The NYISO Business Issues Committee on March 18 approved, in concept, implementation of the ISO’s new firm fuel election process and requirements as part of its changes to capacity accreditation. 

The vote passed unanimously, with only the Market Monitoring Unit and Natural Resources Defense Council abstaining. 

The Installed Capacity Working Group will vote on revised tariff language before the Management Committee’s March 26 meeting. The ISO is aiming for a FERC filing in mid-April. 

For several weeks and across multiple working group meetings, NYISO stakeholders have been hammering out the final details of the ISO’s firm fuel accreditation improvement project. The project is aimed at ensuring that generators that say they have guaranteed (firm) sources of fuel deliver on their promises during the winter months. 

The ISO and the New York State Reliability Council have been concerned about future fuel supply constraints in the winter. As New York transitions to a winter-peaking system, the downstate gas turbine fleet will find itself competing with home heating for fuel during peak periods. 

FERC accepted NYISO’s capacity accreditation changes in July 2024, but it delayed implementation until 2026 after generators complained of the limited amount of time to make their firm fuel elections: The changes required them to tell the ISO by Aug. 1 prior to each capability year how much of their capacity was covered by firm fuel supply. (See FERC Accepts NYISO Capacity Accreditation Changes, with 1-Year Delay.) 

Other requirements include that resources with firm fuel have supply, transportation and replenishment strategies in place by Dec. 1 of the capability year through the end of winter, and have fuel available to run 56 hours over any consecutive seven-day period in December through February. 

Firm suppliers would not have to submit additional attestation that they have secured fuel, and those downstate and in Long Island will get their own capacity accreditation factor. Failure to meet firm fuel performance obligations by being unavailable because of fuel supply issues on the day-ahead or real-time markets could result in audit and financial sanction. The MMU may also examine suppliers if it identifies concerns with bidding or operational behavior. 

Generators would be sanctioned based on the reason that the firm supply was unavailable, with a 1.5 multiplier added to violators who could have otherwise prevented it; NYISO would use NERC’s guidance for “outside management control” events for the base “1.0” sanction. 

During the ICAP Working Group’s meeting the day before the BIC’s vote, stakeholders wondered whether firm generators could be subject to sanctions if they were told by the ISO that they were not being scheduled on the day-ahead market, sold their fuel and then were called on as part of the supplemental resource evaluation program but were unable to respond.  

Responding to this concern during the BIC meeting, Zack Smith, senior manager of capacity and new resource integration for NYISO, clarified that gas-only firm units called in for SREs that don’t respond would only be evaluated to see if fuel was available or if they made efforts to procure fuel.  

“If there was no fuel available and they made those efforts to try and find it, they will not be subject to any penalty for the firm fuel,” Smith said. “If our investigation finds that the fuel was procurable at a price and the entity did not try to get it, they will be subject to the 1.5 penalty.” 

Other stakeholders brought up the 16-month period between the firm fuel election (Aug. 1 prior to the capability year) and the deadline for having supply arrangements in place (Dec. 1 of the capability year). They argued that this could lead to situations where a generator elects as firm but its fuel supplier “goes bankrupt” or experiences some other disruption and can no longer meet a firm fuel obligation. Stakeholders asked whether the eventual tariff revisions would include making generators tell the ISO if this occurred by the Dec. 1 deadline. 

Nikolai Tubbs, a market design specialist for NYISO, said the ISO was going include that provision in the procedures manual, not the tariff. 

Doreen Saia, chair of Greenburg Traurig’s energy and natural resources practice, asked whether every financial penalty should be called a sanction. She said the effect of the 1.0 modifier was to put the generator in the position of not having the financial benefit of being a firm supplier, which wasn’t really a sanction.  

“That’s not a sanction to me; that’s an adjustment,” Saia said. “I think we have to step back from calling it a sanction because [issues outside of a generator’s control are treated] no different than the EFORd [equivalent forced outage rate on demand] rules we have today. I don’t get an EFORd hit if the transmission line to my facility goes down.” 

Saia said she agreed with penalizing poor performers but that clarifying the punitive sanction from the non-punitive was necessary so future tariff revisions would be legible. “I guarantee you, six months from now when someone else is looking at this who has not been part of these conversations, they’re not going to get it.” 

Smith said NYISO was still considering whether to use the word “adjustment” or something else. He said the ISO understood her concern and was working on it. 

Market Monitor Proposes Future Firm Fuel Election Changes

Dovetailing off the firm fuel discussion at the ICAP Working Group meeting, MMU Potomac Economics proposed changes that it said would better coordinate the capacity market with firm fuel elections. 

The Monitor argued there were several issues with the current structure of firm fuel elections and how they interact with the Installed Reserve Margin study and fuel constraints. At the heart of its concerns is that generators make firm fuel elections roughly 15 months before the winter performance period they are electing for and that these elections cannot be changed. This pushes into a system where the IRM, capacity accreditation factors (CAFs) and unforced capacity prices are all interrelated.  

“What we are saying is that there’s a lack of market responsiveness,” Potomac’s Joe Coscia said. “We’re setting the same price regardless of whether there’s more or less fuel relative to the IRM requirement.” 

Coscia said the current system caused problems whether or not firm fuel elections were used in future IRM studies. If they were, generators could over-elect and incur financial losses or under-elect and artificially boost prices. This could increase the volatility of prices and CAFs. If they weren’t used in the IRM, then the market and IRM might not be reflective of actual fuel arrangements.  

“The resource adequacy modeling component should consider how to coordinate these fuel elections in a way that makes sense,” Coscia said. “If you meet the requirements, consumers benefit from it.” 

Potomac proposed moving the firm election deadline to after the final CAFs are published and setting the winter UCAP requirements to satisfy the reliability criteria of the IRM study. This would mean that generators’ firm fuel elections affect the amount of UCAP supplied relative to the reliability requirements, and they would be closer to when generators are sure of having contracts in place, knowing the price of fuel and the price of CAFs. 

The Monitor said that while these changes will not be in place for the 2026/27 capability year, NYISO should discuss implementing them in the long term.