New York ISO Seeks Phase-In of New Capacity Market Zone to Mitigate "Rate Shock" -- 25% Increase in Retail Rates Projected from Capacity Market!

The New York ISO has asked FERC for rehearing of the Commission's earlier decision to establish a new capacity zone (the G-J Locality or Lower Hudson Valley zone) on May 1, 2014, for the purpose of allowing a phase-in of the new capacity zone to avoid potential "rate shock."

See prior story for full details on FERC designation of the G-J Locality capacity zone

Though state regulators and load interests had warned of over half a billion dollars in payments under the first three years of the new capacity zone, the NYISO did not originally take a position on a phase-in of the zone, and FERC rejected a phase-in in its August order establishing the zone.

Now, however, the NYISO, "believes that there is a significant likelihood of short-term consumer impacts that merit action by the Commission."

"After considering more current information about the potential retail rate impacts of implementing the G-J Locality, the NYISO has concluded that a phase-in of the price impacts is necessary to ameliorate effects on consumers and mitigate what has been described as potential 'rate shock,'" NYISO said. The NYISO specifically supports a phase-in over the initial Demand Curve period (i.e., three years).

"After considering the information now available, the NYISO believes phasing in the capacity price increases associated with creating the G-J Locality is an equitable means to protect consumers from the risk of immediate and significant increases in their electric bills. A phase-in would provide retail customers with an opportunity to mitigate bill increases, e.g., through energy efficiency and conservation measures. Further, a principal goal of creating New Capacity Zones, i.e., incentivizing investment in new capacity, would not be defeated by gradually implementing the price signals over the three year duration of the initial ICAP Demand Curve for the G-J Locality. Even with a phase-in, investments in new generation, which typically have a construction cycle of two to three years, will receive the needed price signal. The NYISO also believes that existing capacity needed for reliability can be expected to be retained even with a phase-in over the three year period. Thus, a phase-in can mitigate short-term consumer impacts without suppressing desired investment signals, necessary to satisfy reliability requirements," NYISO said.

The NYISO said that new retail rate impact information has become available since it first filed for approval of the new zone. Specifically, the New York PSC's rehearing request asserted that without a phase-in, some consumer retail rates could increase by as much as 25% upon implementation. In addition, Central Hudson's request for rehearing said that implementing the G-J Locality would result in wholesale capacity price increases of as much as 475% to its customers.