Commissioner Richard Glick Statement
September 4, 2020
Docket No. ER20-1718-001
Today’s order is just the latest in the Commission’s ever-growing compendium of attempts to block the effects of state resource decisionmaking. To achieve that end, the Commission has perverted NYISO’s buyer-side market power mitigation rules into a mind-boggling series of unnecessary and unreasoned obstacles aimed at stalling New York’s efforts to transition the state toward its clean energy future. As a result, those rules have become an unprincipled regime that has little to do with buyers or the exercise of market power.
Today’s order only takes us further down the garden path. This time the Commission does not even bother trying to hide behind “price suppression,” “investor confidence,” “market integrity,” “the premise of capacity markets,” or any of the other inscrutable buzz words that it has used to justify its efforts to “nullify” state policymaking. Without disputing NYISO’s explanation that these reforms would not cause any “price suppression,” the Commission nevertheless rejects the filing because it would expressly facilitate the entry of resources needed to meet New York’s public policy goals. The Commission’s approach is both deeply misguided and will ultimately doom NYISO’s current capacity market construct by forcing New York to choose between the Commission’s constant meddling and the state’s commitment to addressing the existential threat posed by climate change.
Appreciating the implications of today’s order requires a brief foray into the tangled web of buyer-side market power mitigation rules in NYISO’s capacity market. In addition to the exemptions for competitive entry, some self-supply, and the recently approved (but severely limited) renewables exemption, NYISO also implements two additional measures—the Part A and Part B Exemption Tests. Under the Part A Exemption Test, a new resource is exempted from mitigation if the forecasted capacity price for the first year that the resource is operational is higher than the Default Offer Floor, which is 75 percent of the Net Cost of New Entry (Net CONE) of the hypothetical unit modeled in the currently effective demand curve. Under the Part B Exemption Test, a new resource is exempted from mitigation if the average forecasted price in the initial three years of its operation is higher than that particular resource’s Net CONE. These two exemptions are supposed to add some common sense to the mitigation regime by allowing new resources to enter the market without mitigation if capacity gets tight or if the project would likely be economic over the course of its first three years of operation.
Against that backdrop, NYISO has proposed a set of minor, but eminently reasonable changes intended to ensure that the Part A Exemption Test accurately reflects the commercial and regulatory realities in New York. The only change that elicits any analysis from the Commission in this order is NYISO’s proposal to prioritize resources that meet New York’s public policy goals in administering the Part A Exemption Test. NYISO explains that doing so would reflect the practical realities in New York, where resources that satisfy the state’s policy goals, including the targets in its ambitious Climate Leadership and Community Protection Act, are more likely to reach commercial operation. NYISO points to several reasons why that will be the case, including that Public Policy Resources are more likely to secure the necessary permits and siting permissions, more likely to secure firm off-takers, and more likely to secure favorable financing. For example, NYISO explains how the Accelerated Renewable Energy Growth and Community Benefit Act, passed just a few months ago, established an office specifically for the purpose of accelerating the permitting of large renewable energy facilities.
NYISO explains that, as a result of these developments, a resource’s cost structure is no longer the best predictor of whether it will ultimately get developed. Instead, the best indicator is whether the resource is consistent with New York’s policy goals. And, because the Part A Exemption Test is ultimately about facilitating the entry of new resources when they are needed to address tight capacity margins, the likelihood that resources that qualify for the exemption secure the necessary permits, financing, and contractual arrangements is of paramount importance and should dictate the order in which resources are evaluated for the exemption.
At the same time, NYISO’s proposal will not affect the mechanisms that ensure that prices remain at what the Commission calls “competitive levels.” NYISO explains that its proposal will not change the amount of capacity that qualifies under the Part A Exemption Test, meaning that it will not result in so-called “price suppression.” To the contrary, as NYISO explains, ignoring the state’s public policy priorities in the Part A Exemption Test would undermine the purpose of that exemption insofar as it would let resources into the market to address a perceived capacity “need” that will already be met by the state’s preferred resources. Under those circumstances, resources that would otherwise be subject to NYISO’s buyer-side market power mitigation would be exempt based on the misapprehension that the resources’ capacity is “needed.”
Nevertheless, the Commission rejects NYISO’s filing with perfunctory reasoning that displays not even the slightest effort to wrestle with, or even correctly characterize, the arguments advanced by NYISO or the other supporting parties. The Commission first asserts that Public Policy Resources and non-Public Policy Resources are similarly situated because they have similar requirements for interconnection and capacity market participation. That’s beside the point. NYISO’s filing suggests that Public Policy Resources are not similarly situated for the purposes of the Part A Exemption Test because they are subject to relatively favorable siting regimes and, as a result of their status under New York law, are more likely to secure the customers and financing that help ensure that they get developed successfully. Given that the purpose of the Part A Exemption Test is to facilitate the entry of resources when capacity margins are getting tight and additional resources are needed, the likelihood that the exempted resources actually appear is a highly relevant and distinguishing feature that would support differential treatment. Accordingly, the fact that the Public Policy Resources are subject to the same market and interconnection rules as non-Public Policy Resources is irrelevant.
In any case, the Commission has repeatedly recognized that state support may constitute a distinguishing factor that renders resources not similarly situated. For example, in its order accepting ISO New England’s Competitive Auctions with Sponsored Policy Resources (CASPR) construct, the Commission approved of an entire new market—the substitution auction—that was open only to state-sponsored resources. Why it is appropriate to limit an entire auction mechanism to state-sponsored resources, but unduly discriminatory for an ISO to prioritize state-sponsored resources in administering a single exemption from mitigation is, of course, never explained. Instead, the Commission responds only with the puzzling statement that CASPR is inapt because that filing was focused on “mitigating the impact of public policy resources.” Putting aside whether that is an accurate characterization of the intent behind CASPR, it still provides no explanation for the Commission’s determination that the substitution auction was not unduly discriminatory but NYISO’s proposal in this filing is.
The Commission next turns to another strawman. In addressing NYISO’s discussion of the various New York laws that make the development of Public Policy Resources more likely than other resources, the Commission states that it “disagree[s] that the prevalence of Public Policy Resources in the future composition of New York State’s resource mix means they are not similarly situated to non-Public Policy Resources for the purposes of the Part A test.” But no one, certainly not NYISO, argued that non-Public Policy Resources are not similarly situated only because there will be more of them. . Instead, the argument is that Public Policy Resources are more likely to enter the market and, accordingly, it is appropriate to prioritize those resources when administering an exemption intended to ensure that new capacity enters the market when supply is tight. The Commission’s failure to address NYISO’s actual arguments—rather than caricatures of those arguments—is another reason why today’s order is arbitrary and capricious.
That brings us to the Commission’s final argument, which represents a subtle, but important shift in its campaign against state policies. As noted, the Commission’s previous orders on this issue have generally focused, in one form or another, on the idea that state policies are unduly suppressing wholesale market prices. NYISO’s proposal in this filing, however, would not change the number of resources that qualify or the supply of capacity that is exempt from NYISO’s buyer-side market power provisions. As such, it would not have any effect on capacity market prices.
Not to be dissuaded, the Commission still rejects the filing. Lacking any of its usual excuses, the Commission suggests that considering “federal, state, or municipal renewable energy policies” is somehow inimical to its responsibilities under the Federal Power Act. That argument appears to stake out the new, and even more radical, position that it is improper for an RTO to design its tariff in a way that even acknowledges, much less accommodates, state public policies—an approach that is both fundamentally misguided and a striking departure from Commission precedent and practice. Indeed, until recently, the Commission has long asserted an interest in balancing the effects of state policies with measures to address how those policies affect capacity market prices. While reasonable minds can disagree over how effectively the Commission struck that balance in years gone by, it is hard to argue that today’s order does anything but confirm that the era of respect for state decisionmaking is over.
And that, in turn, puts RTOs and ISOs in an impossible position, forcing them to juggle the Commission’s ideological antipathy toward state efforts to shape the resource mix with the realities that Congress gave states responsibility over resource decisionmaking and that the physical system will ultimately, and rightfully, reflect those state choices. This filing sought to strike a balance between those concerns by taking into account the effects of New York law while avoiding any of the “price suppression” concerns on which the Commission has been so focused. And NYISO appeared to have done so admirably. The proposal received a super-majority of votes in the stakeholder process and not a single party protested this issue before the Commission, including any of the generator groups that have cheered on the Commission’s slew of recent buyer-side mitigation orders. But, of course, the Commission thinks it knows better than NYISO’s stakeholders, better than NYISO’s Market Monitoring Unit, better than the New York State Public Service Commission, and better than the people of New York. In rejecting NYISO’s proposal, the Commission makes clear how little it cares about stakeholder compromise or the consequences its actions will have for the practical reality of running an organized wholesale market.
Finally, it is worth reiterating that the most likely outcome of the Commission’s misguided campaign to “protect” capacity markets is their ultimate dissolution. Today’s order makes that result all-the-more likely. New York is currently considering whether to “take back” resource adequacy from NYISO, a move motivated in large part by the Commission’s efforts to prevent the NYISO market from reflecting the state’s policy choices. The evident hostility toward state policies displayed in this order will only add fuel to that fire.
For these reasons, I respectfully dissent.
 See, e.g., N.Y. Indep. Sys. Operator, Inc., 172 FERC ¶ 61,058 (2020) (Glick, Comm’r, dissenting at P 1) (explaining that the Commission’s order “perverts buyer-side market power mitigation into a series of unnecessary and unreasoned obstacles to New York’s efforts to shape the resource mix”).
 See, e.g., id. (Glick, Comm’r, dissenting at P 16) (concluding that buyer-side market power mitigation rules that do not address buyers with market power are per se unjust and unreasonable). In a baffling response, the Commission suggests that my opening paragraph “implies that because the provision at issue is referred to as the buyer-side market power mitigation measure, this should act as a limiting factor in the Commission’s analyses of this provision,” but that the “Commission looks at the full impact and scope of proposed changes to a tariff provision when determining whether it is just and reasonable and not unduly discriminatory or preferential.” N.Y. Indep. Sys. Operator, Inc., 172 FERC ¶ 61,206, at n.72 (2020) (Order). Quite honestly, I have no idea what that footnote means. See N.Y. Indep. Sys. Operator, Inc., 172 FERC ¶ 61,058 (Glick, Comm’r, dissenting at P 30). But I certainly would not disagree that the Commission must look at the full impact and scope of the changes in a proposed filing. But, in this proceeding, it has failed to do exactly that.
 See, e.g., Calpine Corp., 171 FERC ¶ 61,034 (2020) (Glick, Comm’r, dissenting at P 18).
 NYISO, Services Tariff, Attach H., § 18.104.22.168.9.
 Id. § 22.214.171.124.14; see also N.Y. Indep. Sys. Operator, Inc., 172 FERC ¶ 61,058 (Glick, Comm’r, dissenting at PP 22-25) (explaining why the Commission’s treatment of the New York Power Authority under the self-supply exemption was arbitrary and capricious).
 NYISO, Services Tariff, Attach H., § 126.96.36.199.13; see N.Y. Indep. Sys. Operator, Inc., 172 FERC ¶ 61,058 (Glick, Comm’r, dissenting at PP 26-30).
 NYISO Transmittal at 4; see NYISO, Services Tariff, Attach H., § 188.8.131.52.2.
 NYISO Transmittal at 4; see NYISO, Services Tariff, Attach H., § 184.108.40.206.2.
 NYISO Transmittal at 4-5.
 NYISO proposes to define these resources as Public Policy Resources, which include energy storage resources, wind and solar resources, and other resources that NYISO determines to be zero emitting and consistent with New York’s public policy goals. Id. at 14.
 NYISO Transmittal at 12-13; see New York State Public Service Commission Comments at 4.
 NYISO Transmittal at 13.
 Id. (“In the past, it has been reasonable to assume that the most economic resources would be the first to construct in response to market price signals. . . . However, it is no longer valid to assume that the most economic resources are the most likely to be built without reference to the type of resource involved. Considering [Public Policy Resources] before other resources, while continuing to rank resources within each category based on their costs, is more reasonable in light of the interplay of economic and policy considerations in New York State.”).
 Id.; see New York State Public Service Commission Comments at 4.
 NYISO Transmittal at 12 (explaining that the “the core purpose of the Part A Exemption Test . . . is to identify whether the market has a sufficiently small surplus so that new entry should not be subject to an Offer Floor.”).
 Id. at 14.
 Id. at 13 (“Performing Part A Exemption Tests for [Public Policy Resources] first would not result in price suppression.”); see Market Monitoring Unit Comments at 8 (noting that “the current [buyer-side market power mitigation] rules would impede state policy goals even where the subsidized resources would not suppress capacity prices”). In addition, NYISO’s proposal would not affect non-Public Policy Resources’ eligibility for other exemptions from mitigation. As NYISO explains, “[t]he proposed enhancements to the Part A Exemption Test would not prevent non-[Public Policy Resources] from receiving an exemption. Unsubsidized resources would continue to be able to obtain a Competitive Entry Exemption under the [buyer-side market power mitigation rules], which do not depend on the order of the Part A Exemption Test evaluation, regardless of resource type.” NYISO Transmittal at 14.
 See id. at 13.
 See infra P 9.
 Order, 172 FERC ¶ 61,206 at P 29.
 NYISO Transmittal at 13.
 See ISO New England Inc., 150 FERC ¶ 61,065, at P 26 (2015) (“As the Commission has previously explained, the [Federal Power Act] does not forbid preferences, advantages, and prejudices per se. Rather, [it] prohibits ‘undue’ preferences, advantages and prejudices.”); id. (explaining that discrimination is not undue where the relevant entities are not “similarly situated”).
 ISO New England Inc., 162 FERC ¶ 61,205, at PP 7, 45 (2018).
 Order, 172 FERC ¶ 61,206 at n.76.
 Id. P 30
 NYISO Transmittal at 13-14.
 See, e.g., Calpine Corp., 171 FERC ¶ 61,034, at P 25.
 If anything, NYISO’s proposal would improve long-term price signals. NYISO’s Market Monitoring Unit explains that, without NYISO’s proposed reprioritization, there may be an inefficient entry of conventional resources, which could lead to higher costs for consumers and other market distortions, including lower energy and ancillary service prices, which can harm supply resources. NYISO Deficiency Response, Patton Aff. at 10.
 Never mind the fact that NYISO’s proposed definition of Public Policy Resources is not limited only to renewable resources. See NYISO Transmittal at 14.
 See, e.g., New York Indep. Sys. Operator, Inc., 172 FERC ¶ 61,058 (Glick, Comm’r, dissenting at PP 18-19); Calpine Corp., 171 FERC ¶ 61,034 (Glick, Comm’r, dissenting at PP 98-100).
 New York Indep. Sys. Operator, Inc., 172 FERC ¶ 61,058 (Glick, Comm’r, dissenting at P 19 (citing N.Y. Pub. Serv. Comm’n, Case 19-E-0530, Order Instituting Proceeding and Soliciting Comments (Aug. 8, 2019), http://documents.dps.ny.gov/ public/Common/ ViewDoc.aspx?DocRefId=%7b1D25F4BE-9A05-463F-A953-790D36E318BC%7d.)).