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N.Y. to Examine Whether California-Style Bilateral Contracts Are a Feasible Alternative to Current Capacity Market

October 14, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The New York PSC has issued an agenda for its November 5 joint technical conference with FERC concerning the New York ISO capacity market.

Among the notable topics for discussion are:

• Are long-term bilateral contracts a feasible alternative procurement mechanism for New York (e.g., California model)?

• Should the NYISO capacity market provide a longer revenue certainty period (e.g., 3, 5, or 10 years)? Does the existing NYISO capacity market appropriately incent investment as compared with three-year forward market designs in other capacity markets (e.g., PJM, ISO-NE)?

• Are changes to NYISO's capacity market necessary to better ensure resource performance during peak demand conditions (summer or winter)?

• How is the planning of transmission, generation and other resources coordinated between retail and wholesale markets?

The technical conference will also examine, in particular, whether, and to what extent, NYISO's capacity market should play a role in attracting investment in resources and infrastructure to meet public policy objectives, including increasing renewable resources; maintaining or increasing clean energy resources to meet emission reduction goals; increasing distributed resources; increasing energy efficiency and demand response resources; maintaining fuel diversity; maintaining price stability for customers (wholesale, retail, commercial and industrial); economic development; and spurring investment in resources and infrastructure (both power lines and gas pipelines).

This examination will also include a discussion of whether certain aspects of the current NYISO capacity market design -- in particular the capacity market product definition -- need to change to achieve the requisite public policy objectives.

Specific questions include:

• Are changes to the capacity market needed to account for fuel availability/firmness of fuel, or to differentiate the value of capacity resources based on the “firmness” of fuel arrangements?

• Should the capacity market specifically account for or otherwise value resources that are intended to meet current or future public policy goals (e.g., fuel diversity or emission reduction goals)? How should there be modifications to the buyer-side mitigation rules to help achieve those goals?

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