Phase-In of New N.Y. Local Capacity Zone Still Carries Rate Shock for ESCOs, Customers

A proposed phase-in of the new G-J local capacity zone in the New York ISO, as formally proposed at FERC by NYISO last week, won't completely shield ESCOs and customers from rate shock associated with spiked capacity prices from the new zone, an analysis by NYISO shows.

Specifically, last week NYISO filed its periodic update to reset the ICAP demand curves, and as part of the filing NYISO formally proposed to phase-in the previously approved G-J local capacity zone over three years. The new zone is being implemented in the 2014/15 delivery year.

Included in NYISO's filing were "illustrative" capacity prices under a phase-in and scenario without a phase-in. Even with the phase-in, ESCOs and customers in the G-J locality will see rate shock, the analysis shows:

NYISO Illustrative Capacity Prices, G-J Locality
  ($/kW-month)
Capability Year/        Summer   Winter   Annual
  Scenario
2013/14                   5.80    2.85    4.33
2014/15 w/out Phase-In   10.65    6.11    8.38
2014/15 with Phase-In     8.09    4.64    6.37
2015/16 w/out Phase-In   10.18    5.63    7.91
2015/16 with Phase-In     8.95    5.00    6.98
2016/17                  11.72    7.12    9.42

NYISO noted that under the assumptions used in the analysis, the illustrative G-J Locality clearing prices for the 2015/2016 Capability Year reflect more capacity transacted than in the 2014/2015 Capability Year. "Without that additional capacity – i.e. if the supply stack had been held constant – prices for 2015/2016 would be higher than presented for both the scenario with phase-in and the scenario without phase-in. The same phenomena would carry forward to the 2016/2017 Capability Year," NYISO said.

NYISO said that it, "believes the risk of dramatic retail rate impacts identified by the New York State Public Service Commission ('NYPSC') should be ameliorated using the proposed phase-in."

However, NYISO noted that, "consumer impacts may be materially lower if a significant volume of supply enters or re-enters the market over the next three years. One scenario that would have that effect is if the roughly 500 MW Danskammer Generating Station ('Danskammer') returned to service."