FERC on Thursday declined to rehear its February order approving a NYISO proposal to apply buyer-side mitigation to energy storage resources (ESRs). The 2-1 ruling expanded on the previous order and drew another sharp dissent from Commissioner Richard Glick, the lone Democrat on the commission (EL19-86-001).
The commission continued to find that the New York Public Service Commission and the New York State Energy Research and Development Authority “failed to show that applying buyer-side market power mitigation [BSM] to electric storage resources in NYISO is unjust and unreasonable or unduly discriminatory or preferential” and asserted “that such mitigation does not inappropriately intrude on New York’s jurisdiction.”
Chairman Neil Chatterjee and Commissioner James Danly said the complainants failed to show that applying BSM to new electric storage resources offering into the NYISO capacity market is unjust or inconsistent with FERC Order 841.
They further said the commission’s denial of the requested exemption reflected reasoned decision-making based on substantial record evidence, including economic theory, and relied on the opinion of the NYISO’s Market Monitoring Unit that storage resources have the ability to suppress capacity prices absent appropriate mitigation.
“We continue to find that applying buyer-side market power mitigation to electric storage resources will protect the integrity of competition in the wholesale capacity market against unreasonable price distortions and cost shifts caused by out-of-market state support,” the order said.
Glick said the commission “once again perverts buyer-side market power mitigation into a series of unnecessary and unreasoned obstacles to New York’s efforts to shape the resource mix.” It failed to justify the continued use of BSM measures against individual storage resources and explain its differing approaches to issuing exemptions from mitigation for different types of resources, he said.
“All told, today’s order aptly illustrates what a mess buyer-side market power mitigation has become in New York,” Glick said.
Free Markets
The commission said that under-mitigation of uneconomic entry can suppress capacity prices, over-mitigation discourages new entry, and that both extremes jeopardize long-term consumer interests.
Applying BSM to storage resources will protect the integrity of competition in the capacity market against unreasonable price distortions and cost shifts caused by out-of-market state support, the commission said, disagreeing with New York Transmission Owners’ contention that the commission presumed that storage resources participate in the capacity market on an aggregate basis.
“Rather, the commission was concerned with the combined effect that individual subsidized storage resources would have on clearing prices,” it said, noting that BSM “rules may change over time to protect the integrity of the capacity market.”
The commission also said it had not “conflated lower prices resulting from normal supply and demand (competition) with artificial downward price manipulation or … made any finding regarding the per se exercise of market power. … ESRs that receive out-of-market support are not competing on an equal basis with those resources that do not receive similar out-of-market support.”
Glick said the ruling was illogical; instead of promoting true competition, the commission’s approach to buyer-side market power “has degenerated into a scheme for propping up prices, protecting incumbent generators and impeding state clean energy policies.”
Although the specifics of the mitigation regimes vary among the Eastern RTOs, they all generally force new entrants to bid at or above an administratively determined estimate of what a new resource “should” cost, while existing resources are permitted to bid at a lower level, Glick said.
The more the commission interferes with state public policies under the pretext of mitigating buyer-side market power, the more it will force states to choose between their public policy priorities and the benefits of the wholesale markets that the commission has spent the last two decades fostering, Glick said.
“New York provides the perfect example, as the Public Service Commission has begun a proceeding to consider ‘taking back’ from NYISO the responsibility for ensuring resource adequacy,” Glick said.
He noted that numerous states are considering leaving the other Eastern RTOs’ capacity markets, which also have rules that hinder states’ exercise of their resource decision-making authority.
“We got to this point largely because of the commission’s misguided belief that it must ‘protect’ capacity markets from the influence of state public policies,” Glick said. “And the end result will be profoundly inefficient, no matter how many times my colleagues use the words ‘market’ and ‘competition.’ … It is becoming increasingly clear that, unless something changes, the commission’s effort to ‘protect’ NYISO’s capacity market may ultimately be what dooms it.”