ALBANY, N.Y. — NYISO surprised stakeholders July 29 when, as part of an update on where it was with the Winter Reliability Capacity Enhancements project, it revealed it was no longer considering seasonal capacity accreditation factors (CAFs) because it found they would disincentivize participation in the capacity market.
“We are pretty set on retaining annual CAFs for this project,” Alexis Drake, a senior market design specialist for NYISO, told the Installed Capacity Working Group.
The Winter Reliability project is an initiative by the ISO to consider changes to the capacity market to reflect New York’s transition from a summer-peaking system to a winter-peaking one, and resource adequacy becomes more of a concern in the latter season.
CAFs — which represent the reliability contribution of different resource types, expressed in percentages — are set annually for each capability year. NYISO had considered setting them biannually instead, with winter and summer figures, as part of a broader move toward a seasonal capacity market. Because CAFs historically hinge on the annual loss-of-load expectation, and New York has historically been a summer-peaking system, the figures are more representative of resource adequacy contributions during the summer.
But Drake’s presentation did not contain NYISO’s reasoning for maintaining annual CAFs, leading to attendees expressing frustration and demanding an explanation.
Mike Cadwalader, president of Atlantic Economics, said that working groups are supposed to be the forum where market design, rules and policy are discussed in the open and that he did not appreciate that, according to him, NYISO has been presenting “take it or leave it” proposals.
“This is the first time the ISO has presented its proposal not to do seasonal CAFs, and it’s a pretty compressed discussion,” Cadwalader said. “What you have done is you’ve gone off for the last few months to think about it among yourselves. You have not been discussing with market participants.”
Other stakeholders said they would appreciate a presentation of NYISO’s thinking and internal discussions on seasonal CAFs. Cadwalader and Doreen Saia, chair of Greenberg Traurig’s natural resource practice, asked NYISO to present its thinking quickly so that stakeholders could understand where the ISO was coming from before discussions of tariff revisions occur. Cadwalader said that rushing to tariff revisions before conceptual agreement was “putting the cart before the horse.”
Drake said that from the ISO’s perspective, implementing seasonal CAFs might cause price volatility and disincentivize certain kinds of generators from participating in the market all year. If a resource, like a non-firm gas generator, received a 0% value for a seasonal CAF, there would be no incentive for it to participate in that season.
“We felt it would disincentivize participation, which is not what we are trying to achieve,” Drake said.
The other elements of NYISO’s update did not draw as much attention. The ISO is considering requiring External-to-Rest-of-State Deliverability Rights and Unforced Capacity Deliverability Rights holders to submit distinct seasonal elections for the winter and summer capability periods. These seasonal elections would be subject to a must-offer requirement. To participate in the capacity market during that capability period, the holders would need to offer capacity during the periods they are participating in.
NYISO is also proposing to expand the existing New York Control Area minimum ICAP requirement to develop seasonal requirements. These would still be based on the Installed Reserve Margin study. Seasonal transmission security limits and winter locational minimum installed capacity requirements would also need to be implemented.
With seasonal minimum ICAP requirements, the current seasonal capacity adjustments on the demand curve would not be required because the seasonal requirements directly represent the capacity needed to maintain reliability. NYISO will review the demand curve parameters again to see if any additional adjustments are needed.
