Competitive Entry Exemption: New Proposal - NYISO … · · 2013-12-13Competitive Entry...

DRAFT – FOR DISCUSSION PURPOSES ONLY © 2013 New York Independent System Operator, Inc. All Rights Reserved.

Competitive

Entry Exemption:

New Proposal Dr. Nicole Bouchez Principal Economist, Market Design

New York Independent System Operator

Installed Capacity Working Group December 10, 2013

KCC

© 2013 New York Independent System Operator, Inc. All Rights Reserved. 2 DRAFT – FOR DISCUSSION PURPOSES ONLY

Background

Extensive ICAP WG discussions on a Competitive Entry Exemption

(CEE) proposal have not resulted in broad support.

In an effort to provide what the NYISO believes is a tariff

enhancement, the NYISO has further revised the CEE proposal:

Exemptions based on PJM CEE rules, or

ICAP market clearing rules based on Hogan’s Alternative Pricing Rule

(“APR”) proposal, or

Rules based on both PJM’s CEE rules and Hogan’s APR proposal.

The NYISO is also considering an exemption for units needed for

reliability.

The NYISO is seeking stakeholder feedback on these proposals.


PJM Based CEE Proposal:

This proposal would not change the current buyer-side

mitigation (“BSM”) exemption tests and Offer Floor

rules. It adds to the ways a proposed new Installed

Capacity project in a Mitigated Capacity Zone

(presently Load Zones, G, H, I and J) can be exempt.



Additional opportunities for an exemption from BSM:

Create the rule based on the PJM Competitive Entry

Exemption rules and a reliability exemption:

A. Installed Capacity projects that receive no “out-of-market

funding” are exempt from the Offer Floor.

B. Exempts Installed Capacity projects that do receive “out-of-

market funding” only if the funding is received as a part of

competitive, non-discriminatory RFP open to all available

resources, both new and existing.



Criteria for A

Proposing to use the PJM criteria for no “out of market

funding”:

No costs are recovered from customers either directly or

indirectly through a non-bypassable charge linked to the

construction, or clearing in any ICAP auction, of the Installed

Capacity project;

No costs of the Installed Capacity project are supported

through any contract with a term of at least one year obtained

in any state-sponsored or state-mandated procurement

processes that are not Competitive and Non-Discriminatory;



Criteria for A (Continued)

The Installed Capacity project does not have any

arrangements to seek or receive, and it does not receive, any

material payments from any government entity connected with

the construction, or the resource clearing in an ICAP auction

(industrial siting incentives and federal production tax credits

are permitted), or other material support though contracts,

with a term of at least one year, obtained in any state-

sponsored or state-mandated procurement processes

connected to the construction, or clearing in any ICAP

auction, or the resource; and

The Installed Capacity project submits a sworn, notarized

officer certification similar to the certification required for the

PJM self-supply exemption.



Criteria for B

Proposing to use the PJM criteria to determine if a

state procurement process is eligible for an exemption.

An RFP is competitive and non-discriminatory if:

a) both new and existing Installed Capacity Resources can

satisfy the requirements of the procurement process;

b) the selection criteria do not give a preference to new

Installed Capacity Resources;

c) the procurement process does not use indirect means to

discriminate against existing Installed Capacity Resources;

d) the requirements are fully objective and transparent; and

e) the procurement terms do not restrict the type of Installed

Capacity Resource that may participate in and satisfy the

requirements of the procurement.


APR Proposal

This proposal is included in the Evaluation of the New

York Capacity Market by FTI Consulting

http://www.nyiso.com/public/webdocs/markets_operations/doc

uments/Studies_and_Reports/Studies/Market_Studies/Final_

New_York_Capacity_Report_3-13-2013.pdf , see pages 83-

90.

The proposal is a design similar to the proposed (and

subsequently rejected ) ISO-NE “Alternative Capacity

Price Rule.”

The NYISO does not believe FERC’s decision for ISO-NE

means that a NYISO proposal would necessarily be rejected

given that ISO-NE has a significantly different design

including both a vertical demand curve and a forward

procurement.


APR Proposal

Allows BSM mitigated capacity offered below the buyer side mitigation

offer floor to clear, and meet capacity obligation(s). (This means that

more capacity would be purchased)

Allows resources supported by out of market contracts to meet capacity

market obligations (and receive capacity revenue) without impacting the

capacity price paid to existing capacity suppliers and allows state policy

objectives to be met without impacting existing generation.

Addresses the potential in the current design of the price sending a

signal for the construction of new capacity that is not actually needed

because capacity subject to an offer floor is not clearing the spot auction.

This is done by clearing all new capacity at the Initial Capacity Price.

As is the case today, capacity subject to an Offer Floor can only offer its

capacity in the ICAP Spot Market Auction (it cannot be certified

bilaterally, or be sold in the Capability Period or Monthly Auctions). This

is done so the mitigation measures can not be evaded.


APR Proposal: the details

How this is done:

Two spot capacity auction clearings are run each month.

In the first auction clearing, all offers of existing and new

generators are accepted without applying any offer floors.

• The price determined by this auction is referred to as the Initial

Auction Price.

• All the capacity that clears the first auction clearing will receive a

capacity award.

The second auction clearing uses the same offers but

replaces the offer of any unit subject to an offer floor with the

higher of the offer floor and the offer of the unit.

• The price determined by this auction is the Alternative Capacity

Price.


APR Proposal: the details

Pricing:

The Initial Auction Price will be paid to all new resources that

cleared in this initial clearing of the auction, whether or not

subject to an offer floor.

All existing capacity that clears the second clearing is paid the

Alternative Capacity Price.

• Existing capacity that does not clear the second clearing but cleared the

first clearing is paid the Initial Auction Price.

Capacity (including new capacity) that did not clear either

auction would not be selected to provide capacity.

Open questions:

How long does a new resource remain new?

Is it appropriate to revise the “Clearing Rule” on how long a

resource is subject to an offer floor when applying this

proposal?


Reliability Exemption

Proposal

The NYISO is also considering an exemption for

incremental Installed Capacity projects that do receive

“out-of-market funding” if that project is needed for a

NYISO determined or NYISO recognized reliability

need (up to the MW needed for reliability.)

The NYISO intends for this requirement to cover both Bulk

and Non-Bulk Power Transmission Facility Reliability Issues.

The NYISO is considering if this exemption should be limited

to only the RNA base case identified reliability needs or if this

should apply to other scenarios as well.


Next Steps

The NYISO welcomes all comments on these

proposed CEE exemptions and how we can achieve

broad stakeholder support.

Written comments can be sent to

[email protected]

The NYISO plans on returning to the ICAP WG in

January.

Targeting BIC and MC February/March

mailto:[email protected]

Competitive Entry Exemption: New Proposal - NYISO … · · 2013-12-13Competitive Entry...

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