New NYISO capacity zone may encourage transmission investment, FERC says

The New York ISO (NYISO) is set to create an additional capacity zone within its Installed Capacity (ICAP) market in the New York Control Area (NYCA).

FERC on Aug. 13 approved the NYISO’s proposed open access transmission tariff (OATT) revisions to establish and recognize a new capacity zone that will encompass NYISO Load Zones G, H, I and J (G-J).

The NYISO on April 30 filed the proposed tariff revisions together with a new capacity zone (NCZ) study, which, in an August 2009 order, FERC outlined as necessary for establishing criteria for evaluating, identifying and establishing new capacity zones in the NYCA.

“NYISO’s NCZ Study identified a Highway deliverability constraint, which triggered the requirement to create the proposed new capacity zone,” FERC said. “Therefore, we find that NYISO complied with its tariff in identifying a need for and proposing a new capacity zone.”

In the NCZ study, the ISO specifically found that the Upstate New York/Southeast New York (UPNY/SENY) Highway interface into Load Zones G, H, and I was constrained because it was bottling 849.2 MW of generation from Load Zones A through F. The NYISO said that a new capacity zone was therefore necessary.

“NYISO states that it examined and considered the transmission system, capacity market, and economic consequences of its proposal and concluded that establishing and implementing the G-J Locality for the May 1, 2014 start of the 2014/2015 Capacity Year is necessary to send more efficient price signals, enhance reliability, mitigate potential transmission security issues, and serve the long-term interest of all consumers in New York State,” FERC said in the order.

There were supporters and critics of the new capacity zone.

In support, Entergy Nuclear said that the erosion of the electric system in the Lower Hudson Valley over time was proof of the harm that results when inaccurate price signals fail to adequately value capacity in a region, FERC summarized. “Entergy Nuclear concludes that, given seven years of under-valued capacity in the Lower Hudson Valley, any further arbitrary diminution of the value provided by capacity in this region will only turn merchant generation investment away from the New York markets,” FERC said.

In opposition, the New York PSC said the new capacity zone would result in unjust and unreasonable rates to consumers, and that congestion would be alleviated with the construction of “new major transmission facilities” during the 2016-2018 period.

“The NYPSC is concerned that implementation of NYISO’s proposal at this time would cost ratepayers almost half a billion dollars over a three-year Demand Curve reset period without achieving any benefits,” FERC summarized. “Further, according to the NYPSC, the benefits to ratepayers from implementing this new zone in 2014 are speculative and unlikely to materialize as the planned transmission upgrades will come into operation over the same period.”

FERC said it disagreed with the NYPSC’s contention, as the results of a deliverability test demonstrated a significant transmission constraint that currently exists into NYISO’s proposed new capacity zone.

“Any resulting higher capacity prices in the new capacity zone will help to encourage the development of new generation and/or transmission capacity to help alleviate the constraint,” FERC said.

The NYISO’s tariff revisions are effective as of July 1, with the exception of certain revisions that are to be effective Jan. 27, 2014, and Jan. 27, 2015.  

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.