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N.Y. Utilities File Tariff to Procure Demand Response At $500/MWh Plus Capacity Clearing Price If NYISO Programs Barred By Court

February 24, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The six investor-owned New York electric distribution companies have petitioned the New York PSC to approve a utility-offered demand response program to the extent the U.S. Supreme Court rules that FERC (via the RTOs) cannot set compensation for demand response.

The joint utilities’ Bulk Power Reliability (BPR) demand response program will commence only upon the effective date of the anticipated replacement to the existing NYISO Special Case Resource (SCR) program

Participants in the utility BPR Demand Response Program will receive two forms of payments: (1) Reservation Payment and (2) Performance Payment. The Reservation Payment will be made by the utility to a participant monthly. This payment will be equal to a participant’s enrolled capacity as determined by the NYISO (applied to the utility as a Capacity Offset Credit) multiplied by the NYISO Monthly Spot Auction Clearing Price in $/kW for the month of participation for the NYISO capacity zone in which the participant is located.

In addition, a Performance Payment of $500/MWh will be made to a participant for its actual demand reduction during a curtailment event or test called by the NYISO. The participant will receive a Performance Payment for each day and hour of NYISO verified load reduction provided to the utility by the NYISO.

In the event a participant fails to meet its obligations and it results in a penalty being assessed to the utility by the NYISO, the participant will be required to pay its pro rata share of any penalties assessed by the NYISO against the utility in proportion to the Participant’s contribution to the penalties. The utility may first offset any penalties against future payments to the participant as applicable or bill the participant directly without offsetting the penalty against future payments.

The joint utilities anticipate that participants will include individual customers and aggregators of demand response resources.

With respect to cost recovery, the proposed tariff reflects the following:

(1) Reservation Payments would be recovered from utility full service customers because those customers will receive the capacity offset benefit that would result from the purchase of capacity offset credits from demand response providers;

(2) Performance Payments would be recovered from all utility customers as a non-bypassable delivery charge because those payments are made when demand response is called upon to provide system reliability and also mirrors how the NYISO currently recovers any variable payments made to demand response providers at the time of performance; and

(3) any incremental administrative costs and unrecovered penalties would also be recovered from all utility customers through a non-bypassable delivery charge because those are costs that utilities would incur in providing a provider of last resort service to maintain demand response as a resource for providing bulk power system reliability.

The backstop contingency demand response tariff filed by the joint utilities anticipates that the NYISO will continue in its administrative operational role under the contingency programs to the maximum extent possible as the operator of the bulk power system using demand response to maintain bulk power reliability. Individual utilities will provide the administrative services necessary to compensate demand response participants and recover penalties imposed on the utility directly related to demand response participant performance.

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