Power producers lodge protests over New York ISO’s reliability proposal

Power producing companies in New York have a long list of issues with an Oct. 19 proposal from the New York Independent System Operator to the Federal Energy Regulatory Commission for revisions to its Open Access Transmission Tariff (OATT) and its Market Administration and Control Area Services Tariff (Services Tariff).

The proposal is intended to comply with the commission’s Feb. 19 order directing the NYISO to establish provisions governing the retention of and compensation to power generators that wish to mothball or retire (deactivate) but are found by the NYISO to be required to provide service, commonly referred to as “reliability must run” (RMR) service, to satisfy an identified reliability need on the New York electric system.

Several plants, including the Ginna nuclear facility and the Dunkirk coal plant, have been the subject in the last couple of years of reliability proceedings in New York.

Among the parties filing Nov. 30 protests about the proposal were the Independent Power Producers of New York (IPPNY) and Electric Power Supply Association (EPSA) in a joint statement.

“In its RMR Order, the Commission determined that, under Section 206 of the Federal Power Act (‘FPA’), the NYISO’s Services Tariff is unjust and unreasonable because, unlike tariffs administered by other independent system operators (‘ISOs’) and regional transmission operators (‘RTOs’), it does not contain rates, terms, and conditions governing the retention of, and compensation to, Generators required to provide RMR service to satisfy a Reliability Need,” said the two associations. “Pointing to two recent proceedings where Generators wishing to deactivate exercised their right under FPA Section 205 and filed unexecuted RMR agreements for acceptance with the Commission and ultimately agreed to provide service under a Reliability Support Services Agreements (‘RSSA’) accepted by the New York Public Service Commission (‘NYPSC’), the Commission found that the lack of RMR service provisions in the NYISO’s Services Tariff created uncertainty for resources that could harm the reliable and efficient operation of the electric grid and the NYISO’s markets.

“Establishing its jurisdiction over these agreements, the Commission therefore directed the NYISO to submit proposed tariff provisions delineating an appropriate RMR process ‘governing the retention of and compensation to generating units required for reliability, including procedures for designating such resources, the rates, terms and conditions for RMR service, provisions for the allocation of costs of RMR service, and a pro forma service agreement for RMR service.’

The associations said that FERC should order the NYISO to modify its RMR process in several ways, including:

  • The effective date of any RMR Agreement between the NYISO and an RMR Generator should be the date the NYISO completes the Initiating Generator’s Generator Deactivation Assessment and determines that there will be a Reliability Need unless the Initiating Generator continues operations (per the NYISO’s proposal, this determination will be made by the 90th day after the Initiating Generator’s submission is deemed complete).
  • A Generator should be allowed to elect to deactivate without further process or any additional notification from the NYISO as soon as the NYISO completes its Generator Deactivation Assessment and determines that the Generator is not required to satisfy an identified Reliability Need (per the NYISO’s proposal, the same 90-day time frame would apply).
  • An Initiating Generator submitting a Generator Deactivation Notice should not be required to provide financial information to the NYISO prior to the time the NYISO determines the Initiating Generator’s exit from the market presents an identified Reliability Need unless the Generator indicates in its Generator Deactivation Notice that it will offer itself as a potential Gap Solution to meet such Reliability Need.
  • The NYISO should be directed to pay RMR Generators their full costs of service, not the NYISO’s proposed APR, because service may not, in fact, be “voluntary,” and, in any event, RMR Generators are meeting an identified Reliability Need on the system and will be required to continue to provide service, at a minimum, from the time that the Generator Deactivation Assessment is completed and the 365-day period ends and are, thus, entitled to receive their full costs of doing so.

NRG also has issues with the proposal

Another Nov. 30 protest came from the NRG Companies, which are the NRG Power Marketing LLC and GenOn Energy Management LLC subsidiaries of NRG Energy (NYSE: NRG).

They wrote: “While the NYISO asserts that it has established procedures as required by the RMR Order, the RMR Filing fails to comply with important requirements laid out in the RMR Order, and includes rules that would impose unjust and unreasonable hardships on generators seeking to leave the market. For these reasons, NRG respectfully requests that the Commission reject the entirety of the RMR Filing and direct the NYISO to work with stakeholders to develop a more even-handed approach. If the Commission declines to reject the entirety of the RMR Filing, then NRG respectfully requests that the Commission direct the NYISO to modify its proposal as discussed below.”

The NRG Companies noted that if the NYISO’s initial 90 day reliability study finds that a generator is needed for reliability, then under the proposal, a generator potentially needed for reliability is “trapped” for 365 days with no compensation, while a generator not needed for reliability is permitted to leave the market. During that year period, the NYISO and the NYPSC collaborate to find an alternative reliability fix, following a “Byzantine process”:

  • 90 days to determine whether a retirement causes a reliability issue;
  • 30 days for interested parties to propose a Gap Solution as an alternative to a potential RMR Agreement;
  • 120 days to evaluate the viability and sufficiency of the potential alternative Gap Solutions; and
  • The remainder of the 365 days’ notice appears designed to accommodate the unspecified process whereby the NYISO proposes to delegate the ultimate selection of any Gap Solution to the NYPSC.

NRG said it was an active participant during stakeholder meetings and notes that the NYISO incorporated nearly none of the feedback provided by NRG or other generator interests in putting together this compliance filing. “Instead, the RMR Filing proposes an unworkable process for assigning RMR responsibilities in a manner that threatens to increase customer costs and potentially jeopardizes the very system reliability that this filing was designed to protect. NRG voiced its concerns explaining why the NYISO’s proposed structure was neither just nor reasonable – nor even workable in many cases. Despite these constructive comments and suggestions, the RMR Filing simply guarantees extensive litigation during a time when generators are fleeing the New York market, which desperately needs additional certainty. As a result, NRG is forced to recommend that the Commission reject the NYISO’s compliance filing in its entirety, and restart the process of crafting just and reasonable RMR rules.”

Entergy likes some parts of the New York ISO proposal

Entergy Nuclear Power Marketing (ENPM) said in its Nov. 30 comments that despite a wave of proposed deactivations, NYISO had interpreted its tariff in a manner that left NYISO no meaningful role in the development of out-of-market reliability contracts. NYISO had also declined to incorporate transmission security constraints into its market design so as to minimize the need for RMR Agreements in the first instance.

ENPM said it is supportive of certain elements of the NYISO proposal. For example, ENPM supports NYISO’s position that, although its proposed Form of Reliability Must Run Agreement provides for the recovery of only Avoidable Costs (potentially supplemented by availability and performance payments), the deactivating generator can nonetheless submit its own Federal Power Act (FPA) section 205 filing to seek recovery of an alternative rate up to its full cost of service and to propose terms and conditions of service specific to its facility.

ENPM said it also appreciates NYISO’s position that, in some circumstances, RMR units should be required to offer their capacity into the market at a defined offer floor to avoid further distorting and depressing market prices. Although ENPM disagrees with the nature and scope of the capacity offer floor rules proposed by NYISO, it nonetheless appreciates NYISO’s support of this core concept.

“There are several important areas, however, where the Compliance Filing fails to comply with the RMR 206 Order and thereby fails to satisfy the longstanding rule that RMR Agreements are used only as a limited, last-resort option,” said Entergy. “This Protest focuses on three significant flaws that, taken together, will perpetuate the situation where NYISO’s capacity market is plagued with out-of-market interventions that distort capacity market price formation, harm consumers by imposing unhedgeable uplift costs, and deter investment. We address each flaw in turn, including the market design problems associated with the third category that must be fixed to make RMR Agreements a true last resort mechanism.”

Entergy said that NYISO proposes to require the deactivating generator to remain in the market for up to an entire year without compensation while NYISO and the New York PSC evaluate potential alternatives. This proposal is out of line with the deactivation notice period of every other RTO or ISO”, doubles the notice period previously defined by the NYPSC, and deprives the deactivating generator of just compensation while it is required to provide a reliability service during this period, it said. “There is no reasonable basis for this one-year notice requirement without adequate compensation, particularly given that, as explained immediately below, a significant portion of that year is devoted to ceding core responsibilities over the process to the NYPSC,” Entergy added.

NYISO does not propose to play a meaningful role in selecting the least-cost option to address the reliability need triggered by a deactivating generator, Entergy wrote. Rather, NYISO proposes to cede to the NYPSC the role of determining whether any lower-cost transmission or demand response solutions should be selected, which are the very solutions that will often represent the least-cost choice. This leaves NYISO limited to selecting the least-cost generation solution—but not necessarily the least-cost solution—if the NYPSC does not take action, it said.

The New York PSC, on the other hand, filed Nov. 30 comments with FERC generally in support of the New York ISO proposal. For example, it said the 365-day notice period ahead of any planned unit deactivation allows adequate time to find solutions to any grid problems created by that shutdown.

The New York PSC did protest three aspects of the proposal. One is that it would provide the New York PSC with as little as 45 days to review shutdown mitigation plans within the 365-day notice period before the New York ISO pursues an RMR agreement with the applicable generator. That isn’t much time, especially if public comment on any solutions is factored in. The PSC asked for a change that will give it more review time.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.