By William Opalka

The Independent Power Producers of New York failed to persuade federal regulators that out-of-market payments that keep financially strapped generation operating to maintain system reliability suppress capacity prices.

IPPNY had claimed that NYISO’s Market Administration and Control Area Services Tariff — which allows de minimis offers from capacity resources that would have left the market without reliability-must-run agreements or repowering agreements — disadvantaged other generators.

“We find that IPPNY has failed to show that NYISO’s tariff is unjust and unreasonable,” the Federal Energy Regulatory Commission wrote last week in denying the complaint over the Cayuga and Dunkirk generating stations (EL13-62). (See related story, FERC: Hearing or Settlement on Dunkirk RSSA Charges.)

Owners of Cayuga and Dunkirk had notified state officials that the plants would be mothballed because they were not economic to operate. Both negotiated reliability support services agreements (RSSA) with transmission owners that were approved by the New York Public Service Commission.

IPPNY sought to have those resources excluded from the capacity market or required to offer at levels no lower than the resources’ going-forward costs.

FERC said competitive capacity offers should reflect going-forward costs minus other sources of revenue. “If going-forward costs adjusted for revenues are very low, then it would be reasonable to expect a low capacity market offer that reflects the low going-forward costs,” the commission said. “We agree with the New York commission that, when RSSA revenues are taken into consideration, the Cayuga and Dunkirk units’ going-forward costs would likely be low.”

Although FERC rejected IPPNY’s complaint, it ordered NYISO to establish a stakeholder process to consider whether there are circumstances that warrant the adoption of buyer-side mitigation rules in the rest-of-state zone, and whether mitigation measures would need to be in place to address any price suppressing effects of repowering agreements.

“While we find that IPPNY has not satisfied its burden under section 206, we recognize that IPPNY’s [complaint] raises concerns regarding whether changed circumstances in the rest-of-state may necessitate the prospective adoption of market power mitigation rules for the rest-of-state,” FERC wrote.

Chairman Cheryl LaFleur further addressed that aspect in news conference after Thursday’s commission meeting. “The commission has drawn a distinction in its orders between new resources and existing resources. Where repowering falls is somewhere in the middle, which is one of the reasons we asked questions about that,” she said.