FERC on May 6 granted NYISO’s waiver request to update its installed capacity requirement for New York City in the 2024/25 capability year, which began May 1 (ER24-1800). 

The amount of capacity the market is set to procure for Zone J (i.e., the city) was off because NYISO originally used the wrong historical data to calculate the transmission security limit (TSL) floor for the zone, from 2017-2021 instead of 2018-2022. The TSL floor is an input for the locational capacity requirement (LCR) and essentially acts as the minimum LCR. 

The correct inputs lead to a TSL floor value (and LCR) of 80.4% instead of 81.7%. NYISO told FERC in its request that the waiver would save load-serving entities in the city about $15 million to $20 million per month in capacity costs. 

NYISO discovered the issue late and only filed its request on April 18, but it immediately reported the issue to FERC’s Office of Enforcement and the ISO’s Market Monitoring Unit, Potomac Economics, on April 10, as required by its tariff. The grid operator said it acted swiftly to analyze the error and determine its impact and potential remedial impacts. It is also trying to understand how it happened and avoid it going forward, it said. 

The waiver is the narrowest feasible solution to the problem created by the error, NYISO said. Only Zone J needs to be fixed, and the correction would not cause any reliability issues or changes to the reserve margin set for the New York Control Area. 

The waiver also addresses a concrete problem by avoiding overcharging consumers in New York City, and it would not have undesirable consequences, such as harming third parties, the ISO said. 

“NYISO argues that although the correction may result in lower capacity prices in Load Zone J, which may be contrary to the economic interests of some market participants, no stakeholder has a legitimate interest in preventing an error from being corrected for that reason,” FERC said. “NYISO asserts that all market participants will benefit from capacity auction prices that accurately reflect NYISO’s methodology for computing transmission security limit floor values for LCRs.” 

The LCR is also the basis for several downstream processes related to the capacity market, such as the determination of capacity accreditation factors and the availability of capacity import rights, but NYISO said it did not need to fix those issues yet because the financial impacts of doing so would be limited. However, the ISO said it would continue to work with stakeholders to assess the feasibility, implications, timelines and required actions to pursue any corrective actions going forward. 

The Independent Power Producers of New York and New York City both said NYISO should work expeditiously to complete the assessment of how other downstream parts of the capacity market might be impacted.  

FERC found that the waiver request met its requirements, including solving the concrete problem of avoiding overcharging for capacity. 

While some parties argued for additional requirements that NYISO fully address the downstream impacts of its error, FERC said such arguments were beyond the scope of the proceeding. The commission encouraged NYISO to expeditiously complete its assessment of the error’s impact and continue working with stakeholders on a solution.