Elizabeth A. Grisaru
Of Counsel
518.487.7624 phone
egrisaru@woh.com
December 28, 2010
By Electronic Filing
Honorable Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, NE
Washington, DC 20426
Re: New York Independent System Operator, Inc., Docket No. ER11-xxxx-xxx,
Proposed Tariff Revisions to Support Enhanced Interregional Transaction
Coordination
Dear Secretary Bose:
In accordance with Section 205 of the Federal Power Act and Part 35 of the
Commission’s regulations, the New York Independent System Operator, Inc. (“NYISO”)
respectfully submits proposed revisions to its Market Administration and Control Area Services
Tariff (“Services Tariff”) and Open Access Transmission Tariff (“OATT”).1 If approved, these
proposals will allow the NYISO to implement more frequent transaction scheduling at the
borders of the New York Control Area (“NYCA”), which will enable system operators to utilize
transmission between New York and its neighbors more efficiently. The NYISO anticipates that
these measures will result in reduced uplift costs associated with real-time event management
and congestion management, facilitate better integration of intermittent resources, and lower
total system operating costs. The proposed amendments received extensive stakeholder review
over the past twelve months, and obtained approvals from the NYISO’s Management Committee
and the NYISO’s independent Board of Directors in October and November 2010, respectively.
1 Capitalized terms not specifically defined herein have the meaning set forth in the Services Tariff and the OATT.
Honorable Kimberly D. Bose December 28, 2010
Page 2
Part II of this filing describes the background and purpose of the proposed tariff revisions. Part III discusses the specific OATT and Services Tariff changes that are needed to implement the NYISO’s proposals.
I.Documents Submitted
1. This filing letter;
2. A clean version of the proposed revisions to the Services Tariff and the OATT
(“Attachment I”);
3. A black lined version of the proposed revisions to the Services Tariff and the OATT
(“Attachment II”); and
II.Background to this Filing
In its January 12, 2010 compliance filing in the ER08-1281 docket, the NYISO proposed to
pursue both physical and market solutions to the problem of Lake Erie loop flows.2 With the
assistance and support of the Midwest Independent Transmission System Operator, Inc.
(Midwest ISO”), PJM Interconnection, LLC (“PJM”), the Ontario Independent System Operator
(“IESO”), and their stakeholders, the NYISO’s compliance filing recommended four market
solutions: Buy-Through of Congestion, Congestion Management/Market to Market
Coordination, Interface Pricing Revisions, and Interregional Transaction Coordination. The
Commission accepted the NYISO’s filing, conditioned on the filing of answers to certain
questions.3 The NYISO filed its responses on August 16, 2010 and reported that it was
continuing to work collaboratively with IESO, Midwest ISO, PJM, ISO New England (“ISO-
NE”), and Hydro Quebec Trans Energie (“HQ”) to develop the concepts it had proposed.4
With the present filing, the NYISO submits the tariff revisions that are necessary to
implement one of those recommended market solutions, Enhanced Interregional Transaction
Coordination, in New York. These provisions will put in place the program the NYISO and its
partners contemplated in the January 12 filing and report by offering Market Participants the
2 New York Independent System Operator, Inc., Report on Broader Regional Markets, Docket No. ER08-1281 (January 12, 2010).
3 New York Independent System Operator, Inc., 132 FERC ¶ 61,031, at 11 (2010).
4 New York Independent System Operator, Inc., Response to Questions and
Supplemental Report on Broader Regional Markets, Docket No. ER08-1281, at 3 (August 16,
2010).
Honorable Kimberly D. Bose December 28, 2010
Page 3
ability to schedule flexible transactions at the NYISO’s external interfaces. The NYISO
anticipates that implementation of this capability will lower total system operating costs by
improving the consistency of transaction schedules with market-to-market prices, expanding the
pool of resources available to the system operator to balance intermittent resources, improving
transmission utilization, and reducing the uncertainties associated with forward-looking
scheduling horizons.
There are two fundamental elements to the NYISO’s proposal. First, the tariffs must be revised to authorize more frequent scheduling of External Transactions. Second, the pricing rules that currently apply at external Proxy Generator Buses need to be modified to support flexible scheduling. The modified pricing rules must also take into account the fact that, as the Commission has previously recognized, some external interfaces are not fully competitive.5 The NYISO further proposes to clarify the existing import curtailment guarantee settlement rules for all Proxy Generator Buses, which the NYISO will apply independently of the flexible scheduling and revised pricing changes described here.6
The NYISO’s Real-Time Market rules and Real Time Commitment (“RTC”) and Real Time Dispatch (“RTD”) software presently allow Market Participants to schedule energy at the NYCA borders only once per hour. The NYISO settles those hourly transactions at the applicable realtime clearing prices. Today, there is a time gap of 60 to 120 minutes between scheduling the energy and the determination of the real-time prices at which the transactions are settled. This gap exposes traders to locked-in positions and potential volatility in the real-time market prices. Reducing the time between the scheduling and pricing of energy at the NYCA border will reduce this pricing risk and should ultimately increase efficiency and decrease costs to consumers in New York and in neighboring Control Areas.7
5 New York Independent System Operator, Inc., 104 FERC ¶61,220 (2003); 105 FERC ¶61,347 (2003) (accepting tariff revisions recognizing certain external proxy buses as noncompetitive). To date, Proxy Generator Buses associated with the HQ Control Area and the Dennison Scheduled Line have been designated as non-competitive. The NYISO is not
proposing to change those designations here.
6 Import curtailment guarantees are intended to protect a Market Participant’s Day Ahead settlement in the event of a real-time curtailment imposed by the NYISO for reliability. The
proposed clarifications implement that principle in language that will apply to hourly as well as intra-hour Transactions.
7 An analysis prepared by Potomac Economics, the NYISO’s independent Market
Monitor, suggests a total annual production cost savings for all NYISO interfaces of $175
million as a result of adopting the more frequent external transaction scheduling protocols
proposed here. Analysis of the Broader Regional Markets Initiative, Potomac Economics
presentation to Joint NYISO-IESO-MISO-PJM Stakeholder Technical Conference on Broader Regional Markets (September 27, 2010), available at
Honorable Kimberly D. Bose December 28, 2010
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The tariff changes discussed below will provide the NYISO and Market Participants the ability to schedule energy at designated Proxy Generator Buses on a fifteen-minute basis, and in some instances, on a five-minute basis. At the same time, Market Participants will continue to have the ability to schedule hourly transactions at those Proxy Generator Buses, at their option. However, until the NYISO implements flexible scheduling at all Proxy Generator Buses, wheelthrough transactions will be unable to opt for intra-hour scheduling, in order to ensure matching injection and withdrawal schedules.
This filing also proposes revised pricing rules to be implemented in conjunction with the
introduction of intra-hour scheduling at any particular Proxy Generator Bus.8 The pricing rules
vary depending on whether (1) the NYISO has designated the Proxy Generator Bus as available
for flexible scheduling, (2) the same bus has also been designated as non-competitive or is
associated with a designated Scheduled Line, and (3) the bus is or is not subject to a constraint.9
The NYISO will continue to utilize the RTC and RTD software to schedule transactions and
evaluate price constraints.
All External Transactions at a given Proxy Generator Bus will settle based on the LBMPs
derived by RTD unless the Proxy Generator Bus is constrained. In such a case, Transactions at
the constrained location will settle using the appropriate alternative pricing rule. The proposed
tariff sheets identify the various formulas that the NYISO will use depending on scheduling
frequency and system conditions at any given Proxy Generator Bus; in general, the proposed
rules require the NYISO to substitute more appropriate LBMPs for the RTD LBMPs when
congestion or other constraints limit either imports or exports at that location.10 The substitute
LBMPs will include the constraint costs at the Proxy Generator Buses resulting from the
economic evaluation and scheduling of external transactions, where the LBMP outputs from
RTD may not include these costs, as external transaction schedules may have already been
established prior to the RTD execution.
If the Proxy Generator Bus is non-competitive, or if it is associated with a designated
Scheduled Line, the NYISO will apply a different set of rules to determine pricing. Again, the
http://www.nyiso.com/public/webdocs/committees/bic_miwg/meeting_materials/2010-09-
27/BRM_Analysis_Presentation_to_RTOs_9-27-10.pdf.
8 More details of the Proxy Generator Bus Pricing Rules can be found at
http://www.nyiso.com/public/webdocs/committees/bic_miwg/meeting_materials/2010-06-
07/Agenda_04_EITC_Scheduling_Pricing_Concept.pdf.
9 The designated Scheduled Lines are the Cross Sound Cable, the Linden VFT, and the Neptune line. Services Tariff, Attachment B, section 17.1.6.3. A specific Proxy Generator Bus is associated with each of these for purposes of transaction scheduling.
10 Special pricing rules will also apply to Transactions at the designated Scheduled Lines.
Honorable Kimberly D. Bose December 28, 2010
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choice of pricing rule is dictated by whether or not the particular bus is available for hourly or
more flexible scheduling and by the presence or absence of specific constraints. As the
Commission has noted, LBMPs at a non-competitive facility or designated Scheduled Line can
be influenced by limited opportunities for competition during constrained periods. Thus
additional rule sets need to be applied to mitigate the possibility of non-competitive outcomes.
The Commission should note that these revised pricing rules are conceptually the same as
those employed by the NYISO today at Proxy Generator Buses. The modifications are designed
to extend the current Commission-approved pricing to accommodate the various scheduling
frequencies that will be possible as the NYISO implements intra-hour scheduling at the NYCA
borders. The NYISO’s pricing will continue to substitute LBMPs that reflect the value of
constraints for those generated by RTD. Where an interface is non-competitive, the pricing will
continue to recognize minimum and maximum bounds, as the current rules do today.
The proposal also includes modifications to the eligibility rules for real-time bid production
cost guarantees for transaction bids at Proxy Generator Buses available for more flexible
scheduling; these are intended to create an incentive to offer intra-hour transactions in real-time.
The NYISO intends to implement the proposed more frequent scheduling and new pricing
rules one Proxy Generator Bus at a time. The NYISO will provide at least a two week notice to
its Market Participants before activating more frequent scheduling at a Proxy Generator Bus.
Those Proxy Generator Buses that have not yet been designated as available for intra-hour
scheduling will continue to be governed by the existing pricing and bid production cost
settlement rules.
III. Description of Tariff Changes
Implementation of the NYISO’s proposals requires modifications to both the Services Tariff and the OATT. The principal changes are described below.
A. Changes to Definitions. The tariff sheets submitted with this filing include changes
to the definitions of certain terms that appear in both tariffs, as well as new terms.
Services Tariff 2.4, OATT 1.4: A change to the definition of Desired Net Interchange will facilitate more frequent External Transaction scheduling.
The NYISO also proposes to add the term “Dynamically Scheduled Proxy Generator
Bus” to identify those locations at which the NYISO will be capable of
accommodating transactions that are subject to modification every five minutes in
real-time.
Services Tariff 2.5, OATT 1.5: The new term “Energy Profile MW” will be used to specify the maximum desired schedule for an External Transaction Bid.
Honorable Kimberly D. Bose December 28, 2010
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Services Tariff 2.18, OATT 1.18: The NYISO proposes minor changes to the
definitions of “Real-Time Commitment” or “RTC” and “Real-Time Dispatch”
(“RTD”) to authorize intra-hour scheduling at a Proxy Generator Bus. The NYISO is also adding a new term, “Rolling RTC,” to identify any RTC run that schedules fifteen-minute External Transactions.
Services Tariff2.19, OATT 1.19: The NYISO proposes modifications to the
definition of“Sink Cap Price Bid” that will allow for bid curves on Export
transactions.
Services Tariff 2.22, OATT 1.22: The NYISO is introducing another new term,
“Variably Scheduled Proxy Generator Bus.” This term identifies locations at which
the NYISO will offer to schedule External Transactions at fifteen minute intervals.
B. Services Tariff Changes. The NYISO proposes several changes to Sections 4.4.1,
4.4.2, 4.4.3, and 4.5 of the Services Tariff that are necessary to implement intra-
hourly transactions. The NYISO is also proposing related changes to Attachments B,
C, and J.
Section 4.4.1.1: The NYISO revises this section to clarify that RTC will produce binding schedules for External Transactions on a quarter-hour basis.
Section 4.4.1.2.2: The changes proposed for this section eliminate the fixed
requirement that External Transaction Bids have a minimum one-hour duration and
substitutes provisions that will allow the NYISO to implement variable scheduling at
specific Proxy Generator Buses with the agreement of the parties submitting the Bids.
Section 4.4.1.3: The NYISO’s revisions will allow RTC to schedule intra-hour External Transactions by the quarter hour at Proxy Generator Buses for which variable scheduling has been authorized. The changes also provide that the amount of Energy scheduled in association with an External Transaction may change on the quarter hour within a given hour.
Section 4.4.1.4: This section sets forth the basic rules governing RTC’s role in making scheduling decisions for External Transactions. The proposed modifications specify the timing for RTC to schedule hourly and 15 minute External Transactions at Variably Scheduled Proxy Generator Buses. The changes also require subsequent RTC runs within the hour to revisit prior External Transaction schedules and to schedule the next set of economic 15 minute External Transactions.
Honorable Kimberly D. Bose December 28, 2010
Page 7
Section 4.4.2: The changes proposed here are intended to implement five minute
transactions. Modifications to subsection 4.4.2.1 specify that the Real-Time Dispatch
will produce such schedules for External Transactions at Dynamically Scheduled
Proxy Generator Buses. New subsection 4.4.2.2 provides that RTD will schedule
External Transactions on a five minute basis at those locations and authorizes the
NYISO to change the schedule for energy associated with an External Transaction
every five minutes. The new language also clarifies that the existing rules in
Attachment J of the OATT will apply to External Bilateral Transaction Schedules.
The subsequent sections are renumbered to accommodate this new subsection.
Section 4.4.3: The existing section authorizes the NYISO to activate the RTD-CAM software when unexpected system conditions occur. The proposed changes will permit RTD-CAM to schedule five minute transactions at Dynamically Scheduled Proxy Generator Buses.
Sections 4.5.3.2 and 4.5.4.2: The proposals for this subsection modify existing rules for the assessment of Financial Impact Charges related to failed transactions (injections and withdrawals) and calculating Curtailment Guarantee Payments to accommodate intra-hour External Transaction scheduling.
Attachment B, Section 17.1: The NYISO proposes numerous modifications to the
pricing rules used in calculating real-time LBMPs at Proxy Generator Buses and
designated Scheduled Lines. Subsection 17.1.6.1 defines the types of constraints that
may be binding at a given Proxy Generator Bus and thus dictate application of a
special pricing rule for an External Transaction. Changes to the next section,
renumbered 17.1.6.2, establish the general rules for pricing External Transactions at
Proxy Generator Buses that are subject to one or more of the defined constraints.
Different formulas apply depending on whether the particular bus has been
designated for hourly, fifteen-minute, or five-minute scheduling. If the Proxy
Generator Bus is non-competitive, subsection 6.3 specifies the pricing rules that will
apply to Transactions at that interface. A third set of pricing formulas, described at
subsection 17.1.6.4 applies to Proxy Generator Buses associated with designated
Scheduled Lines, which may also be subject to any of the defined constraints.
Finally, subsection 17.1.6.5 will be modified to specify the method for calculating the
Marginal Loss and Congestion components of real-time LBMPs for Transactions at
Proxy Generator Buses that are scheduled intra-hour.
Attachment C, Section 18.6.1.2: This section addresses Suppliers’ eligibility for real-
time Bid Production Cost guarantee payments. The NYISO will add subparagraph
2.1 to preclude hourly import transactions scheduled at either Variably Scheduled or
Dynamically Scheduled Proxy Generator Buses from receiving real-time shortfall
payments. Similarly, customers will not be eligible for such payments with respect to
import transactions at Non-Competitive Proxy Generator Buses or at any of the
Honorable Kimberly D. Bose December 28, 2010
Page 8
designated Scheduled Lines, when the facility is export constrained. Other changes substitute the term “Customer” for “External Generators and other Suppliers.”
Attachment J, Section 25.6.1: This proposed modification confirms the method for
determining a customer’s eligibility for an Import Curtailment Guarantee Payment,
and clarifies the formula that the NYISO will use to calculate an eligible Supplier’s
payment.
C. Changes to the OATT. The NIYSO proposes corresponding changes to the OATT.
Section 3.1.8: A minor change to this section recognizes that External Transaction schedules may not be hourly and authorizes the NYISO to schedule Firm Transmission Service intra-hourly in real-time.
Attachment J, Section 16.3: The NYISO will add a new provision that parallels the
proposed changes to Section 4.4.1 of the Services Tariff. The new language
authorizes the NYISO to vary External Transaction Schedules more frequently than once an hour, so long as the bidder has opted for variable scheduling. Transmission Customers will also be allowed to modify Bilateral Transactions in the Real-Time Market. Additional changes provide the NYISO with needed flexibility to implement intra-hourly scheduling for these transactions.
IV. Effective Date and Implementation Plan
The NYISO requests an effective date of March 15, 2011 for the proposed amendments. The changes to the import curtailment guarantee settlement rules will become effective for all Proxy Generator Buses on that date. The NYISO intends to phase in the new scheduling and pricing rules on an interface-by-interface basis. The first location for more frequent Transaction scheduling will be the Hydro-Quebec/Chateauguay interface starting after the requested effective date in March 2011; the specific start date will depend on system operating conditions in both regions. The NYISO plans to extend implementation to Proxy Generator Buses at the PJM interface in the 4th quarter of 2011, and to the ISO-NE interface in early 2013. The NYISO will inform its Market Participants of the availability of intra-hour scheduling at a Proxy Generator Bus at least two weeks prior to implementing the change.
V.Stakeholder Approval
The amendments proposed in this filing were discussed and reviewed five times with
stakeholders in the Market Issues Working Group forum. These amendments were unanimously
approved by the NYISO’s Business Issues Committee on October 6, 2010 and were unanimously
approved, with abstentions, by the NYISO’s Management Committee on October 21, 2010.
Honorable Kimberly D. Bose December 28, 2010
Page 9
VI.Communications and Correspondence
All communications and service in this proceeding should be directed to:
Robert E. Fernandez, General Counsel*Elizabeth A. Grisaru
Ray StalterWhiteman Osterman & Hanna
Director of Regulatory AffairsOne Commerce Plaza
*Mollie LampiAlbany, New York 12260
Assistant General CounselTel: (518) 487-7624
10 Krey BoulevardFax: (518) 487-7777
Rensselaer, NY 12144egrisaru@woh.com
Tel: (518) 356-7530
Fax: (518) 356-7678
rfernandez@nyiso.com
rstalter@nyiso.com
mlampi@nyiso.com
*Persons designated for receipt of service.
VII. Service
The NYISO will electronically send a link to this filing to the official representative of
each of its customers, to each participant on its stakeholder committees, to the New York Public
Service Commission, and to the electric utility regulatory agencies of New Jersey and
Pennsylvania. In addition, the complete filing will be posted on the NYISO’s website at
www.nyiso.com. To the extent necessary, the NYISO requests waiver of the requirements of
Section 35.2(d) of the Commission’s Regulations (18 C.F.R. § 35.2(d) (2007)) to permit it to provide service in this manner.
Honorable Kimberly D. Bose December 28, 2010
Page 10
VIII. Conclusion
Wherefore, for the foregoing reasons, the New York Independent System Operator, Inc. respectfully requests that the Commission accept for filing the proposed tariff revisions attached hereto with an effective date of March 15, 2011.
Respectfully submitted,
/s/ Elizabeth A. Grisaru
Elizabeth A. Grisaru
Whiteman Osterman & Hanna
Counsel to the New York Independent System Operator, Inc.
One Commerce Plaza
Albany, New York 12260
mailto:egrisaru@woh.com
cc:Michael A. Bardee
Gregory Berson
Connie Caldwell
Anna Cochrane
Lance Hinrichs
Jeffrey Honeycutt
Michael Mclaughlin
Kathleen E. Nieman
Rachel Spiker
John Yakobitis
