NYISO may shift 500 MW of the statewide reserve requirement to Southeastern New York (SENY) in order to boost resource flexibility and provide ready access to resource capability following a contingency event, ISO officials said Monday.

The proposal would not change the New York Control Area’s 2,620 MW of 30-minute total reserves but would add to the existing 1,300 MW of reserves in SENY, the Installed Capacity/Market Issues Working Group (ICAP-MIWG) heard during a teleconference.

However, the proposal would not add to the existing reserve requirements currently applicable to Zones J and K covering New York City and Long Island, respectively. The proposal seeks to increase the current 30-minute reserve requirement for the broader SENY region, which encompasses Zones G through K. The proposal would also reduce the NYC real-time reserve requirements to zero megawatts during thunderstorm alerts (TSAs).

“The proposal here is to have a reserve requirement that allows us to bring transmission facilities back to normal transfer criteria following a contingency,” said Ethan Avallone, the ISO’s technical specialist in energy market design, who presented the analysis on reserves for resource flexibility.

The proposal is based on the current system topology. However, it was acknowledged that NYISO continually evaluates its reserve requirements to account for material system changes.

“In the future, if we have to reevaluate the requirement to account for anticipated transmission upgrades, or after any large change to transmission, we would still look to procure enough reserve to bring transmission facilities back to normal transfer criteria in that case,” Avallone said.

Market Mechanics

Absent procuring the proposed additional SENY reserves, the ISO could at times need to use out-of-market actions to return transmission facilities to normal transfer criteria, Avallone said.

The additional reserve would be procured at all times in the day-ahead and real-time markets.

“Up until this point, the reserve requirement for SENY is designed to allow the ISO to take the system back to emergency transfer criteria, and if the system doesn’t recover post-contingency, out-of-market actions may potentially be taken to bring the transmission facilities back to normal transfer criteria,” he said.

Couch White attorney Kevin Lang, representing the city of New York, asked how often the ISO has needed to resort to out-of-market actions for such cases. The ISO did not have immediate access at the meeting to the specific data to quantify the frequency. The ISO was asked to provide such data as part of future discussions related to the proposal.

“You’re looking at procuring these additional reserves on an ongoing basis, so there’s a payment required for that from Zone J,” Lang said. “If you’ve only been required to use out-of-market actions once a year or once every two or three years, then there isn’t a justification for increasing these costs to Zone J and adding this new requirement, even though it’s just shifting the location for procuring reserves from NYCA to SENY.”

The ISO needs to demonstrate a reason to increase the reserve requirement to SENY, Lang said. Without knowing how many times the grid operator has needed to resort to out-of-market actions, market participants “have no way of knowing whether this is really necessary, or whether this is just a hypothetical concern,” he said.

“We look at this proposal as a market-based way to reflect the flexibility operators are looking for on a reliability basis into the market,” Avallone said.

Aaron Breidenbaugh of Luthin Associates, who represents a group of nonprofit institutional customers known as Consumer Power Advocates, echoed Lang’s concern.

“Right now, with what’s going on in New York City and what’s going on in our state, this isn’t the time to start layering more costs on New York City customers,” Breidenbaugh said.

Mark Younger of Hudson Energy Economics suggested that the ISO not look at the data only in terms of what percent of the time the ISO had to take out-of-market actions to secure the transmission, but what portion of time there was a contingency that required action by the ISO.

“Contingencies are rare,” Younger said. “We have reserves to make sure we can operate when contingencies happen, so looking at it in terms of all time is not the appropriate way to do it.”

Consumer Impact Analysis

In addition to estimating potential energy market impacts, the NYISO will estimate both the potential short-term and long-term capacity market impacts of the proposal using revised reference prices calculated for the 2020/21 capability year ICAP demand curves, said NYISO Senior Manager and Consumer Interest Liaison Tariq N. Niazi.

He presented an outline of the methodology to be used in a consumer impact analysis of the proposed change in SENY reserves.

Niazi assured stakeholders that the results of the consumer impact analysis would be presented before seeking approval before the Business Issues Committee and Management Committee. “So just in case we have to revise the analysis, I think there should be time. … We actually seek to present the impact analyses at least 30 days before seeking a vote at BIC,” he said.

The ISO also will evaluate reliability and environmental impacts, as well as the impact on transparency as part of its consumer impact assessment. In terms of the future timeline, if the proposal obtains stakeholder approval, the ISO would seek to begin developing the necessary software in 2021 to facilitate implementing the proposed enhancements in 2022.

Pallavi Jain, a NYISO market design specialist, presented a related project to revise ancillary services shortage pricing.

The shortage price for the current 1,300-MW SENY 30-minute reserves is $500/MWh, and the ISO proposes a shortage price value of $25/MWh for the 500-MW increase in the SENY 30-minute reserve requirement.

The ISO has proposed to increase the initial $25/MWh shortage pricing value for these additional SENY 30-minute reserves to $40/MWh upon implementation of the subsequent proposed enhancements related to the separate ongoing effort to reevaluate the current reserve shortage pricing values for all products and locations. However, for the reserve requirements applicable to Zones J and K, the ISO is not proposing to increase the current $25/MWh shortage pricing value due to the limited number of eligible suppliers in New York City and Long Island, respectively.