January 16, 2018

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., Compliance Filing,
Docket No. ER16-120-_____

Dear Secretary Bose:

The New York Independent System Operator, Inc. (“NYISO”) hereby submits revisions
to its Open Access Transmission Tariff (“OATT”) and its Market Administration and Control
Area Services Tariff (“Services Tariff”) concerning its Generator Deactivation Process. The
proposed revisions fulfill the directives of the Federal Energy Regulatory Commission
(“Commission”) in its November 16, 2017, Order on Compliance and Rehearing in the above-
captioned proceeding (“November 2017 Order”) and in accordance with the Commission’s
November 28, 2017, Notice of Extension of Time.1 The NYISO respectfully submits that its
proposed compliance tariff revisions fully comply with the directives of the November 2017
Order, are fully supported, are just and reasonable, and should be accepted without modification
or condition.2 The NYISO respectfully requests that the compliance tariff revisions proposed in
this filing become effective on October 20, 2015 as described in Part V below.

I.BACKGROUND

In an order issued February 19, 2015, the Commission determined that the NYISO is the
appropriate entity to administer “reliability-must-run” (“RMR”) service in New York under its
tariffs, with the option to enter into an RMR Agreement with a Generator if necessary (“Initial
RMR Order”).3 The Initial RMR Order directed the NYISO to submit proposed tariff revisions

1 N.Y. Indep. Sys. Operator, Inc., Order on Compliance and Rehearing, 161 FERC ¶ 61,189 (2017)

(“November 2017 Order”); N.Y. Indep. Sys. Operator, Inc., Notice of Extension of Time, Docket No. ER16-120-003 (November 28, 2017).

2 Capitalized terms that are not defined in this filing letter have the meaning ascribed to them in Section

38.1 of the OATT or, if not defined therein, in Section 1 of the OATT or Section 2 of the Services Tariff.

3N.Y. Indep. Sys. Operator, Inc., Order Instituting Section 206 Proceeding and Directing Filing to Establish Reliability Must Run Tariff Provisions, 150 FERC ¶ 61,116 (2015) (“Initial RMR Order”).

Honorable Kimberly D. Bose January 16, 2018

Page 2

to establish a process to govern “the retention of and compensation to generating units required for reliability, including procedures for designating such resources, the rates, terms and
conditions for RMR service, provisions for the allocation of costs of RMR service, and a pro forma service agreement for RMR service.”4

In response to these directives, the NYISO has submitted two compliance filings to

implement reliability-must-run requirements through a new Generator Deactivation Process

located in Attachment FF of the OATT, along with related compensation and market monitoring
requirements in the OATT and Services Tariff. The Commission has largely accepted these
provisions.5

The November 2017 Order directed the NYISO to submit a further compliance filing to
make a limited number of additional revisions concerning: (i) the anti-toggling requirements, (ii)
the eligibility of certain generators to address a reliability need resulting from a Generator’s
deactivation, and (iii) which solutions identified in the Generator Deactivation Process will be
included in the base case for the Reliability Needs Assessment performed by the NYISO in its
biennial reliability planning process. The NYISO discussed the tariff revisions developed in
response to the directives of the November 2017 Order with stakeholders at a joint meeting of its
ICAP Working Group, Market Issues Working Group, and Electric System Planning Working
Group on January 10, 2018.

In response to the November 2017 Order’s directives, the NYISO proposes the revisions to the NYISO’s tariffs described in Parts II through IV below.

II.ANTI-TOGGLING PROVISIONS

The Initial RMR Order stated that the NYISO should “include rules to eliminate, or at

least minimize, incentives for a generator needed for reliability to toggle between receiving RMR compensation and market-based compensation for the same units.”6 As part of the NYISO’s
anti-toggling RMR requirements, Section 15.8.7 of the Services Tariff establishes that an RMR Generator or Interim Services Provider must repay certain capital expenditures or above-market rates for it to return to receiving market-based rates in the NYISO-administered markets. In the November 2017 Order, the Commission directed the NYISO to make certain changes detailed
below to these anti-toggling requirements.

The Commission directed the NYISO to revise the requirements for repaying above-

market revenues “to only require repayment of above-market revenues that exceed an RMR

generator’s going-forward costs for RMR service, and to allow RMR generators that accepted an [Availability and Performance Rate (“APR”)] to retain their availability and performance

4 Initial RMR Order at P 11.

5 November 2017 Order at P 11; N.Y. Indep. Sys. Operator, Inc., Order on Compliance and Rehearing, 155 FERC ¶ 61,076 at P 14 (2016) (“April 2016 Order”).

6 Initial RMR Order at P 21.

Honorable Kimberly D. Bose January 16, 2018

Page 3

incentives.”7 To comply with the Commission’s directives, the NYISO proposes the following revisions to Section 15.8.7 of Rate Schedule 8 of its Services Tariff:

First, because both the APR8 and the rate paid to Interim Service Providers9 were

developed to compensate a Generator’s going-forward costs to provide service, the NYISO

proposes to limit the potential claw-back from former Interim Service Providers and from former RMR Generators that were paid an APR to the recovery of Capital Expenditures in Section

15.8.7 of Rate Schedule 8 of the Services Tariff.

Second, consistent with paragraph 84 of the November 2017 Order, the NYISO has

removed any obligation for former RMR Generators that were paid an APR to repay Availability Incentives10 or Performance Incentives11 they earned while providing RMR service if they later return to participating in the ISO Administered Markets.

Third, the revised formula that applies to the claw-back of Above Market Revenues from
former RMR Generators is now designed to claw-back the amount by which an Owner
Developed Rate (“ODR”) that NYISO pays in accordance with Section 15.8.5 of Rate
Schedule 8 of its Services Tariff exceeds the going-forward cost based rate that the NYISO
calculates in accordance with Section 15.8.1 of Rate Schedule 8 of its Services Tariff.12

The Commission also directed the NYISO to revise the repayment periods for capital
expenditures and above-market revenues “to require repayment of either in the shorter of 36
months or twice the duration of the applicable RMR agreement.”13 The NYISO proposes to
revise Section 15.8.7.1 of the Services Tariff to implement a recovery period that is consistent
with the Commission’s directive. The key proposed revisions to Section 15.8.7.1 are:

For the component of a former RMR Generator’s or former Interim Service Provider’s

Above Market Revenues that is Capital Expenditures, the value derived in the calculation above shall be divided by “mCapEx” months;

mCapEx = For a former RMR Generator, the shorter of 36 months or twice the duration
of the applicable RMR Agreement in months. For a former Interim Service Provider,
twelve months. Alternatively, if the former RMR Generator or former Interim Service
Provider elects to repay its entire obligation before it begins participating in the ISO
Administered Markets at market-based rates, then mCapEx shall be one monththe number

7 November 2017 Order at PP 82, 84.

8 See Services Tariff Section 15.8.1.

9 See Services Tariff Section 15.8.6.

10 See Services Tariff Section 15.8.3.

11 See Services Tariff Section 15.8.2.

12 See proposed revised Services Tariff Section 15.8.7.2.

13 November 2017 Order at P 86.

Honorable Kimberly D. Bose January 16, 2018

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of months in the Recovery Term, determined in accordance with Section 15.8.7.1.1
below.

The NYISO proposes minor revisions to the definition of the term “mAMR” in Section

15.8.7.2 to better align it with the proposed definition of mCapEx in Section 15.8.7.1, and to

remove the obligation for Interim Service Providers to repay Above Market Revenues consistent with the Commission’s determination that claw-backs should only recover payments that exceed a Generator’s going-forward costs.

Finally, the Commission directed the NYISO to make two “technical corrections” to the
anti-toggling provisions that the New York Transmission Owners proposed and the NYISO
agreed with.14 First, the Commission directed the NYISO to revise the term RVi in Section

15.8.7.1.1 “to weigh the remaining life of each capital investment by the depreciated value of

that investment to calculate a weighted average life.”15 Second, the Commission directed the

NYISO to revise the first paragraph of Section 15.8.7.2 and the equation in the second paragraph of that section “to refer to the proration of market revenues between reimbursements for capital expenditures and other above-market revenues.”16

Although both technical corrections were appropriate at the time they were proposed by
the New York Transmission Owners, directives in the November 2017 Order subsequently
obviated the need for these changes. The change to the term RVi in Section 15.8.7.1.1 is no
longer necessary because the Commission instructed the NYISO to require the repayment of
Capital Expenditures over the shorter of 36 months or twice the duration of the RMR Agreement
(which significantly simplifies implementation).17 The NYISO proposes to delete Section

15.8.7.1.1 entirely, and to replace it with the definition of mCapEx that is set forth above.

The change to the first paragraph of Section 15.8.7.2 and the equation in the second

paragraph of that section to refer to the proration of market revenues between reimbursements

for capital expenditures and other above-market revenues is also no longer necessary. Consistent with paragraph 86 of the November 2017 Order, the cost of Capital Expenditures is now being recovered over the same recovery term as other Above Market Revenues. This Commissioninstructed change enabled the NYISO to simplify the Above Market Revenue claw-back
equation so that the improvement the New York Transmission Owners developed, the NYISO agreed with, and Commission accepted, is no longer necessary.

III. NEW GENERATOR AS GENERATOR DEACTIVATION SOLUTION

Sections 38.4 and 38.5 of Attachment FF of the NYISO OATT provide that if the NYISO
identifies a reliability need resulting from a Generator’s deactivation, it will solicit proposed

14 See November 2017 Order at PP 73, 78, 87.

15 November 2017 Order at P 87.

16 Id.

17 Id. at P 86.

Honorable Kimberly D. Bose January 16, 2018

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Generator Deactivation Solutions, which may include regulated and market-based transmission, generation and market-based demand response. Developers may propose “generation” solutions that are market-based or an RMR Agreement with a generator that is currently mothballed or in an ICAP Ineligible Forced Outage.18

In their protest of the NYISO’s previous compliance filing in this proceeding,

Independent Power Producers of New York , Inc. (“IPPNY”) and Electric Power Supply

Association (“EPSA”) requested that the Commission direct the NYISO to clarify in its tariff that a developer may propose generator solutions that are not market-based solutions or involve
generators that are currently mothballed or in an ICAP Ineligible Forced Outage.19 IPPNY and EPSA provided a proposed tariff insert for a new Section 38.4.2.3 that addressed their concern, and they informed the Commission that the NYISO did not oppose this change, 20 which the
NYISO subsequently confirmed.21

In response, the Commission directed the NYISO in the November 2017 Order to clarify
that a Developer may also propose “generation RMR alternatives to a reliability need that are not
market-based, or that involve generators that are currently mothballed or in an ICAP ineligible
forced outage.”22 Accordingly, in order to clarify that a new Generator is eligible for
consideration as a Generator Deactivation Solution, the NYISO proposes to insert a new Section

38.4.2.3 that is consistent with the insert proposed by IPPNY and EPSA and states that: “Any

Developer may submit a proposed new Generator that requires an RMR Agreement to operate as a temporary Generator Deactivation Solution. A proposed new Generator that requires an RMR Agreement must satisfy the project information requirements in Sections 31.2.4.8.1 and

31.2.4.8.2 of Attachment Y of the ISO OATT.”23 As revised, the NYISO will now consider -
for purposes of entering into an RMR Agreement as a temporary solution to address a reliability need - any new or existing Generator not currently participating in the NYISO-administered markets, including the acceleration or increased capacity of new generation.

18 OATT Sections 38.4.2.2 and 38.5.

19 New York Independent System Operator, Inc., Protest of Independent Power Producers of New York, Inc.
and Electric Power Supply Association, Docket No. ER16-120-003 at pp 23-24 (October 25, 2016) (“IPPNY/EPSA
Protest”).

20 Id. at p 24.

21 New York Independent System Operator, Inc., Request for Leave to Answer and Answer of New York
Independent System Operator, Inc., Docket No. ER16-120-003 at p 40 (November 9, 2016) (“NYISO Answer”).

22 November 2017 Order at P 49.

23 The NYISO’s proposed insert in Section 38.4.2.3 of Attachment FF is consistent with the insert proposed by IPPNY and EPSA, but corrects an internal cross-reference and does not include language concerning the
satisfaction of certain information requirements contained in Appendix B of Attachment FF, as this requirement is already addressed in Section 38.4.3 for all proposed Generator Deactivation Solutions.

Honorable Kimberly D. Bose January 16, 2018

Page 6

IV.INCLUSION OF GENERATOR DEACTIVATION SOLUTION IN RELIABILITY

NEEDS ASSESSMENT BASE CASE

Section 31.2.2.3.2 of Attachment Y of the NYISO OATT establishes the requirements for developing the base case for the Reliability Needs Assessment (“RNA Base Case”) performed by the NYISO in its biennial reliability planning process. In its previous compliance filing, the
NYISO proposed to revise Section 31.2.2.3.2 to indicate that interim Generator Deactivation
Solutions, such as RMR Agreements, would not be included in the RNA Base Case, so that the NYISO can identify permanent solutions to any reliability need resulting from a Generator’s
deactivation in its biennial reliability planning process. Permanent Generator Deactivation
Solutions would be included in the RNA Base Case.

In their protest of the NYISO’s previous compliance filing, IPPNY and EPSA requested
that the Commission direct the NYISO to make certain revisions to clarify which resources will
be included in the RNA Base Case.24 IPPNY and EPSA provided proposed revisions to Section

31.2.2.3.2, and they informed the Commission that the NYISO did not oppose the revisions, 25
which the NYISO subsequently confirmed.26 In response, the Commission directed the NYISO
in the November 2017 Order to clarify in its tariff that “NYISO will exclude RMR generators
and Interim Service Providers from its reliability needs assessment base case, and will include
permanent transmission RMR alternatives.”27 Accordingly, the NYISO proposes to revise the
relevant language in Section 31.2.2.3.2 consistent with IPPNY and EPSA’s proposed revisions as
follows:

the ISO shall not include in the RNA Base Case an Interim Service Provider, an
RMR Generator, or any other interim non-RMR Generator Deactivation Solution
selected by the ISO pursuant to Attachment FF of the ISO OATT; provided,
further, the ISO will include in the RNA Base Case a permanent transmission
non-RMR Generator Deactivation Solution selected by the ISO pursuant to
Attachment FF of the ISO OATT if it meets the base case inclusion requirements
in the ISO Procedures.

V.EFFECTIVE DATE

The NYISO respectfully requests that the Commission accept the tariff revisions

proposed in this compliance filing with an October 20, 2015 effective date. This is the effective date the Commission accepted for the NYISO’s RMR tariff provisions adopted in this
proceeding for which all parties are on notice.28

24 IPPNY/EPSA Protest at pp 24-25.

25 Id. at p 24.

26 NYISO Answer at p 40.

27 November 2017 Order at P 93.

28 November 2017 Order at P 11; April 2016 Order at P 14.

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

Registered Corporate Counsel

*Carl F. Patka, Assistant General Counsel
New York Independent System Operator, Inc.

10 Krey Boulevard

Rensselaer, NY 12144
Tel: (518) 356-6000
Fax: (518) 356-4702
rfernandez@nyiso.com
rstalter@nyiso.com

kgach@nyiso.com
aschnell@nyiso.com
cpatka@nyiso.com

*Persons designated to receive service

VII. DOCUMENTS SUBMITTED

*Ted J. Murphy

Hunton & Williams LLP 2200 Pennsylvania Ave, NW Washington, DC 20037
Tel: (202) 955-1500

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

*Michael Messonnier29
Hunton & Williams LLP

Riverfront Plaza, East Tower 951 East Byrd Street

Richmond, VA 23219
Tel: (804) 788-8712
Fax: (804) 343-4646

mmessonnier@hunton.com

Honorable Kimberly D. Bose January 16, 2018

Page 8

New Jersey Board of Public Utilities. In addition, the complete public version of this filing will
be posted on the NYISO’s website at www.nyiso.com.

IX.CONCLUSION

WHEREFORE, the New York Independent System Operator, Inc. requests that the

Commission accept this compliance filing without requiring any modifications and determine that the NYISO has fully complied with the directives in the November 2017 Order.

Respectfully submitted,

/s/ Alex M. Schnell

Carl F. Patka, Assistant General Counsel

Alex M. Schnell, Assistant General Counsel/ Registered Corporate Counsel

New York Independent System Operator, Inc.

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