By Michael Brooks and Michael Kuser

WASHINGTON — FERC on Thursday narrowed the resources exempt from NYISO’s buyer-side market power mitigation (BSM) rules in southeastern New York, ordering the ISO to subject storage and demand response to a minimum offer floor in its capacity market.

In doing so, the commission granted a request for rehearing by the Independent Power Producers of New York, partly reversing its 2017 decision to grant a blanket exemption from the rules for special-case resources (SCRs), a type of DR (EL16-92, ER17-996). (See ‘Special Case’ DR Exempted from MOPR in NYISO.) FERC ordered that all new SCRs be subject to the rules. It also decided it will evaluate retail-level DR programs on a program-specific basis to determine whether their payments should be excluded from the calculation of SCRs’ offer floors, initiating a paper hearing to gather information on the programs.

The commission also denied a complaint from the New York Public Service Commission and the New York State Energy Research and Development Authority seeking an exemption for electric storage resources (ESRs), ruling that applying “buyer-side market power mitigation to electric storage resources in NYISO appropriately protects the capacity markets from the price-suppressive effects of resources receiving out-of-market support” (EL19-86).

FERC also rejected NYISO’s proposed 1,000-MW cap on the exemption for renewable resources and a proposal to allow state entities to be eligible for the exemption for self-supply resources (ER16-1404). The proposals were part of a compliance filing the ISO filed in response to FERC ordering it to exempt a narrowly defined set of renewable and self-supply resources.

“Rather than basing the megawatt cap on the mitigated capacity zones, NYISO proposes a megawatt cap based on historical entry of all resource types across the entire [New York Control Area],” FERC said. “We reiterate that NYISO must develop a megawatt cap narrowly tailored to the mitigated capacity zones that recognizes that only eligible renewable resources entering the mitigated capacity zones are subject to the buyer-side market power mitigation rules and, therefore, are eligible to apply for the renewable resources exemption.”

Commissioner Richard Glick dissented on the three orders and issued a concurrence on a fourth ruling upholding the commission’s rejection of a complaint by IPPNY seeking to apply the rules to existing capacity resources retained pursuant to a reliability support service agreement and those with repowering agreements (EL13-62).

IPPNY had also requested that NYISO’s BSM rules be applied statewide, which the commission also rejected. Only resources in the G-J Locality, consisting of the Lower Hudson Valley (Zones G, H and I) and New York City (J), are subject to the rules.

In announcing the commission’s decisions at its open meeting, Chairman Neil Chatterjee said they “narrow the scope of exemptions from the BSM rules, thereby broadening the market’s protections against price distortion. … Consumers benefit when our organized markets remain competitive and send the right price signals.”

Chatterjee acknowledged the speculation that the commission would be taking the same action as its expansion of PJM’s minimum offer price rule (MOPR) in December. (See “MOPR Contagion?” PJM Seeks to Quell ‘Inflammatory’ Exit Talks.) “These two markets’ footprints and capacity constructs are very different, and our orders today are shaped by the unique issues that arise in New York ISO and the particular complaints brought by parties in these proceedings,” he said. “However, the underlying principles for both actions are similar: We are working to ensure that capacity markets provide accurate price signals to ensure adequate supply where it’s needed.”

Commenting on his dissents, Glick said, “It’s comical to suggest that what we’re doing here in New York … has anything to do with buyer-side market power. … Most of the resources affected by today’s orders aren’t even buyers. And those that are, very few of them have actual market power. And yet the commission has decided to subject them all to a mitigation regime that’s going to increase prices and make renewables, demand response and energy storage less likely to clear in the market.”

Glick rejected Chatterjee’s “underlying principles,” instead saying that the orders, as well as the PJM MOPR expansion and ISO-NE’s Competitive Auctions with Sponsored Policy Resources construct, mean the commission wants “to raise prices for existing generators and stunt the development of new clean energy resources, which so many states are eager to promote.”

“The fact is we’ve created one big mess in the Eastern capacity markets, and I don’t think my colleagues have a plan for getting us out of it.”

Commissioner Bernard McNamee said in response that “our obligation is not to impose a worldview on those different RTOs or ISOs. Instead, it’s to look at, how are they developed? What are the resources that are available to them? How does their load look? … My goal is not to give some overarching theme, but instead to address the issues that are before us.”

Though FERC did not publish the orders until well after the end of the open meeting, clean energy groups were quick to lambast them.

“FERC does not appear to value the contribution of clean energy resources to fight climate change,” the Alliance for Clean Energy New York said. “The FERC decisions create an unnecessary barrier to entry of new renewable energy resources that are essential to achieving New York state’s Climate Leadership and Community Protection Act goals to address climate change.”

“FERC delivered a new subsidy to the fossil fuel industry today at the unfortunate expense of New York ratepayers,” said Gregory Wetstone, CEO of the American Council on Renewable Energy. “This is an echo of FERC’s so-called ‘MOPR’ decision in December that delivered a Christmas gift to fossil fuels in the PJM capacity market. FERC has once again made a decision that will lead to more pollution and higher electricity rates, this time for New Yorkers.”

The Natural Resources Defense Council said the orders are “the latest attempt by a hyper-politicized Trump FERC to try and pose barriers to states deploying clean energy resources.”

“We are encouraged that FERC’s decisions recognize the NYISO’s markets as a strong platform to address the challenges of a grid in transition,” NYISO CEO Rich Dewey said. “The NYISO is working quickly to develop a compliance plan in response to the FERC decisions that will also help New York meet its aggressive clean energy goals. The NYISO is confident carbon pricing in the wholesale markets can also address the federal, state and stakeholder concerns highlighted in these proceedings.”

The New York PSC has initiated a proceeding on whether NYISO’s capacity market is an effective tool to meet the state’s ambitious clean energy and emission-reduction goals. (See NYPSC Opens Resource Adequacy Proceeding.) Speaking to reporters after the meeting, Chatterjee declined to speculate what the PSC would do in response to FERC’s orders or how they would affect NYISO and the state’s joint effort to price carbon into the markets.

“In my view, today’s orders protect the competitiveness of New York ISO’s capacity market by addressing the price-distorting actions that could have unintended impacts on the future supply of electricity for consumers,” he said. “This is a technology-neutral, fuel-neutral approach to trying to protect the competitiveness of the capacity market.”