FERC Orders Report on Potential Changes to NYISO Zone K Capacity Rules

FERC has ordered the New York ISO to conduct a stakeholder process to review whether Zone K should be modeled as an export-constrained zone in its capacity market.

FERC said that while it agrees with NYISO that it is premature to require the ISO to file tariff language by June 1, 2015, the date the report will be due, "we believe that valuable market rule changes that could reduce costs should not be unduly delayed."

Central Hudson has said that under the current treatment of Zone K, Zone K customers avoid cost responsibility for "using up" 292 MW of scarce UPNY/SENY interface capacity, which must be paid for by customers in Zones G, H, and I in the form of higher capacity prices

NYISO has said that it is possible in principle to treat Zone K as export-constrained; however, because such modeling has not yet been justified and may not be practically implementable, it should first be evaluated through the stakeholder process.

NYISO has said that several fundamental market design changes as well as software changes may be needed to accommodate the inclusion of Zone K as an export-constrained zone, and moving to any form of export-constrained modeling would very likely be challenging to integrate.

NYISO therefore recommended that the Commission provide an opportunity for it to explore issues and proposals related to Zone K through its stakeholder process. NYISO had said that allowing it to work through these issues in detail in the stakeholder process would also give it time to continue to consider the potential development of alternative rules to pre-define and eliminate capacity zones.

FERC agreed to the stakeholder process and directed NYISO to file a report by June 1, 2015.