NYISO/NYSRC REPORT March 2013
Rich Bolbrock – NYISO Advisor
The following are highlights of recent NYISO and NYSRC activities:
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Uplift/OATT Schedule 1 Charges
Uplift for February continued to be low. It was ($0.24)/MWh, down from the $0.08/MWh for
January. The Local Reliability Share is $0.40/MWh (about the same as the $0.41/MWh in
January), while the Statewide Share is $(0.64)/MWh (lower than the $(0.33)/MWh in January).
2012 Comprehensive Reliability Plan
At its March meeting the NYISO Board approved the 2012 Comprehensive Reliability Plan.
The findings and recommendations contained in the Plan were reported on in last month’s News
& Views. Potomac Economics, the NYISO Market Monitor, is required to review and comment
on the CRP, especially regarding the extent to which the market design provides incentives for
meeting the reliability needs identified in the report. The Market Monitor issued its comments in
March and noted the importance of proceeding with two significant market design
enhancements.
The first enhancement is the establishment of a new capacity zone in the lower Hudson Valley.
The new zone will be known as the Southeast New York or SENY zone and is scheduled to be
implemented in May 2014. More on this below. The second enhancement is the adoption of a
competitive entry exemption from the NYISO’s buyer-side mitigation measures. The intent of
the exemption is to ensure that market-based investors are not prevented from making
investments in facilities that would help satisfy resource adequacy criteria if units retire
unexpectedly (such as Indian Point or in-city generation). The buyer-side mitigation rules are
intended to prevent uneconomic generation from depressing capacity prices based on an
‘exemption test’ performed about three years in advance of a unit entering the market. Because
of the multi-year lead time for the exemption test, subsequent unforecasted retirements can result
in over-mitigation of competitive entry. The new rule under development would grant an
exemption to developers engaged in private investment who do not receive public
subsidies/revenues directly or indirectly through a contract with another party.
The Market Monitor notes that while the NYISO markets are generally well-designed and the
two enhancements noted above are proceeding, they are concerned that the current capacity
market does not readily adapt to future reliability needs in specific load zones. They recommend
a third market design enhancement “to better allow the NYISO markets to facilitate efficient
investment and retirement decisions while satisfying the system’s planning requirements”.
The new proposed enhancement is intended to address features of the current market design
which limit location-specific economic signals. The general concept would involve pre-defining
a complete set of potential interfaces and/or zones that the NYISO would model in the capacity
market. This would potentially enable the capacity market to immediately price capacity at all
locations as existing units retire or new capacity enters regardless of lead time. [Pursuing this
recommendation would be a major undertaking and the benefits are not clear, especially in light
of the Energy Highway and other initiatives that are ongoing.]
New Capacity Zone
The NYISO has proposed a new capacity zone comprised of Zones GHIJ but not Zone K (Long
Island). Some market participants are arguing for Zone K to be included. The NYISO has
presented analysis that shows Zone J (Con Ed) to be electrically more integrated with the
transmission system in G-H-I and able to provide more capacity value to G-H-I than Zone K 9.
The Market Monitor has claimed that “modeling a SENY capacity zone would likely have
reduced capacity clearing prices in Zones A to F and in Zone J….”.
The NYISO has reported that for summer 2013 the SENY load pocket (representing 64% of state
load) will have insufficient local generation and external ICAP to meet peak demands. For
normal weather, 8.8% of SENY load is met from upstate generation (1884 Mw) while for
extreme weather 12.3% is met from upstate generation (2788 Mw). Transmission capacity into
SENY is limited to about 3000 Mw. For the upcoming summer, under extreme weather
conditions SENY generation outages in excess of 250 Mw will require Demand Response
activation to avoid possible load curtailment.
Odds and Ends
On the personnel front, CFO Mary McGarvey left the NYISO at the end of March. Mary was
very helpful to us in working out issues such as credit requirements. A new NYISO Board
member was named to replace Karen Antion (term limited), effective with the April meeting of
the Board. Dan Hill is a former SVP and CIO for Exelon. Over the next 5 years a half dozen
Board members will need to be replaced due to term limits.
In a State of the Market report, the Market Monitor recommended that the NYISO change the
type of unit anchoring the ICAP Demand Curve. The Market Monitor has stated that if the unit
used to anchor the curve does not represent the lowest net cost unit, there will be an incentive to
over invest and maintain high surpluses of capacity. The NYISO presented tariff language to
accomplish this change at the March 27th Management Committee meeting. It was narrowly
defeated with the Generators and Other Suppliers voting no. Next steps are unknown at this
time.
As you may recall, one component of the Indian Point Contingency Plan called for Con Ed and
NYPA to develop an RFP process which would identify new generation proposals and new
transmission proposals (other than those offered by the Transmission Owners) that could meet
the June 2016 in-service date. The PSC staff will evaluate both the TO and RFP projects in
making a recommendation regarding which group of projects should move forward. On March
14th the PSC approved the RFP process subject to modifications and specified a 45 day response
period. In the March 14th Order the PSC declined to approve the Con Ed and NYPA request for
a State-approved cost recovery mechanism. Con Ed and NYPA based their request on the fact
that the federal rate proposed by the TRANSCO may not become effective until Con Ed and
NYPA have expended significant funds on project development.
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As always, please convey any questions or comments that you may have on the above or any
other issues related to the NYISO or NYSRC to me through the MEUA office.
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