Commissioner James Danly and Commissioner Neil Chatterjee Joint Statement
April 9, 2021
Docket No. ER21-502-001
I dissent from the majority’s rejection of the 17-year amortization period for the peaking generator plant that the New York Independent System Operator, Inc. (NYISO) proposed as part of its demand curve reset. New York has passed a law that “requires electricity demand in the State to be served by 100% zero-emission resources by January 1, 2040.”[1] Accordingly, NYISO reasonably proposed to base the depreciation period for the natural-gas burning H class frame unit that serves as the proxy resource for its Net CONE calculation on the required date for that H class frame unit to exit service, which New York State law currently dictates will be January 1, 2040.
NYISO reasoned that 17 years was the average service life for a hypothetical H class frame resource to be in service over the five years covered by the demand curve reset, 2021-2025. I actually prefer a 15-year amortization period because it likely will take at least a couple of years to build such a unit after these new demand curves are implemented, but I would not substitute my judgment that 15-years is more just and reasonable for NYISO’s 17-year proposal. Our sole duty in reviewing this section 205 filing is to determine whether NYISO’s proposal is just and reasonable in the first instance.[2] It is. Potentially better ideas are irrelevant to our analysis.
The majority cites the “speculative assumption that all fossil-fueled resources will cease operation in 2040.”[3] I find this to be puzzling. Though no one can predict the future, no one disputes that this is what New York’s statute requires. After dismissing the conclusion that New York will enforce its current law as speculative, the majority justifies its rejection of the 17-year amortization period by citing a provision in the same law that permits the New York Public Service Commission to “temporarily” suspend or modify its requirements.[4] The majority does not explain why it is speculative to assume that New York will enforce its existing statutes as a basis for setting demand curves today, but it is not speculative to assume that New York will “temporarily suspend or modify” its laws in the future. Regardless, any such “temporary” suspension or modification is not only speculative, but also of indefinite duration and effect and thus not a reasonable basis upon which to reject NYISO’s proposal.
Another argument protestors made is that fossil-fuel resources could retrofit in the future to meet New York’s renewable mandate.[5] This, too, is speculative. It is apparently also irrelevant as the majority does not see fit to address this argument. In any event, I doubt that retrofits on such a scale are likely to be spurred by artificially low capacity market prices. Retrofits are expensive, and it is obviously speculative to assume at this point that an H class frame will be able to extend its life 18 years from now by switching from burning natural gas to burning some zero-emissions fuel at a cost that would permit it to remain in service.
I also am troubled by the majority’s cherry-picking of one assumption out of the dozens, or hundreds, or thousands, of assumptions built into the NYISO section 205 filing to reset demand curves, many of which reduce the costs used for the Net CONE calculation. It is true that this one assumption regarding the amortization period has a significant cost impact, but I disagree that these cost impacts are “unnecessarily high.”[6] First, the majority does not address record evidence raised in a protest that focused on the overall rate impact of the proposed demand curves, which is to significantly reduce capacity prices in critical zones.[7] It is arbitrary and capricious to reject the proposed amortization period as too costly without considering the overall rate effect of the proposed demand curves. Second, it will be expensive to replace or retrofit all fossil fuel resources in New York in the next 18 years and 8 months, including many—like the hypothetical natural-gas burning H class frame peaking unit at the foundation of these Net CONE estimates—that have yet to be built. By requiring an artificially low demand curve today, we jeopardize reliability and only defer and increase the costs that consumers will ultimately have to bear when they eventually underwrite the construction of a new fleet of emissions-free generation resources.
Accordingly, I oppose the majority’s determination regarding the correct amortization period. I otherwise support the order.
For these reasons, I respectfully dissent in part.
[1] N.Y. Indep. Sys. Operator, Inc., 175 FERC ¶ 61,012, at P 149 (2021) (citing Climate Leadership and Community Protection Act, N.Y. Statutes, Chapter 106 of the laws of 2019 (July 18, 2019)).
[2] See City of Bethany v. FERC, 727 F.2d 1131, 1136 (D.C. Cir. 1984).
[3] N.Y. Indep. Sys. Operator, Inc., 175 FERC ¶ 61,012 at P 161.
[4] Id. P 161 n.255.
[5] See, e.g., id. P 157 (summarizing arguments).
[6] See id. P 161 (stating that the 17-year amortization period “may result in unnecessarily high Net CONE estimates”).
[7] See Independent Power Producers of New York, Inc. December 21, 2020 Protest and Supporting Comments at 6-8 (stating that NYISO’s proposed demand curve “proposes reference point prices . . . that are as much as 20% lower in certain load zones”) (IPPNY Protest). The majority twice mentions IPPNY’s concern that changes to some assumption might drive down reference prices (see N.Y. Indep. Sys. Operator, Inc., 175 FERC ¶ 61,012 at PP 28, 53), but omits any reference to IPPNY’s larger point that the proposed demand curves already reduce demand curves by as much as 20 percent and that changes should not be made to drive the prices down “even further.” See IPPNY Protest at 6-8. That is, of course, exactly what the majority does.