The NYISO Business Issues Committee on Dec. 11 tabled an ISO proposal to levy financial penalties against consistently underperforming generators in the reserve market, though it supported a related measure intended to better identify such resources so they can be removed.

The Operating Reserves Performance Penalty proposal, presented to the Installed Capacity Working Group in November, consisted of two components. The BIC declined to recommend that the Management Committee approve assessing the financial penalties, which would require tariff changes and was not well received by members of the ICAPWG. (See Stakeholders Skeptical of NYISO Performance Penalty Proposal.)

“We’ve received robust feedback across multiple meetings, and in the holiday spirit, it makes me feel a bit like a chestnut roasting on an open fire at times,” said Nathaniel Gilbraith, NYISO manager of energy market design.

While NYISO believed that the performance penalty proposal was “reasonable and commensurate” with the issue of underperformance, the ISO recognized that stakeholders preferred focusing on disqualification and removal of poor performers, Gilbraith said.

The dollar value of these poor performers ranges between $100 million and $260 million per year, according to the ISO.

The committee did, however, support the second component, which is to establish a rebuttable presumption for resources found to be underperforming. Those resources would be removed from the market unless they can demonstrate that the cause of the poor performance has been fixed. As part of that, NYISO would establish three different metrics for assessing underperformance. The BIC recommended directing the ISO to describe the “consequences for persistent operating reserve market underperformers” as described in the original proposal.

If approved by the MC at its meeting Dec. 18, NYISO would develop a new proposal in the first quarter of 2025 to be presented for feedback and aiming for stakeholder approval by the end of next year.

The BIC’s motion specified that “the proposed process enhancements will not alter the NYISO’s existing tariff authority to remove operating reserves qualification from suppliers that consistently underperform.”

It passed with four abstentions and New York City in opposition.

“As I understand it, the removal will occur after some period of time, but during that period of time, these market participants are still going to be compensated for a service they have not provided,” said Kevin Lang of Couch White, speaking on behalf of the city. “From the perspective of a consumer, that is unjust and unreasonable.”

Lang said that while the city supported removing bad actors, without the financial penalties, the proposal did not fully address the issue.

“We are extremely concerned that the NYISO is not going to pursue what, quite frankly, we thought was the totality of this,” he said.

NYISO staff clarified that penalties could be reexamined in 2025. Lang was not satisfied, later saying that this was not a “market design complete” proposal, something he blamed on the rushed process toward the end of the year.

Mark Younger of Hudson Energy Economics agreed.

“I hope we can do this at a high level and get through this alternative motion quickly, and get on with the holiday period,” Younger said. “It should be no surprise to anybody that I thought the process we took to get here was a total disaster. … You heard vociferous and, as you tended to note, very consistent and clear concerns that were ignored until about a week ago.”

Younger added that he hoped NYISO would have this “all wrapped up by the end of April.”