By William Opalka

FERC told NYISO last week that proposed changes to its rules for reliability-must-run generators are insufficient, ordering another compliance filing in 60 days.

In February 2015, the commission found NYISO’s Tariff unjust and unreasonable because it lacked rules governing the retention and compensation of generating units needed for reliability. FERC took action after several coal-fired and nuclear generators in western New York announced their closures and the ISO was unable over nearly four years to win stakeholder consensus regarding uniform compensation rules for RMR units. (See FERC Orders NYISO to Standardize RMR Terms in Tariff.)

On Thursday, the commission said the ISO’s revised rules complied only in part with its directive (ER16-120, EL 15-37).

The commission approved the ISO’s use of going-forward costs as a compensation mechanism for generators and its use of net present value to compare solutions to reliability concerns. But it rejected the ISO’s proposed role for the New York Public Service Commission, its cost allocation proposal and its plan for bidding RMR generators into capacity auctions.

‘Gap Solution’

NYISO proposed adding its RMR rules to its existing “gap solution” process. The gap solution is currently triggered when the ISO’s biennial reliability planning process determines that neither market-based nor regulated proposals will address a reliability need quickly enough, or if its Board of Directors — after consulting with state regulators — determines there is an imminent reliability threat.

Under the ISO’s proposal, it would solicit gap solution — generation, transmission or demand response — and market-based solution proposals when it identifies a reliability need that would result from a generator deactivation.

If there are no viable market-based solutions, the ISO would provide the PSC with a list of transmission and DR gap proposals. The ISO would enter into an RMR agreement only if there are no viable non-generation solutions or if the PSC does not select such a solution from the list provided by the ISO.

FERC said the ISO’s plan was inconsistent with Order 1000, improperly delegated authority to the PSC and could lead to inefficient transmission development.

The commission also rejected a proposal that generators provide 365 days’ notice before deactivation, more than doubling the 180 days required by the PSC. Generators had protested that the proposed notice period was “unreasonably long.”

FERC did not rule on the merits of the extended time frame but said it would address the timing issue after NYISO proposes Tariff amendments outside of the gap solution process. The commission further said it could not determine whether a generator should be compensated during the notice period and at what level.

Capacity Pricing

FERC also rejected the ISO’s proposed cost allocation for RMR generators and transmission gap solutions as inconsistent with Order 1000 and its plan to bid RMR generators into its capacity auction at prices above $0/kW-month. “It is more efficient for RMR generators to offer their [unforced capacity] at $0.00/kW-month as ‘price-takers,’” FERC said.

It accepted in part the ISO’s provisions to prevent generators from “toggling” between RMR compensation and market-based rates, requiring additional protections.

FERC also denied rehearing of a PSC complaint that FERC’s February 2015 order encroached on its jurisdiction. (See FERC Interfering with Reliability Order, NYPSC Says.)