UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

New York Independent System Operator, Inc.)Docket Nos. ER16-120-001

)ER16-120-003

)EL15-37-003

)

REQUEST FOR LEAVE TO ANSWER AND ANSWER OF

THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC.

In accordance with Rule 213 of the Commission’s Rules of Practice and Procedure,1 the
New York Independent System Operator, Inc. (“NYISO”) respectfully submits this request for
leave to answer and answer to the December 18, 2017 Request of Entergy Nuclear Power
Marketing, LLC for Clarification or, in the Alternative, Rehearing (the “Request for
Clarification”). Entergy Nuclear Power Marketing, LLC (“Entergy Nuclear”) asks the
Commission to “clarify” that the November 2017 Order2 dictates that the “deadline for the
NYISO to complete its final market power review of the Indian Point deactivation notice (if such
a review is deemed warranted) shall be no later than March 13, 2018.”3 In the alternative,
Entergy Nuclear seeks rehearing on the theory that the “NYISO’s Generator Deactivation
Process cannot be just and reasonable without a clear deadline set early in the overall process for
the NYISO to complete any final market power review deemed warranted.”4
For the reasons set forth below, the Commission should deny both clarification and
rehearing. Entergy Nuclear’s request is inconsistent with the NYISO’s Market Administration

1 18 C.F.R. § 385.213 (2017)

2 New York Independent System Operator, Inc., 161 FERC ¶ 61,189 at P 103 (2017) (November 2017 Order).

3 Request for Clarification at 1.

4 Id. at 3-4.

and Control Area Services Tariff (“Services Tariff”). None of the NYISO’s filings in this

proceeding included tariff language that would impose a 120-day deadline on market power

review or the issuance of final withholding determinations. Entergy Nuclear’s request also

mischaracterizes past statements by the NYISO that addressed circumstances very different from those presented by the proposed deactivation of Entergy’s Indian Point units.
The independent Market Monitoring Unit for the NYISO, i.e., Potomac Economics, Ltd., has authorized the NYISO to state that it has reviewed the Request for Clarification, shares the NYISO’s concerns, and supports this answer.

I.REQUEST FOR LEAVE TO ANSWER

The NYISO is authorized to answer Entergy Nuclear’s Request for Clarification.5 The Commission also has discretion6 to accept answers to requests for rehearing and has done so
when they help to clarify complex issues, provide additional information, or are otherwise
helpful to its decision-making process.7 The Commission should accept the NYISO’s answer in this instance. The Request for Clarification mischaracterizes certain statements made by the
NYISO and makes no mention of a tariff provision that is directly relevant to the issues it raises. Consequently, the Commission should allow the NYISO to answer in order to ensure that there is a complete and accurate record in this proceeding.

II.ANSWER

Entergy Nuclear asks the Commission to clarify that the NYISO is bound to meet a 120-
day deadline for conducting a final market power review, which encompasses physical

5 Rule 213(a)(3) authorizes parties to answer all pleadings except for those specifically enumerated in Section 213(a)(2).

6 See 18 C.F.R. § 385.213(a)(2).

7 See, e.g., Cal. Indep. Sys. Operator Corp., 129 FERC ¶ 61,241 at P 16 (2009); PJM

Interconnection, L.L.C., 127 FERC ¶ 61,188 at P 6 (2009); Missouri Interstate Gas, LLC et al., 127 FERC ¶ 61,011 at P 8 (2009).

withholding analyses, of deactivating generators. In doing so, Entergy Nuclear is seeking to

compel the NYISO to complete a final market power analysis and issue a final withholding

determination for Indian Point Units 2 and 3 by March 13, 2018 because the deactivation notices
for those units were deemed to be complete by the NYISO on November 13, 2017. Entergy
Nuclear would require this notwithstanding the fact that the Indian Point units asked to
deactivate on, and are not expected to deactivate before, April 30, 2020 and 2021 respectively.8
The Commission should deny the requested clarification, as well as the related request for rehearing. Requiring the NYISO to complete market power analyses so far in advance of the units’ expected withdrawal from the market is not required by the tariff language the NYISO submitted in this proceeding, is inconsistent with and cannot be justified by reference to prior NYISO statements, and is contrary to the existing Services Tariff. It would be unreasonable for the Commission to create such a requirement, particularly given the facts and circumstances of this proceeding.

A.The Services Tariff Does Not Establish, and the NYISO Has Never Proposed,

a 120-Day Deadline for Completing Market Power Analyses for Deactivating

Generators

As Entergy Nuclear acknowledges, neither the NYISO’s Initial Compliance Filing9 nor
its Second Compliance Filing10 included tariff language that would impose a 120-day deadline
on market power review or the issuance of final withholding determinations for Generator
deactivations. The NYISO has never proposed such a deadline, and it cannot be found in the

8 See Posting of Completed Generator Deactivation Notice, November 13, 2017 at:

http://www.nyiso.com/public/webdocs/markets_operations/services/planning/Documents_and_Resources
/Planned_Generation_Retirements/Planned_Retirement_Notices/Posting-of-Completed-Generator-
Deactivation-Notice-Indian-Point%20Units-2-and-3-11-13-17.pdf.

9 New York Independent System Operator, Inc., Compliance Filing, Docket No. ER16-120-003 (October 19, 2015) (“Initial Compliance Filing”).

10 New York Independent System Operator, Inc., Compliance Filing, Docket No. ER16-120-003 (September 19, 2016) (“Second Compliance Filing”).

Services Tariff or in any other NYISO document. There is thus no tariff basis for Entergy Nuclear’s position.

The Request for Clarification suggests that Entergy Nuclear has only recently

“discovered” the absence of deadline language in the tariff. Energy Nuclear implies that an express deadline for physical withholding analyses was omitted unintentionally from the filed tariff language.11 In reality, the NYISO never sought to establish a 120-day deadline; such a deadline was never proposed, and no such deadline has ever existed in the NYISO’s tariff. The NYISO is opposed to Entergy Nuclear’s attempt to introduce a deadline now.

B.The NYISO’s and the Commission’s Past Statements Do Not Support the

Request for Clarification

Entergy Nuclear tries to use several past NYISO statements to support its desired

deadline. First, the NYISO’s May 2016 request for clarification in this proceeding explained that
the Commission’s April 2016 Order12 had created uncertainty by requiring the NYISO to re-
submit numerous tariff revisions governing its proposed generator deactivation review process.
The April 2016 Order raised the question of how the NYISO, “should proceed if it receives a
Generator Deactivation Notice before it submits a second compliance filing that contains the
revised deactivation review process tariff rules.”13 The NYISO stated that “under the
circumstances” it believed the “most reasonable interim approach would be for it to generally
follow the timetable and procedures for evaluating Generator deactivation notices that was
proposed in its original Compliance Filing” such as taking “up to 120 days to review market

11 Request for Clarification at 4, 6 n. 14.

12 New York Independent System Operator, Inc., 155 FERC ¶ 61,076 (2016) (“April 2016
Order”).

13 New York Independent System Operator, Inc., Request for Rehearing and Clarification, Docket No. ER16-120-001, EL15-37-002 (May 23, 2016) (“NYISO Clarification”) at 15.

power concerns...”14 The November 2017 Order accepted the Second Compliance Filing and

held that the NYISO’s concerns had thereby been “rendered moot.” It added that the NYISO’s
proposed interim process would be “appropriate” to the extent that the NYISO “has received a
generator deactivation notice between the Commission’s issuance of the [April 2016 Order] and

this order...”15

Entergy Nuclear claims that the NYISO Clarification and November 2017 Order

obligates the NYISO to complete a final physical withholding analysis for the Indian Point units
within 120 days. Entergy Nuclear’s claim is incorrect. The NYISO’s references to completing
market power reviews within 120 days throughout this proceeding and the related stakeholder
process were intended to address circumstances where a generator proposed to deactivate by
providing 365 days’ notice. This focus on generators deactivating in 365 days, and the NYISO’s
rationale for proposing this timeframe as the minimum notice period, is abundantly clear in all of
the NYISO’s stakeholder presentations and all of its filings in this proceeding. The NYISO’s
statements regarding the timing of market power reviews were never intended to create a binding
deadline. They were not focused on all potential deactivation scenarios, including those such as
Entergy Nuclear’s in which a generator is planning on continuing to operate for a lengthy period
and then deactivate years after the conclusion of the 365-day Generator Deactivation Process
review period.

Second, Entergy Nuclear cites NYISO statements found in its December 2015 Answer in
this proceeding. In that pleading the NYISO stated that it would “begin performing its analysis
regarding whether a Generator’s proposed deactivation raises market power concerns or
constitutes conduct inconsistent with competitive behavior promptly following a Generator’s

14 Id.

15 November 2017 Order at P 103.

submission of its completed Generator Deactivation Notice.”16 It also said that the withholding analysis “must be performed at the start of the process to provide transparency regarding
potential penalties that the Generator could be subject to if it were to deactivate and to enable the NYISO to address any market power concerns.”17

These statements were all made in the context of the NYISO’s plans for generators

seeking to deactivate within the NYISO’s proposed minimum notice period, i.e., 365 days (or on
an expedited basis, where permitted, in less than 365 days). Indeed, immediately before the
statements quoted by Entergy Nuclear, the NYISO emphasized that its “ability to timely perform
its responsibilities as required within the limited 365-day notice period would be significantly
impeded if it were unable to obtain the information required by Appendix F at the start of the
process.”18 The December 15 Answer did not address the timing of market power analyses for
generators that intended to deactivate years in the future. This is hardly surprising given the
amount of attention dedicated in this proceeding to the rationale for, and details of, the NYISO’s
minimum 365-day notice period.

Third, Entergy Nuclear points to three presentations that the NYISO made to its

stakeholders in 2015 during the development of its generator deactivation proposal.19 Just as

with the December 2015 Answer, each of these presentations was concerned chiefly with issues
pertaining to generators that wished to deactivate within 365 days. Their references to the timing
of market power determinations were illustrative and intended to demonstrate why 365 days’

16 See New York Independent System Operator, Inc., Request for Leave to Answer and Answer of New York Independent System Operator, Inc., Docket No. ERl6-120-000 (December 21, 2015)
(“December 2015 Answer”) at 27.

17 Id.

18 Id. at 26.

19 See Request for Clarification at 5-6.

notice was the minimum appropriate period. They were not intended to address or limit

situations where the generator requested far longer than 365 days and, importantly, none of the
presentations specified that the NYISO would adhere to a 120-day deadline in all cases. Entergy
Nuclear highlights language in one of the presentations which indicated that the NYISO would
“require a minimum of 4 months after submission of a complete notice to . . . review for possible
physical withholding.”20 But even that reference clearly stated that the NYISO would require a
“minimum of” four months which is not the same as applying a 120-day deadline to all

scenarios.

Fourth and finally, Entergy Nuclear claims that the NYISO’s Initial Compliance Filing
“confirmed” that the NYISO “would evaluate the economic justification of deactivation requests
received from generators in a Mitigated Capacity Zone within 120 days of the Generator
Deactivation Assessment Start Date.”21 In fact, the Initial Compliance Filing makes no such
binding commitment but rather suggests that the NYISO would be conducting its “evaluation of
the economic justification of the deactivation of Generators in Mitigated Capacity Zones”
concurrent with other early steps in its Generator Deactivation Process. Once again this
statement was made in the context of a discussion of the NYISO’s then-proposed minimum 365-
day notice period, and neither asserts, nor suggests, the existence of a “deadline” by which the
NYISO would complete its market power evaluation. It is not a “confirmation” that the NYISO
intended to conduct market power analyses in the same timeframe for generators planning to
deactivate years in the future.

20 Request for Clarification at 13.

21 Request for Clarification at 6; citing Initial Compliance Filing at 16.

C.The Request for Clarification Is Inconsistent with Section 23.4.5.6.1 of the

Currently Effective Services Tariff

The Services Tariff includes language that directly contradicts Entergy Nuclear’s
position. Services Tariff Section 23.4.5.6.1 (Attachment H)) expressly establishes that
retirement and de-rating decisions are subject to NYISO audit and review at any time. The
provision reads:

Any proposal or decision by a Market Participant to retire or otherwise remove an
Installed Capacity Supplier from a Mitigated Capacity Zone Unforced Capacity
market, or to de-rate the amount of Installed Capacity available from such
supplier, may be subject to audit and review by the ISO if the ISO determines that
such action could reasonably be expected to affect Market-Clearing Prices in one
or more ICAP Spot Market Auctions for a Mitigated Capacity Zone in which the
Resource(s) that is the subject of the proposal or decision is located, subsequent to
such action; provided, however, no audit and review shall be necessary if the
Installed Capacity Supplier is a Generator that is being retired or removed from a
Mitigated Capacity Zone as the result of a Forced Outage that began on or after
May 1, 2015 that was determined by the ISO to be a Catastrophic Failure. Such
an audit or review shall assess whether the proposal or decision has a legitimate
economic justification or is based on an effort to withhold Installed Capacity
physically in order to affect prices. The ISO shall provide the preliminary results
of its audit or review to the Market Monitoring Unit for its review and comment.
The responsibilities of the Market Monitoring Unit that are addressed in this
section of the Mitigation Measures are also addressed in Section 30.4.6.2.10 of
Attachment O to this Services Tariff.

Entergy Nuclear would have the Commission read this provision out of the Tariff, and
read in its preferred 120-day deadline, based on Entergy Nuclear’s interpretation of the NYISO
statements referenced above. Even if the NYISO had made those statements with the intent that
Entergy Nuclear ascribes to it, the NYISO could not have overridden Services Tariff 23.4.5.6.1
simply by saying that it intended to, even in a filing to the Commission. As noted above, the
NYISO never proposed, and the Commission has never accepted, tariff revisions that would

nullify Section 23.4.5.6.1 of the Services Tariff.

D.It Would Be Unreasonable for the Commission to Impose a 120-Day

Deadline for Market Power Reviews

As noted above, the NYISO’s process for conducting physical withholding analyses is

well settled in the Services Tariff. The relevant provision does not include a time limit. Entergy Nuclear is effectively attempting to restrict the NYISO’s flexibility by artificially locking it into conducting deactivation-related physical withholding analyses at a prescribed time.

Requiring the NYISO to complete physical withholding analyses years in advance of

generator deactivation would clearly be unreasonable and unjustified on equitable or policy

grounds. Market conditions could change dramatically over a two or three year period, as could
a generator owner’s business plans as well as the plans of other generators.22 For example, other
resources might give notice of their intent to deactivate and then deactivate before a multi-year
notice period runs. Decisions that appear, or that do not appear, to raise market power concerns
within 120 days of the Generator Deactivation Assessment Start Date could thus look very
different in the future. A lengthy delay between the completion of a physical withholding
analysis and a generator’s actual deactivation raises the possibility that a generator’s ownership
and affiliations might change in ways that would be significant to a market power evaluation. In
addition, generators with distant deactivation dates might decide to extend their participation in
the market beyond those dates. The combination of potential changes in ownership, affiliations,
and incentives that exist when years separate a Generator Deactivation Notice from the
generator’s deactivation also gives rise to gaming concerns. It would be unreasonable to compel
the NYISO to complete its market power reviews for units years before their actual deactivation.
Moreover, although the data necessary to determine that a Generator Deactivation Notice is complete may also be needed to perform a withholding analysis, it does not necessarily

22 Indeed, a rational actor behaving in a competitive manner should be expected to incorporate new information about market conditions into its business plans as that information becomes available.

represent all of the data required to perform such an analysis. Specifically, the data used to

evaluate the completeness of a deactivation notice does not require all of the information needed
to make the Services Tariff’s required determination of whether there is a “legitimate economic
justification”23 for the generator’s proposal or decision. Therefore, it would not be reasonable to
tie a deadline for NYISO’s completion of this review to a milestone that would not ensure that
the deactivating generator has provided all necessary data for the NYISO to complete its review.

Thus, to assert that the NYISO must issue a determination by a prescribed deadline

would be both unreasonable and contrary to the long-standing tariff provisions governing market power examinations and determinations. There is likewise no basis for revising Section

23.4.5.6.1 of the Services Tariff to establish specific deadlines for completing market power
reviews associated with generator deactivations. If the NYISO were compelled to conduct
physical withholding analyses using information remote in time from a generator’s actual
deactivation there would be a substantial risk of both under- and over-mitigation.24 As long as generators have the freedom to request deactivation far in advance of their proposed deactivation the NYISO will need to retain comparable flexibility to conduct market power analyses at
reasonably appropriate times on a case-by-case basis. Entergy Nuclear is effectively attempting to restrict the NYISO’s flexibility by artificially locking it into conducting deactivation-related physical withholding analyses at a prescribed time.

23 See Services Tariff Section 23.4.5.6.1 (discussed above in Section II.C.).

24 The Commission has consistently emphasized that it is critically important to guard against
both over- and under-mitigation in cases involving buyer-side market power mitigation measures. See,
e.g., New York State Public Service Commission, et al. v. New York Independent System Operator, Inc.

158 FERC ¶ 61,137 (2015) at P 34 (“[T]he Commission seeks to ensure that buyer-side market power mitigation rules strike a careful balance between over-mitigating and under-mitigating new capacity resources.”) The same concerns are relevant to this proceeding.

E.If the Commission Concludes that the November 2017 Order Established an

“Interim Process” with a 120-Day Deadline that Deadline Should Cease to Apply After November 16, 2017

In the alternative, if the Commission were to decide that the November 2017 Order

obliges the NYISO to follow the interim process proposed by the NYISO Clarification, then it
should also clarify that the interim process was only in effect until the issuance of the
Compliance Order on November 16, 2017. In that case, the interim rules, including any 120-day
deadline, would no longer apply to Entergy Nuclear because they would have only been in effect
for the three days after Entergy Nuclear submitted a completed Generator Deactivation Notice.
Even if the Commission somehow found that the Clarification request bound the NYISO to
complete the physical withholding analysis in 120 days, such requirement would now be moot
and inapplicable to Entergy’s pending request. The “interim process” proposed in the NYISO
Clarification was just that - a process for the interim period only. It was meant to avoid
protracted uncertainty regarding the treatment of deactivation notices at a time when it was
unclear which tariff rules would apply to them.25 The NYISO’s issuance of Entergy Nuclear’s
deactivation notice was completed three days before the issuance of the November 2017 Order.
By accepting the Second Compliance Filing (effective October 20, 2015) that order eliminated
all doubt regarding the processing of deactivation requests.26 The mere fact that the Indian Point
deactivation requests were completed just a few days before the November 2017 Order would

25 Furthermore, the NYISO Clarification was clear that the NYISO only intended to make an “interim process” available to deactivation requests that were submitted before the Second Compliance Filing was made, i.e., before September 16, 2016, and not before the Commission acted on that filing. The NYISO’s intent was to address any deactivation requests received between the submission of the Second Compliance Filing and a Commission order under the tariff provisions included in the Second Compliance Filing. The November 16 Order was therefore not accurate when it stated that the interim period was intended to run until the issuance of a Commission order.

26 The Request for Clarification acknowledges (at n. 1) that although the November 2017 Order “was issued subject to limited condition, the issues that remain to be resolved in these proceedings are not germane to this request.”)

not be a reasonable basis for handling them under an alternative rule set not reflected in the effective tariff language.

III.CONCLUSION

In conclusion, the Commission should deny both clarification and rehearing and take no other action in this proceeding.

Respectfully submitted,

By: /s/ Alex M. Schnell

Robert E. Fernandez, General Counsel

Raymond Stalter, Director, Regulatory Affairs Karen G. Gach, Deputy General Counsel
Alex M. Schnell, Assistant General Counsel/ Registered Corporate Counsel

New York Independent System Operator, Inc.

10 Krey Boulevard

Rensselaer, NY 12144
Phone: 518-356-6000

E-Mail: aschnell@nyiso.com

Ted J. Murphy

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

tmurphy@hunton.com

Counsel for the New York Independent System Operator, Inc.

January 2, 2018

cc:Michael Bardee

Anna Cochrane
James Danly
Jette Gebhart
Kurt Longo

David Morenoff
Daniel Nowak
Larry Parkinson

J. Arnold Quinn
Douglas Roe

Kathleen Schnorf Gary Will

CERTIFICATE OF SERVICE

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

designated on the official service list compiled by the Secretary in this proceeding in accordance with the requirements of Rule 2010 of the Rules of Practice and Procedure, 18 C.F.R. §385.2010.
Dated at Rensselaer, NY this 2nd day of January 2018.

/s/ Joy A. Zimberlin

Joy A. Zimberlin

New York Independent System Operator, Inc.

10 Krey Blvd.

Rensselaer, NY 12144 (518) 356-6207