FERC Orders Modifications to NYISO Buyer-Side Mitigation Proposal

FERC directed the New York ISO to make several changes to its proposed methodologies for determining the duration of in-City buyer-side mitigation in the ICAP market (ER10-3043, Only in Matters, 9/28/10), finding that the original proposals, "potentially may over- or under-mitigate the exercise of buyer-market power."

First, FERC rejected NYISO's offer floor duration methodology in proposed section 23.4.5.7(a) of the tariff, under which mitigation was to be lifted after the later of when the capacity surplus is expected to be absorbed (based on forecast load growth) or three years. Though a similar methodology had previously been accepted, FERC said that additional methodologies proposed by NYISO, which do not rely on the ambiguities and complexities inherent in a method that relies on forecasts of load growth, are superior to the methodology contained in proposed section 23.4.5.7(a).

FERC endorsed the general premise that the duration of in-City buyer-side mitigation should be based on actual acceptance of the resource's capacity in the market at the offer floor, but rejected NYISO's specific proposal to end such mitigation after 24 months if 50 percent of the mitigated capacity cleared in each auction during that timeframe. This 50 percent provision, "would deem the entire resource as economic even though only a part of the resource is clearing at the offer floor, which may allow resources that remain uneconomic to be exempted from offer floor mitigation," FERC agreed, stating that only the consistently cleared portion of the capacity of a given resource over a total of 12 monthly auctions should have its offer floor mitigation lifted.

FERC also rejected the NYISO's proposed minimum period of mitigation of 6 capability periods (approximately 3 years), and its proposed maximum of 30 capability periods (approximately 15 years), agreeing with several load serving entities and the New York PSC that a specified minimum period of mitigation is not needed.