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Commissioner Tony Clark Statement
December 10, 2012
Docket No. EL12-56-000
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Riverbay Corp v. NYISO

“We agree with the majority that the only question presented by the complaint is whether or not Technical Bulletin 217 is consistent with NYISO’s Tariff. But while the order properly identifies the question before it, it does not answer the question. Instead, it merely recites the Complainants’ arguments that the Tariff is ambiguous and finds that ambiguity is a valid justification for granting the complaint. The order then directs NYISO to cease enforcing the Technical Bulletin, but to submit a compliance filing revising the Tariff to reflect the Technical Bulletin’s requirements.

“We disagree with granting the complaint. Further, we believe that answering the question posed in the complaint requires interpretation of the Tariff, and that such interpretation reveals that Technical Bulletin 217 is consistent with the Tariff. Moreover, by granting the complaint and requiring a compliance filing, the Order has the effect of: (1) allowing reliability concerns voiced by NYISO to persist; and (2) requiring customers to pay for demand response the Complainants cannot provide. Therefore, we respectfully dissent.

I. Technical Bulletin 217 is Consistent with the Tariff

“Drafted in response to a stakeholder question concerning the eligibility requirement for Special Case Resources, Technical Bulletin 217 clarifies that capacity regularly used to serve load from behind the meter generators cannot be used in calculating the amount of demand response a Special Case Resource is eligible to provide because Special Case Resources must be able to reduce system load at the direction of the NYISO. NYISO explains this limitation exists because it relies on Special Case Resources to reduce load on short notice during specific events. Thus, according to NYISO, behind-the-meter generation that cannot reduce load at its direction (because it is entirely dedicated to serving a local power need) is incapable of providing emergency demand response.

“Complainants operate or represent behind-the-meter generators. They assert that they participate in the Special Case Resources Program (ICAP/SCR Program) pursuant to section 2.19 of the Tariff, which defines Special Case Resources to include “Local Generators.” Their main argument is that Technical Bulletin 217 effectively truncates the Tariff’s definition of capacity (“the capability to generate or transmit electrical power, or the ability to control demand at the direction of the ISO, measured in megawatts”) by reducing it to “the ability to control demand at the direction of the ISO.”

“We believe that the question posed in this proceeding requires an examination of the Tariff to determine whether the Technical Bulletin is or is not a substantial change to the Tariff that requires a stakeholder vote as Complainants allege. Upon carrying out this analysis, we have concluded that the Tariff is most reasonably read to already require what is stated more clearly in Technical Bulletin 217 – that Special Case Resources can only participate in the ICAP/SCR Program if they can reduce demand from the system at NYISO’s direction.

Section 2.19 of the Tariff defines a Special Case Resource as follows:

    Demand Side Resources capable of being interrupted upon demand, and Local Generators, rated 100 kW or higher, that are not visible to the ISO’s Market Information System and that are subject to special rules, set forth in Section of this ISO Services Tariff and related ISO Procedures, in order to facilitate their participation in the ICAP market as Installed Capacity Suppliers. (emphasis added)

Section allows for the qualification of Special Case Resources that:

    (i) are available to operate for a minimum of four (4) consecutive hours each day, at the direction of the ISO…following notice of the potential need to operate twenty-one (21) hours in advance…; and (ii) were not operated as a Load modifier coincident with the peak upon which the LSE Unforced Capacity Obligation of the LSE that serves that customer is based, unless that LSE’s LSE Unforced Capacity Obligation is adjusted upwards to prevent double-counting. (emphasis added)

“Complainants assert that the term “Local Generators” in section 2.19 supports their argument because it represents a separate category of Special Case Resources that is not required to perform emergency demand response at the direction of NYISO. The majority contends that section supports this argument because requirement (ii) can be read to permit Local Generators to qualify as Special Case Resources even if they cannot be used to perform emergency demand response at the direction of NYISO. The majority recites Complainant’s arguments and, without analysis, finds that they render the Tariff ambiguous.

“We find that Complainant’s interpretation of the Tariff is not plausible. In order to entertain Complainants’ argument, the majority must read requirement (ii) in section apart from the remainder of the section, which provides that Local Generators must comply with both requirements (i) and (ii). The relevant section, read as a whole as required by Commission precedent, provides that Local Generators must comply with both requirements (i) and (ii). Therefore, a demand response provider enrolled as a Special Case Resource cannot rely on requirement (ii) alone; it must also be able to show that it is able to satisfy requirement (i), which specifies that it must be able to reduce demand at the direction of the ISO.

II. Continued Payment for Demand Response

“The order also fails to explain why Complainants should receive payment for demand response they cannot provide until the Commission acts on a future NYISO compliance filing. We find this approach to be of particular concern here since NYISO highlights the reliability concerns that are presented by resources that do not have the ability to reduce load when called upon under the ICAP/SCR Program.

“In its answer, NYISO provides the example of a behind-the-meter generator that supplies 2 MW to its own load and never takes power from NYISO’s system. NYISO notes that if this resource participates as a Special Case Resource by “adding back” 2 MW to its ICAP/SCR demand response eligibility, then a resource that creates no load on the system would be credited with the ability to provide 2 MW of load reduction when called upon by NYISO; when in actuality, the resource would provide no net load reduction on the system. This scenario permits “a [Special Case Resource] to receive a full capacity payment for generation that it regularly operates to serve base load” behind the meter and “adversely impact[s] system reliability.”

“The Commission has addressed concerns nearly identical to those raised by NYISO in a proceeding on the New England Day-Ahead Load Response Program (DALRP). In that proceeding, participants in the DALRP were receiving compensation for demand response during core DALRP hours (non-holiday weekdays from 7 AM to 6 PM) without actually providing any demand response during those hours. Addressing a particular example concerning parties that had shifted their load to off-peak hours (hours that were not eligible for compensation under the DALRP program), the Commission stated that “it is not clear what these participants are being paid for, nor what demand response they could provide when called upon, since they are not operating during these hours.” The Commission further found that “besides raising payment issues (in both the energy and capacity market), this also poses a threat to system reliability.”

“While the majority argues that the DALRP proceeding is distinguishable because ISO-NE’s program was “exclusively a demand response program,” the fundamental concerns in these two proceedings are identical. In the DALRP proceeding, the Commission took direct action to address the harm to reliability and concerns over inappropriate compensation for resources that were unable to reduce load when called upon by ISO-NE. Both of these issues are present in this proceeding. However, here the majority requires that Complainants receive payments for demand response they cannot provide until a future time when the Commission approves NYISO’s compliance filing.

“We cannot support this result, as granting the complaint undercuts the fundamental integrity of the ICAP/SCR program and is inconsistent with a reasonable interpretation of the existing Tariff. This is a program available to interruptible load and emergency backup generation designed to respond in the case of reliability events. Therefore, we see no basis for the continued compensation of resources that purport to provide demand response yet do not and cannot reduce system load. If Complainants do not intend or cannot reduce consumption from the grid when directed to do so by NYISO, they cannot provide the reliability service that the ICAP/SCR program is intended to provide and therefore should not be compensated as a demand resource.

“Accordingly, we respectfully dissent.”