FERC last week denied a complaint by two natural gas-fired plants that sought to have NYISO implement a “clean” minimum offer price rule (MOPR) for all new and existing resources receiving out-of-market subsidies in New York.

FERC voted 4-1 to reject the complaint by the 1,016-MW Cricket Valley Energy Center (CVEC) and the 635-MW Empire Generating facility, with Commissioner James Danly dissenting (EL21-7).

The October 2020 complaint by CVEC and Empire alleged that state subsidies were suppressing prices and distorting price signals in NYISO’s installed capacity market (ICAP).

FERC’s majority, however, reiterated its support for the ISO’s narrowed buyer-side mitigation (BSM) rules, which the commission accepted on May 10. (See FERC OKs NYISO Capacity Market Changes Stemming from NY Climate Law.)

The change, which exempted from the BSM rules new capacity resources required to satisfy the goals of the state Climate Leadership and Community Protection Act, “appropriately focused buyer-side market power mitigation on those resources that behave uncompetitively through the exercise of buyer-side market power,” FERC said.

Expanding the BSM rules, as suggested by the complaint, would reverse these changes, according to FERC, and upset the balance between “the need to mitigate the potential exercise of buyer-side market power against the harms of over-mitigation.”

Profitability Damaged

Empire and Cricket Valley complained that their profitability was damaged by the uneconomic retention of state-subsidized generation, including New York’s award of zero-emission credits to nuclear plants. Empire said its plant, which went into service in 2010, was forced into bankruptcy proceedings because it was unable to earn sufficient energy and capacity payments in the NYISO markets to cover its costs.

The 635-MW Empire Generating facility in Rensselaer, N.Y. | Empire

But the commission said it was not required “to shield NYISO’s market from the indirect effects of state policies to ensure that commission-jurisdictional rates remain just and reasonable.

 “… We have already found the BSM rules to be just and reasonable … and neither the complaint nor the complainants’ financial performance provide a basis to undermine that finding,” it said.

In the May 10 ruling, the commission acknowledged that prior FERC orders — when the commission was under Republican control — “treated state policy choices as equivalent to anti-competitive conduct.”

But it said the current Democratic majority “no longer believes it appropriate to presume that states’ exercise of their reserved authority over generation facilities is the equivalent of anticompetitive conduct, simply because of the inevitable, albeit indirect, effect on ICAP market prices.”

Republican Commissioner Mark Christie issued a concurrence last week, saying he supported NYISO’s BSM proposal because the costs of New York’s policies would be limited to that single state ISO and not impact other regions. “The chief recourse for New York consumers and businesses who do not like the costs and consequences of that state’s public policies is to the ballot box,” he said.

Danly: Return to Cost-based Rates?

FERC Commissioner James Danly | FERC

Danly, also a Republican, reiterated his opposition to the narrowed BSM rules in his dissent last week, warning that, “When the inevitable price suppression caused by unmitigated state subsidies results in the premature retirement of generators with needed attributes, resource adequacy will be compromised.”

As states “continue to place their finger on the scale in order to favor certain resources,” FERC should consider returning to “cost-based ratemaking to protect ratepayers,” Danly said. “Doing otherwise perpetuates the notion that our markets are competitive and, therefore, capable of incentivizing investment in the necessary type and quantity of resources, when, in fact, they are not.”