramapo PARs
Charge; (2) Con Edison will be the sole party responsible for determining whether a repair or
replacement is in accordance with good utility practice; and (3) the schedule for any such repair
or replacement will be determined by Con Edison based on reliability considerations.

IV.Effective Date

The NYISO respectfully requests that the Commission issue an order accepting the

proposed OATT revisions by August 21, 2017 (i.e., sixty-one days from the date of this filing) with an effective date of July 1, 2017.

The requested July 1, 2017 effective date will provide Con Edison the cost recovery

certainty necessary for the expedited installation of the second PAR at the Ramapo Substation. In reliance on this filing, Con Edison has already begun the work necessary to put the
replacement Ramapo PAR in-service.  Con Edison has indicated that it expects the replacement Ramapo PAR should be placed in-service in September of 2017.

V.Stakeholder Approval

The proposed amendments to Rate Schedule 1 were approved without dissent by the NYISO Management Committee on May 31, 2017.  The NYISO Board of Directors approved the filing of these proposed revisions on June 19, 2017.

VI. Communications and Correspondence

All communications and service in this proceeding should be directed to:

Robert E. Fernandez, General Counsel

Raymond Stalter, Director, Regulatory Affairs *Alex M. Schnell, Assistant General Counsel/ Registered Corporate Counsel

*James H. Sweeney, Senior Attorney

10 Krey Boulevard

Rensselaer, NY 12144
Tel:  (518) 356-6000
Fax: (518) 356-7678
rfernandez@nyiso.com
rstalter@nyiso.com
aschnell@nyiso.com
jsweeney@nyiso.com

*Person designated for receipt of service.

Honorable Kimberly D. Bose June 21, 2017

Page 7

VII.   Service

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

VIII.   Conclusion

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

Commission accept for filing the proposed OATT revisions that are attached hereto with an effective date of July 1, 2017.

Respectfully submitted,

/s/ James H. Sweeney

James H. Sweeney
Senior Attorney

New York Independent System Operator, Inc.

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