By Michael Kuser

ALBANY, N.Y. — Stakeholders told New York and NYISO officials Friday they are concerned about the transparency and aim of the process being laid out to integrate carbon pricing into the wholesale electric market.

The ISO and the New York Department of Public Service this month jointly formed an Integrating Public Policy Task Force. At the group’s first public meeting Oct. 27, Scott Weiner, DPS deputy for markets and innovation, asked stakeholders to “kick the tires” on the concept from every angle.

New York Public Service Commission Chair John Rhodes and NYISO CEO Brad Jones cosigned an introduction to The Brattle Group report on pricing the social cost of carbon into generation offers and reflecting the cost in energy clearing prices. The two opened the first public hearing on the issue in Albany on Sept. 6, before the chartering of the task force. (See NYISO Stakeholders Talk Details of Carbon Charge.)

In announcing the formation of the task force, a PSC notice Oct. 19 outlined the process, solicited comments and set a schedule of meetings this year, including a technical conference Dec. 11.

DPS or NYISO Procedures?

James Brew, an attorney speaking for Nucor Steel, asked if anyone could “explain how the PSC’s process is supposed to work with the NYISO process, and will we be looking at orders or rulings from the PSC?”

Marco Padula, DPS deputy director for market structure, said the commission will not be issuing rulings. “This was a notice from the [DPS]; it has not instituted a commission proceeding,” he said. “It’s a joint process that enables stakeholders to develop a proposal that eventually would go through the whole ISO stakeholder process and any other regulatory approval mechanism, if necessary.”

Attorney Kevin Lang of Couch White, representing New York City, said it would be helpful to understand DPS staff’s position on the Brattle report, “because right now [it is] the only thing we have before us.”

“While what may come out of the process may not be the same as the Brattle report, that is the starting point,” Lang said. “NYISO has been telling us for months and months that’s where we’re going to start the conversation.”

Although the task force is not a commission process, Lang said, “the DPS issued a series of questions that they’re looking for answers to, which certainly is not consistent with the way we do things at NYISO.

“It struck me and others that much of what you’re requesting in that notice is horribly premature,” he continued. “To ask parties about what their input assumptions are, what the costs and benefits [are]… We haven’t even got that level of detail from Brattle, and we just started the discussion.”

No Embrace

Paul Gioia, representing transmission owners New York Power Authority and Long Island Power Authority, said “the DPS has made it clear that it has not embraced the Brattle report as a solution. I’m not aware of whether the DPS has ever identified the aspects of the Brattle report that it has concerns about or disagrees with. I think it would be helpful to us as we go forward if we could know that.”

Padula responded that the department was working closely with the ISO to examine the details of the report and look for things that could be revised. “Absolutely we’ll get into more of that as we move forward in the process,” he said. “Have we put out a paper on staff’s position? No. Are we going to? Not until we continue through this process and hear input from all parties.”

Weiner emphasized that the task force is a joint process, neither wholly conforming to the department’s normal operating procedures nor to those of NYISO. He said that since the Brattle report came out in August, several stakeholders have suggested other approaches, but they’re “still around the fundamental design element … that we’re looking at wholesale markets and incorporating a value of carbon that would become part of the [NYISO] settlement.”

“I know that there are individuals and organizations in this room and on the phone that have been working and are continuing to work to provide at least a first offering, if you will, of other approaches that either build off the Brattle foundation or may take it in another direction,” he added.

Starting Point

Weiner said the process is not about the strengths and weaknesses of the Brattle report but about how to take elements of the report and other suggestions that may come in through filings to build a consensus solution. “The Brattle report, by its own definition, called out areas that were not addressed, but I don’t think we’ll advance the discussion by calling out what did any party like or dislike about” the report, he said.

Attorney James King, speaking for multiple speakers, said “everybody keeps talking about the market, so I’d like to get clarification that what we’re looking at here is the potential of carbon pricing that would be integrated into the wholesale markets as part of NYISO’s settlement process. Is that the starting point that we’re looking at here?”

Nicole Bouchez, a NYISO market design economist who co-chaired the session with Padula, said “the starting point is even a little bit higher than that. It’s how do we integrate public policy and wholesale markets with respect to carbon policy. Now, one of the options is definitely integrating within the NYISO market and the settlement, but there are a lot of open questions on the settlement. … We’re in the listening mode and the proposal hasn’t yet been fleshed out.”

Technical Details

Weiner said that the department’s engagement with the Brattle report began with a briefing by NYISO and Brattle after DPS staff sought to review the report’s methodology.

At Brattle’s request, staff also corrected factual errors regarding DPS and PSC proceedings or positions, Weiner said.

The department also suggested removal of what Weiner called “charged” words. “The example I’ll give you revolved around the use of the word ‘markets.’ When I read the report, [I got] the impression that one organization was more market-oriented than the other, that one point of view was more supportive of markets than another. So we tried to suggest neutral language. That was the extent of it.”

The Dec. 11 technical conference will cover at least two topics: border adjustment mechanisms to prevent leakage, and the criteria and principles that should be applied in developing a plan for allocating carbon revenues.

Erin Hogan, of DPS’ Utility Intervention Unit, asked if stakeholders will have an opportunity to modify the topics for the technical conference. “I understand that the leakage issue was a concern, but … it could be premature if we’re not setting up other alternatives first,” she said.

“We expect many technical conferences over the course of this proceeding — or this activity,” Weiner said.

“If there are other ideas, by all means [tell us]. Your question reminds me why we decided to do leakage. [Some people] believe leakage becomes an issue in certain contexts, in certain designs. In other designs it manifests itself differently.”