The New York Power Authority (NYPA) and others are requesting rehearing of a FERC order that NYPA said would penalize New York electricity ratepayers by up to $400m and $500m in 2013, and continue to have financial impacts until the electricity supply and demand dynamics change in New York City.
According to the Sept. 10 FERC order, in July 2011, Astoria Generating Company and TC Ravenswood filed a complaint against the New York ISO (NYISO) alleging that the system operator improperly implemented its buyer-side market power mitigation rules in the New York City installed capacity (ICAP) market with respect to the new 575-MW generating facility owned by Astoria Energy II and potentially other new facilities, including the approximately 512-MW generating facility being developed by Bayonne Energy Center.
The companies asserted, among other things, that the NYISO allowed the Astoria II project to offer into the July 2011 ICAP auction at a price that was below competitive levels and below its estimated cost, in violation of the requirements of the NYISO’s services tariff and prior FERC orders regarding implementation of the buyer-side market power rules.
In an August 2011 answer to the complaint, the NYISO said the outcome and details of its analysis and the underlying data used are confidential and protected information under its tariffs. Among other things, the NYISO said Astoria Generating Company and TC Ravenswood have not met their burden of showing that its exemption determinations were contrary to the tariff or otherwise unjust and unreasonable. The NYISO also said that lower capacity prices are not evidence that it has violated its tariff or that existing tariff provisions are unjust and unreasonable.
FERC granted in part and denied in part the complaint and directed the NYISO to redo its exemption determinations for the Astoria II and Bayonne facilities.
According to NYPA, at issue is a market pricing test, or standard, that the NYISO applied to the Astoria II project, which was brought into service in July 2011 through a contract with NYPA for an additional power source for the electricity requirements of NYPA’s governmental customers in New York City.
FERC directed the NYISO to rerun the market test for the Astoria II project with several modifications that would “adversely impact” the plant’s ability to take part in a segment of the NYISO’s marketplace in which power generators are paid for their capacity to produce electricity, NYPA said.
The plant’s absence from the market would result in a cost spike for governmental customers and all state ratepayers, NYPA said, noting that it buys the plant’s full output under a 20-year contract. NYPA chose the plant as a result of a competitive procurement process to replace the now-retired 885-MW Charles Poletti power plant in Queens, N.Y.
“If the order is allowed to stand, it will discourage the upgrade and modernization of aging, inefficient power plants,” NYPA President and CEO Gil Quiniones said in the statement.
The NRG Companies also filed a request for rehearing of two aspects of the order, including that FERC institute a process to assure itself and other market participants that the NERA Economic Consulting model accurately calculates projected energy and ancillary services revenues when the model uses future, rather than historical, natural gas prices.
Other parties seeking a rehearing include the NYISO, which said in its request for rehearing that FERC should, for instance, reverse its interpretation of a section of the NYISO’s market administration and control area services tariff, or at least modify its holding that the NYISO “violated” that provision.
“Correcting these rulings is important to ensuring that the NYISO’s buyer-side capacity market mitigation rules do not result in over-mitigation,” the NYISO said. “Misapplying the rules has the potential to harm consumers, the markets, and reliability by deterring investment and impairing competition.”