The Federal Energy Regulatory Commission (FERC) recently announced New York’s Commercial System Distribution Load Relief Programs (CSRPs) would no longer be exempted from the New York Independent System Operator’s (NYISO’s) buyer-side mitigation. New York’s Distribution Load Relief Programs (DLRPs), however, would qualify for exemption from the calculation of Special Case Resources (SCR) offer floors.
The FERC said, “The record in this proceeding demonstrates that the purpose of the DLRPs under consideration is to maintain distribution-level reliability by reducing distribution system demands in response to contingencies and other emergencies. We find, however, that the CSRPs under consideration are not designed to address and do not address solely distribution-level reliability needs, and therefore payments received under those programs must be included in the calculation of SCR offer floors in the NYISO.”
FERC Chair Neil Chatterjee and Commissioner James Danly delivered the ruling. Both are Republicans. Commissioner Richard Glick, a Democrat, expressed his dissent, saying, “I dissent from the recent order because it once again perverts buyer-side market power mitigation into a series of unnecessary and unreasoned obstacles to New York’s efforts to shape the resource mix. Buyer-side market power mitigation should be all about and only about buyers with market power.
“In this order, the commission continues to apply buyer-side market power mitigation where it does not belong. In addition, as part of that regime, the commission imposes illogical offer floors on demand response resources that punish them for earning revenue through retail-level demand response programs. In so doing, the order creates far more problems than it solves by approving unworkable rules that will only prop up prices and place the commission in direct conflict with the State of New York.”
The debate is the result of a paper hearing started by the FERC in February 2020. While in 2017, the commission had granted a blanket exemption for SCRs from buyer-side mitigation, in February 2020, it narrowed the resources exempt from the NYISO’s buyer-side mitigation rules in southeastern New York.
“We find that a blanket exemption does not appropriately recognize that certain payments to SCRs outside of the ICAP market could provide SCRs with the ability to suppress ICAP market prices below competitive levels,” the FERC had said.
In his statement of dissent on the recent order, Glick said when buyer-side market power mitigation rules were initially introduced, they were aimed at mitigating the exercise of buyer-side market power — that is, the ability of a large buyer of capacity to exercise monopsony power to lower capacity market clearing prices. To the extent the commission required buyer-side mitigation of capacity market offers, it limited that mitigation to resources that could be used effectively for the purpose of depressing capacity market prices or to resources with both the incentive and ability to depress capacity market clearing prices.
“[Buyer-side market power rules] have evolved into a scheme for propping up prices, freezing in place the current resource mix, and blocking states’ exercise of their authority over resource decision-making. The result is an ever-expanding system of administrative pricing that is, ironically enough, justified on the basis that it promotes competition,” Glick wrote in his statement.
The primary purpose of distribution-level demand response programs, which include utility-administered distribution-level programs analogous to the DLRP and CSRP, is to benefit the administering utilities’ distribution system, feels Glick.
“The record before us suggests that both DLRPs and CSRPs are retail-level programs directed at distribution system issues. They do so by having retail customers curtail their consumption in order to reduce the stress on particular elements of the distribution system,” said Glick. “That solves a very different issue than NYISO’s SCR program, which addresses peak demand on and the reliability of the bulk power system by, among other things, calling on demand response to maintain adequate operating reserves. To see that, one need look no further than the fact that the dispatch of DLRPs and CSRPs rarely overlaps the NYISO’s SCR dispatch.”
