The NYISO Business Issues Committee on Wednesday recommended that the Management Committee approve tariff revisions to allow transmission owners to exercise a right of first refusal (ROFR) to build, own and recover the costs of upgrades to their transmission facilities in the ISO’s public policy transmission planning process.
Under the proposed changes, TOs could exercise their ROFR even if the upgrades are part of another developer’s project selected by the ISO for cost allocation.
The BIC voted 64.91% to advance the measure to the MC, which will consider whether to recommend that the Board of Directors approve the proposal and facilitate an anticipated September filing with FERC under Section 205 of the Federal Power Act. The ISO indicated that such a filing would request a decision within 60 days after filing.
The proposal is intended to apply to the current Long Island offshore wind export public policy transmission need, said Yachi Lin, NYISO senior manager for transmission planning. The filing is anticipated to be prior to an initial draft of a viability and sufficiency assessment of the need.
FERC in April confirmed that New York TOs have a federal ROFR under the ISO’s tariff and Order 1000 for upgrades to their transmission facilities, but it declined NYISO’s request for clarification that a TO exercising such upgrade rights should be treated as the developer (EL20-65). (See FERC Confirms NYTOs’ Right of First Refusal.)
The commission left open the question as to whether a new transmission facility proposal in another developer’s Order 1000 transmission solution requires the agreement of the TO that owns the existing transmission facility, a state regulatory proceeding or a court order authorizing the decommissioning.
The proposal is principally aimed at developing a mechanism for TOs to exercise the ROFR in NYISO’s public policy transmission planning process, Lin said, but it also would enhance the information used in the evaluation and selection phase of the process.
Assessing Risk
Several stakeholders asked at what point would a TO know a cost estimate for the upgrades. Another participant asked who would bear the consequences should a transmission upgrade come in late and cause another portion of the project being developed to be delayed, which would be especially significant in the event that the developer has proposed a cost cap.
The ISO has several well defined stages in the planning process, from defining a need to requesting project proposals, through to evaluation and selection, Lin said.
“There are 10 categories of metrics for evaluation and selection, and risk is one of them, so if there is any risk to project completion, it would certainly be best if developers understand their risk and then outline the mitigation measures in their proposal,” Lin said.
Cost allocation would depend on the specifics of the relevant contract; on whether a developer proposed a hard cost cap for its own capital costs and included that in the contingency; or if the developer negotiated a soft cap that included cost-sharing with ratepayers, said Carl Patka, NYISO assistant general counsel.
“If the developer wants to argue that, ‘well these are circumstances beyond my control completely, and I should be released from the obligation of my hard cap or my soft cap,’ they can make an argument, but I can’t predict for you today how that would come out at FERC,” Patka said.
Implementation Details
The current tariff provisions call for NYISO to enter into a development agreement with the selected developer, whether or not it is a TO, which under the proposed revisions is referred to as the “designated entity,” said Brian Hodgdon, NYISO senior attorney.
“The NYISO is treating the developer and TOs that exercise their right of first refusal comparably in regard to the development agreement,” Hodgdon said. “Whoever will be developing a selected public policy transmission project or a portion of it will have to enter into a development agreement now, and as we propose in the future, we would just be using the term ‘designated entity.’”