By William Opalka

NYISO last week defended itself against criticism from New York Gov. Andrew Cuomo but said it will cooperate with a review by state regulators that could result in changes to the ISO’s governance and market design.

Cuomo called last month for the Public Service Commission to review the ISO, saying its market design is at odds with his administration’s Reforming the Energy Vision initiative, which seeks increased deployment of distributed resources and clean energy. Cuomo also called for more public and consumer representation on the ISO’s board of directors.

The review was proposed in the 548-page 2015 Opportunity Agenda, a companion document to the state budget that outlines state policy goals.

“The development of cleaner energy resources requires proper price signals at both retail and wholesale levels and a marketplace that recognizes their value. The current wholesale market structure is not designed for, nor may be well suited for, the proliferation of clean distributed energy resources. The evidence lies in the limited deployment of demand response in the wholesale energy and ancillary services markets and the eroding penetration of demand response in the capacity market. Renewable energy resources also face financial difficulty operating within the current wholesale market structure,” the agenda said.

“In designing and administering the wholesale markets, NYISO makes decisions that can have profound impacts on New York’s electricity prices and energy resource mix, and thus on consumers, the economy and the environment. However, NYISO’s board of directors does not have adequate public and consumer representation and are not subject to the same transparency standards as other governmental organizations.”

Review ‘Prudent’

James Denn, a spokesman for the PSC, said a review is “prudent policy and practice” as it seeks to align the operation of the wholesale electricity market with REV.

He also alluded to the PSC’s opposition to NYISO actions that have raised rates. The most recent is the creation of a capacity zone in the counties north of New York City that NYISO proposed and the Federal Energy Regulatory Commission approved. Consumers were hit with higher costs, which NYISO said was necessary to send price signals to power generators to encourage plant construction in the region to alleviate a transmission bottleneck.

“The commission regularly reviews market issues and has successfully argued to FERC for changes that have saved ratepayers hundreds of millions of dollars, such as the 2011 reversal of a FERC decision regarding the NYISO demand curve,” Denn said. “Our recent experience fighting the new capacity zone in the lower Hudson Valley has raised serious questions as to whether there are underlying governance and market design problems at the NYISO that if fixed would avoid similar problems in the future.”

The review, which has no deadline, could include recommendations for legislative changes.

Strong Relationship

NYISO spokesman David Flanagan said the ISO will cooperate with the PSC inquiry. “We look forward to continuing our strong relationship with the Public Service Commission and building on the NYISO’s 15-year track record of open collaboration with our regulators and stakeholders as markets and innovative technologies continue to evolve,” he said. “We are proud of the significant value the NYISO provides to consumers through unmatched system reliability, efficient wholesale energy markets and long-term planning.”