10 Krey Boulevard Rensselaer, NY 12144
November 7, 2011
Ms. Kimberly D. Bose Secretary
Federal Energy Regulatory Commission 888 First St, NE
Washington, DC 20426
Re: New York Independent System Operator, Inc., Compliance Filing
Docket No. ER04-449-____
Dear Ms. Bose:
Pursuant to the Commission’s September 8, 2011 Order on Compliance Filing
(“September Order”)1 regarding the New York Independent System Operator, Inc.’s (“NYISO”)
compliance filing addressing the Commission’s directives in its June 30, 2009 order in this
proceeding (“June 2009 Order”), the NYISO respectfully submits this compliance filing.2 This
filing proposes tariff revisions to the NYISO’s Market Administration and Control Area Services
Tariff (“Services Tariff”) to comply with the September Order’s directives. Specifically, the
NYISO is modifying its Services Tariff to identify the deliverability criterion that will be used to
determine whether a new capacity zone (or new capacity zones) (“New Capacity Zone” or
“NCZ”)3 is required, and establish related procedures. The NYISO requests an effective date of
January 9, 2012 for these provisions.
I.LIST OF DOCUMENTS SUBMITTED
The NYISO respectfully submits the following documents:
1.This filing letter;
2.A blacklined version of the proposed compliance modifications to the Services
Tariff (“Attachment I”);
1New York Independent System Operator, Inc., 136 FERC ¶ 61,165 (2011) (“September Order”).
2 New York Independent System Operator, Inc., 127 FERC ¶ 61,318 (2009) (“June 2009 Order”).
3 The proposed definition of the term New Capacity Zone or NCZ is a “single Load Zone or
group of Load Zones that is proposed as a new Locality, and for which the ISO shall establish a Demand Curve.” See proposed revisions to Services Tariff Section 2.14. When used herein, the term New
Capacity Zone also encompasses New Capacity Zones.
Ms. Kimberly D. Bose, Secretary
Page 2
3.A clean version of the proposed compliance modifications to the Services Tariff
(“Attachment II”);
II.BACKGROUND
The June 2009 Order directed the NYISO to work with stakeholders and develop a
proposal to “address the implications and effects of a new capacity zone or zones on the tariff
provisions and market rules governing Capacity Resource Interconnection Service.” On
January 4, 2011, in compliance with the June 2009 Order, the NYISO and the New York
Transmission Owners (“NYTOs”) submitted a joint filing proposing criteria and considerations
to “govern the evaluation and potential creation of new Installed Capacity4 (“ICAP”) zones in
the New York Control Area” (“January Compliance Filing”). The January Compliance Filing
proposed two criteria (i.e., the Highway Capacity Deliverability Test and Reliability Criteria)
and three analytical considerations which were developed pursuant to the NYISO’s stakeholder
processes.
In its September Order, the Commission accepted in part and rejected in part the
NYISO’s January Compliance Filing.5 The Commission rejected the NYISO’s Reliability
criterion and the proposed considerations but accepted the Highway Capacity Deliverability Test criterion, subject to several modifications.6
On October 11, 2011, the NYISO submitted a request for clarification or, in the
alternative, rehearing of the September Order.7 The NYISO requested that the Commission clarify its directive that the NYISO use the test in OATT Attachment S, Section 25.7.8.
Specifically, the NYISO asked for clarification that the directive was intended to require
compliance tariff modifications that apply the Section 25.7.8 test to Highway facilities only and that do not apply the separate analysis contained in Section 25.7.8.2.14.8 The Request for
Clarification is pending before the Commission.
4 Terms with initial capitalization not defined in this transmittal letter or in the proposed Services
Tariff revisions set forth in Attachments I and II to this filing letter, have the meaning set forth in the
Services Tariff, and if not defined herein, then as defined in the NYISO’s Open Access Transmission
Tariff (“OATT”).
5 September Order at PP 60-61.
6 Id. at PP 52-58.
7 Request for Clarification, or In the Alternative Rehearing, of the New York Independent System Operator, Inc., Docket No. ER04-449-023 (filed October 11, 2011) (“Request for Clarification”).
8 As explained in the Request for Clarification, the Section 25.7.8 test is currently applied to both Highway and Byway facilities. Further, Section 25.7.8.2.14 requires a comparative analysis designed to identify the impact of proposed projects on the transfer capability of Highway facilities.
Ms. Kimberly D. Bose, Secretary
Page 3
III.DESCRIPTION OF PROPOSED COMPLIANCE TARIFF REVISIONS
A. Definitions
The NYISO is proposing to include a number of new defined terms related to the
examination and possible creation of one or more “New Capacity Zone” in Section 2 of the
Services Tariff. In addition, the proposed compliance revisions incorporate by reference certain defined terms that are set forth in Attachments S and X to the NYISO’s Open Access
Transmission Tariff. The incorporation of existing defined terms from the OATT is described in proposed new Section 5.16.9
B. Establishment of the New Capacity Zone Study and Process, and Relationship to
the Triennial Demand Curve Reset Process
The September Order accepted the January Compliance Filing’s proposal that the test for
determining whether to create a New Capacity Zone be applied “every three years in conjunction
with the ICAP demand curve reset process.”10 Accordingly, the NYISO is proposing to revise
Section 5.14.1.2 of the Services Tariff, which describes the ICAP Demand Curve reset process,
to provide that any New Capacity Zone will be factored into the ICAP Demand Curve reset
process every three years. Thus, the economic parameters of the ICAP Demand Curve for any
New Capacity Zone would be established as part of the normal ICAP Demand Curve reset
procedure. Under the proposed revisions, any New Capacity Zone would have an Indicative
Locational Minimum Installed Capacity Requirement established for use in the ICAP Demand
Curve reset process, and the ICAP Demand Curve for the New Capacity Zone (subject to
Commission acceptance of any tariff revisions to establish it) would become active at the same
time that ICAP Demand Curves for existing Localities and the NYCA go into effect.11
The timing and sequence of the steps required to evaluate and create a New Capacity
Zone is an important component of the filing. The NYISO’s proposed revisions to Section
5.14.1.2, along with those in proposed new Section 5.16, specify the timing and sequence of the
steps. The NYISO intends to commence the triennial New Capacity Zone study (as defined in
9 As described in Section II(G) below, the NYISO also proposes in this filing to renumber current Services Tariff Section 5.16 to 5.17.
10 September Order at P 68. The September Order also included a directive that the
“NYISO, along with its stakeholders, consider the desirability and feasibility of creating new zones on an annual basis rather than only once every three years.” See September Order at 69. The NYISO will explore this possibility with its stakeholders and, as required by the September Order, will address the issue in a future compliance filing.
11 Thus, under the proposed revisions to Section 5.14.1.2, the periodic review of the Demand
Curves would include a review of a Demand Curve for a New Capacity Zone at the same time the review of Demand Curves for existing Localities and the NYCA is conducted.
Ms. Kimberly D. Bose, Secretary
Page 4
proposed Section 5.16, the “NCZ Study”) before September 1 in the year preceding the calendar
year in which the NYISO files ICAP Demand Curves.12 Thus, it would commence in the same
year in which the NYISO retained the consultant for the ICAP Demand Curve periodic review.13
This starting point is necessary to allow sufficient time to establish the case that will be studied
and to perform the NCZ deliverability study. The proposed tariff revisions provide for the
NYISO’s review of the study inputs and assumptions with stakeholders on or before October 1,14
and provide that a written report of the NCZ Study results to stakeholders no later than January
15 of the ICAP Demand Curve Reset Filing Year.15
If the NCZ Study identifies a Highway constraint, the NYISO would identify the
boundary of the New Capacity Zone. Another step that would need to be completed early is a
determination of the then-anticipated Locational Minimum Installed Capacity Requirement that
would apply to the New Capacity Zone (proposed as the new defined term “Indicative Locational
Minimum Installed Capacity Requirement”).16 That analysis would need to be conducted in
order to perform the analysis of a Demand Curve for the New Capacity Zone, which will be on-
going in the months immediately following the January 15 written report on the NCZ Study. As
discussed in Section F below, the NYISO would submit tariff revisions to establish a New
Capacity Zone for the Commission’s review along with the report of the results of the NCZ
Study by March 31 of the ICAP Demand Curve Reset Filing Year. That timing would provide
an opportunity for the concurrent review of all ICAP Demand Curves for the next triennial
period and other implementation action so that the New Capacity Zone could be effective at the
beginning of the Capability Year after the Demand Curves are accepted.
C. New Capacity Zone Study Methodology and Procedures
The September Order directed the NYISO to “use the methodology contained in the
existing Attachment S Deliverability Test in Section 25.7.8 of Attachment S to the NYISO
OATT in determining whether to create new zones.”17 The Commission explained that the
criterion should require the creation a new zone “when the total transmission transfer capability
(including any upgrades that would be required to be built to make new resources capacity-
12 The year in which the NYISO files the proposed revised ICAP Demand Curves is defined in the enclose tariff sheets as the “ICAP Demand Curve Reset Filing Year.” See proposed revisions to Services Tariff Section 2.9.
13 See Services Tariff Section 5.14.1.2.2.
14 See proposed new Services Tariff Section 5.16.1.2.
15 See proposed new Services Tariff Section 5.16.
16 See proposed revisions to Services Tariff Section 2.9.
17 See September Order at P 52.
Ms. Kimberly D. Bose, Secretary
Page 5
qualified) is insufficient to allow all of the capacity resources in a pre-existing zone to be deliverable throughout the pre-existing zone.”18
In compliance, the NYISO is proposing a new Section 5.16.1 of the Services Tariff to
delineate the methodology by which it will determine whether to create a New Capacity Zone.
Proposed new Section 5.16 specifies that the NYISO will provide a written report of the study
results to its stakeholders on or before January 15 in each ICAP Demand Curve Reset Filing
Year.
As described below in this Section C, and pursuant to the proposed tariff revisions, the
NYISO would use the deliverability test methodology set forth in Attachment S to the NYISO
OATT. Proposed Section 5.16.1.1 specifies the inputs and assumptions that would be included
in the study case. This tariff section clearly describes the inputs and assumptions regarding
generation, transmission, and Load that will be made for the NCZ deliverability analysis. It is
necessary because the NCZ Study starts at a different time than a Class Year Deliverability
Study under Attachment S, and is being performed outside the context of the Class Year
Interconnection Facilities Study, of which the Class Year Deliverability Study is one component.
Specifically, proposed Section 5.16.1.1 identifies which “existing” and proposed
generation and Merchant Transmission Facilities must be modeled in the NCZ Study. Further,
proposed Section 5.16.1.1(vii) provides that transfers of CRIS rights not reflected in the
applicable NYISO annual Load and Capacity Data report (“Gold Book”) but completed and the
transferee operational prior to the NCZ Study Start Date are to be modeled. The proposed tariff
revisions also identify that the NYISO is to use the Gold Book to identify the load forecast and
the transmission additions and retirements that must be modeled. Thus, the data set used will be
identified objectively.
Sections 5.16.1.1.4 and 5.16.1.1.5 expressly cross-reference the provisions of OATT
Attachment S that describe base conditioning steps and the test methodology that will be applied
to the inputs and assumptions. Proposed Section 5.16.1 therefore complies with the September
Order’s requirement that the deliverability test criterion be “clearly defined” and “formulaic.”19
Proposed Section 5.16.1.1.4 specifies that the NCZ deliverability test will only evaluate and identify constraints on Highways interfaces. As explained in the NYISO’s Request for
Clarification, while the Attachment S deliverability test is applicable to both Highways and
Byways in the Class Year Deliverability Study, only Highway facilities are relevant to the
evaluation of potential New Capacity Zones. Assessing Byway facilities would not provide any indication of whether the transmission system interfaces between Load Zones are constrained. Proposed Section 5.16.1.1.4 therefore specifies that the NYISO’s New Capacity Zone Study
methodology will only consider Highways.
18 Id.
19 Id. at P 61.
Ms. Kimberly D. Bose, Secretary
Page 6
D. New Capacity Zone Determinations
In compliance with the September Order, proposed Section 5.16.2 states that the NYISO
“shall identify the boundary of a New Capacity Zone” if the NCZ Study shows that “there is a
constrained Highway interface into one or more Load Zones.” The boundaries of a New
Capacity Zone could include one or more existing constrained Load Zones on the constrained
side of a Highway. Proposed Section 5.16.3 also establishes that when determining such
boundaries, the NYISO “shall consider the extent to which incremental capacity in individual
constrained Load Zones could impact the reliability and security of the adjacent constrained
Load Zones, taking into account interface capability between constrained Load Zones.” To the
extent that excess capacity in an individual Load Zone within the region of consideration for a
New Capacity Zone can improve the reliability and security of a potential New Capacity Zone, it
is a positive indicator for including that Load Zone as part of the New Capacity Zone.
Conversely, Load Zones that are relatively electrically isolated from other candidate Load Zones
within the potential New Capacity Zone would tend to be a negative indicator for including it in
the New Capacity Zone.
E. Indicative New Capacity Zone Locational Minimum ICAP Requirements
Proposed new Section 5.16.3 of the Services Tariff provides that for “each Load Zone or
group of Load Zones identified in the NCZ Study as having a constrained Highway Interface”
the NYISO shall determine the “Indicative NCZ Locational Minimum ICAP Requirement” no
later than March 1 of each ICAP Demand Curve Reset Filing Year. Thus, the Indicative NCZ
Locational Minimum ICAP Requirement applies the concept of Locational Minimum Installed
Capacity Requirement to a New Capacity Zone. The NYISO will use this value solely for the
purposes of establishing the revised ICAP Demand Curves.20 The proposed tariff provision
states that the NYISO will provide stakeholders with an opportunity to review and comment on the proposed Indicative NCZ Locational Minimum ICAP Requirement.
F. The NCZ Report and Tariff Revisions to Establish and Recognize NCZs
Proposed new Section 5.16.4 of the Services Tariff states that the NYISO will make a
filing no later than March 31 of each ICAP Demand Curve Reset Filing Year. If the NCZ Study
identifies a constrained Highway interface, the March 31 filing will include proposed tariff
revisions necessary to establish and recognize a New Capacity Zone for the Commission’s
review. It would also include a report on the NCZ Study results. If the NCZ Study does not
identify a constrained Highway interface, the NYISO’s report of the study results would be
included in a filing setting forth the NYISO’s determination that the NCZ Study did not indicate
that any New Capacity Zone is required pursuant to the process. The NYISO’s proposed tariff
20 As is currently the case, the annual process for determining Locational Minimum
Installed Capacity Requirements would also determine that requirement for any New Capacity Zone (subject to Commission acceptance of tariff revisions to establish it) prior to the start of the Capability Year in which the New Capacity Zone takes effect.
Ms. Kimberly D. Bose, Secretary
Page 7
revisions specify that the independent Market Monitoring Unit (“MMU”) would have an
opportunity to review and comment on the NCZ Study and any resulting proposed tariff
revisions.21
The January Compliance Filing explained that there are numerous Services Tariff and
OATT provisions that would need to be revised to create a New Capacity Zone. Many of these
revisions cannot be proposed until the boundary of any New Capacity Zone, and whether a New
Capacity Zone might be “nested,” are known. Consequently, if the NCZ Study identifies a
constrained Highway interface, the NYISO contemplates that the March 31 tariff filing would
address Attachment S’s CRIS provisions, and the various other issues, outlined in the January
Compliance Filing.
The NYISO would expect to seek Commission acceptance of any proposed tariff
revisions for any specific New Capacity Zone within sixty days of their submission. Acceptance would be needed within that timeframe so that the Demand Curve consultant could develop an
ICAP Demand Curve for the New Capacity Zone along with the other ICAP Demand Curves. In addition, although the NYISO is presently developing software to accommodate New Capacity Zones, there will be certain development, testing, and deployment steps that are specific to the
particular New Capacity Zone.
G. Renumbering of Existing Services Tariff Section 5.16 and Related Cross-References
In order to efficiently sequence the New Capacity Zone tariff sections within the Services
Tariff, the NYISO also proposes to renumber current Section 5.16 - Expedited Dispute
Resolution Procedures, to be new Section 5.17. The NYISO therefore proposes to revise cross
references to current Section 5.16 to read 5.17 in Services Tariff Sections 2.4, 2.5, 5.9, 5.10 and
5.11.
IV. MARKET POWER MITIGATION MEASURES FOR NEW CAPACITY ZONES
The September Order confirmed that “additional market power mitigation measures may
be needed for an established new capacity zone.”22 The NYISO has discussed this issue with the
MMU for the NYISO, and the NYISO and the MMU agree that a consistent set of supplier-side
and buyer-side market power mitigation measures applicable to all New Capacity Zones should
be included in the NYISO’s tariffs. The NYISO envisions that these measures would be
imposed only on suppliers including, with respect to buyer-side mitigation, new market entrants
in New Capacity Zones that trigger clear and objective market power screens. The specific
parameters and thresholds under the generally applicable screen might vary from one New
Capacity Zone to another.
21 See proposed new Section 5.16.4 of the Services Tariff and proposed new Section 30.4.6.3.2 of Attachment O to the Services Tariff.
22 See September Order at P 64.
Ms. Kimberly D. Bose, Secretary
Page 8
Given the inherent complexity of designing such measures it was not possible to develop
a market power mitigation proposal by the deadline for making this filing. The NYISO expects
that there will be substantial stakeholder interest in the design of these measures. It plans to have
discussions with stakeholders regarding potential mitigation measures. Accordingly, the NYISO
intends to make a further compliance filing, no later than June 30, 2012, that would propose new
market power mitigation tariff provisions that would apply to any future New Capacity Zone.
To the extent that the Commission deems necessary, the NYISO respectfully requests that it grant an extension of time to make this further compliance filing. There would be good cause for granting such an extension because of the complexity of the market power mitigation issues and the likely intensity of stakeholder interest. In addition, no interests would be
prejudiced by such an extension because the NYISO would make its further compliance filing almost two years before any New Capacity Zone would be activated.
V. STAKEHOLDER AND MARKET MONITORING UNIT REVIEW
The NYISO made presentations summarizing the expected content of this compliance filing at two meetings of its Installed Capacity Working Group in October. Written comments on the presentations were solicited and considered by the NYISO. The NYISO also circulated a draft of a near final version of its proposed compliance tariff revisions for stakeholder comment on November 3, 2011 and reviewed stakeholder comments on them.
In addition, the MMU was given an opportunity to review and comment on the proposed compliance tariff revisions. The NYISO carefully considered and incorporated
recommendations of the MMU in this compliance filing.
VI. REQUESTED EFFECTIVE DATE
The NYISO requests that the Commission accept these proposed modifications effective
January 9, 2012. The NYISO is presently developing internal processes to accommodate the
New Capacity Zone deliverability test, and for making corresponding changes to provisions in
numerous sections of its Services Tariff and ICAP Manual that would be needed to
accommodate and recognize one or more new Localities (i.e., a New Capacity Zone after it is
established and effective). In addition, the NYISO is developing software to accommodate New
Capacity Zones. In Spring 2012, the NYISO will initiate the process for its next triennial
Demand Curve reset process. It would be beneficial at the early stage of the process - including
determining the content of a request for proposals from potential consultants - to have the tariff
revisions effective.
VII. SERVICE
This filing will be posted on the NYISO’s website at www.nyiso.com. In addition, the
NYISO will e-mail an electronic link to this filing to the official representative of each party to
Ms. Kimberly D. Bose, Secretary
Page 9
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.
VII. CONCLUSION
Wherefore, for the foregoing reasons, the New York Independent System Operator, Inc. respectfully requests that the Commission accept this compliance filing to become effective on January 9, 2012.
Respectfully submitted,
/s/ Gloria Kavanah
Gloria Kavanah
Senior Attorney
New York Independent System Operator, Inc.
10 Krey Boulevard
Rensselaer, NY 12144 518.356.6103
gkavanah@nyiso.com
cc:Michael A. Bardee
Gregory Berson
Connie Caldwell
Anna Cochrane
Jignasa Gadani
Lance Hinrichs
Jeffrey Honeycutt
Michael Mc Laughlin
Kathleen E. Nieman
Daniel Nowak
Rachel Spiker
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 7th day of November, 2011.
/s/ Joy Zimberlin
Joy Zimberlin
New York Independent System Operator, Inc
10 Krey Blvd.
Rensselaer, NY 12114 (518) 356-6207
