By William Opalka

The Federal Energy Regulatory Commission has ordered NYISO to begin a stakeholder proceeding to resolve a dispute over the installed capacity market on Long Island, which was excluded from a previous attempt to address transmission congestion in the areas around New York City.

The ISO is to report its findings to FERC by June 1, 2015. FERC rejected a recommendation by the ISO’s Market Monitor that it complete tariff changes to address the issue by June.

In August 2013, FERC approved NYISO’s proposal to create a new capacity region encompassing New York City and its northern suburbs. The zone did not include the Long Island suburbs because NYISO said insufficient transmission existed there for it to participate.

Critics said Long Island (Zone K) contributes to overloading of the Upstate New York/Southeastern New York (UPNY/SENY) Interface — which led to the creation of the new capacity region — but has escaped any cost responsibility for the overloads, thus causing higher capacity prices for New York and the Hudson Valley (Zones G, H, I and J), which were included.

FERC’s order follows a February 2014 technical conference that considered whether Long Island could be modeled as an export-constrained zone for future ICAP Demand Curve proceedings.

“We agree that it would be worthwhile for NYISO and its stakeholders to explore whether a proposal can be developed that could reduce the cost of procuring capacity while meeting the NYISO [loss-of-load expectation] objective,” FERC said (AD14-6).

FERC directed the report to include points raised by the Market Monitor, which said that the ISO should be required to improve its methodology for modeling deliverability constraints and calculating local capacity requirements.

The new capacity region went into effect in May over the strenuous objections of utilities, consumer groups and the New York Public Service Commission. NYISO said it was necessary to send price signals to encourage development of additional generation and transmission in the area.

FERC agreed with NYISO that June was too soon to require tariff amendments but added “market rule changes that could reduce costs should not be unduly delayed.”