NYISO’s transmission planning requirements result in a need for more capacity than is required in the ISO’s market rules, according to Potomac Economics, the Market Monitoring Unit.

Potomac highlighted the gap between what it calls the “effective planning requirement” for transmission security and capacity market requirements in a presentation before the NYISO Operating Committee on Oct. 24.

“The reliability planning process effectively requires more capacity to meet transmission security needs than is represented in the capacity market requirements that are ostensibly based on transmission security,” according to a memo Potomac sent to the ISO. For the 2025/26 capability year, Potomac said the effective requirement for New York City is 743 MW higher than its locational capacity requirement.

NYISO this month found a potential reliability need by 2033 for New York City, which would trigger a process in which the ISO solicits solutions from utilities and stakeholders, including non-market interventions. (See NYISO Draft RNA Finds Reliability Need for New York City.)

“Within the next five years, the base case assumptions become much more important when reliability needs appear,” Pallas LeeVanSchaick, vice president at Potomac, told the committee. “If there are not forthcoming market-based solutions, then there’s the potential to identify a need that requires an out-of-market investment to resolve it. That raises concerns.”

The MMU noted the 565 MW of peaking units retained in Brooklyn to address a reliability need identified in a Short-Term Assessment of Reliability in 2023. Despite that, the city is expected to have an over 800-MW surplus in summer 2025.

“Out-of-market actions to satisfy the planning requirements increase risk to investors by depressing capacity prices below anticipated levels,” it said.

LeeVanSchaick said that special-case resources — a type of demand response for large loads — were not being counted in transmission security analyses because they are only called upon in emergency conditions. Surplus capacity, he said, was being overcompensated in part because it was being set by the inflated transmission security floors.

“When SCR program resources also participate in peak shaving programs, the resulting load reductions are not counted towards satisfying the reliability need even though they occur during normal operations,” the MMU said. “This treatment significantly increased capacity shortfalls in the transmission security analysis of the RNA and inflates the transmission security limit for New York City by a comparable amount.”

The MMU recommended including loads participating in peak shaving and emergency DR programs in transmission security analyses and compensating capacity suppliers based on the requirements they contribute to meeting. It also repeated a previous recommendation that NYISO implement more granular capacity zones, particularly in places like New York City, and update them dynamically.

The OC voted to send the draft RNA to the Management Committee, though it changed the motion from an approval of the draft itself to an approval of its findings.

NYISO also presented the results of the 2024-2025 Winter Assessment, finding that the ISO expects sufficient winter capacity assuming that all firm fuel generation is available under both normal and extreme weather conditions. The ISO cautioned that disruptions in fuel supplies could create problems for the grid given the reliance on firm fuel generation during extreme cold weather.