FERC approves NYISO reserve rules for forecast uncertainty

The Federal Energy Regulatory Commission approved the New York Independent System Operator's proposal to implement new reserve requirements aimed at addressing forecast uncertainties in its day-ahead and real-time markets.

The July 2 order (ER25-1998) seeks to tackle challenges in predicting energy supply and demand, particularly with the growing reliance on renewable energy sources such as wind and solar power.

FERC said NYISO's proposal for additional operating reserve requirements throughout the New York Control Area would help ensure that the grid operator "can maintain system balance without relying on out-of-market actions to address forecast errors associated with load and intermittent resources."

In its April filing, NYISO highlighted that demand growth and the anticipated addition of more load and intermittent resources heavily dependent on the weather would increase the risk of significant deviations between conditions anticipated in the day-ahead market and what materializes in real time. To get ahead of this, the NYISO proposed adding so-called uncertainty reserve requirements to its existing reserves structure.

The proposal includes a formulaic process based on historical forecast errors to determine the quantity of additional operating reserves needed to manage uncertainties. These reserves would be procured through NYISO's existing energy and ancillary services processes in the day-ahead and real-time markets.

The uncertainty reserve requirements aim to achieve a 95% probability that the additional reserves would offset the net effect of uncertainty associated with load, wind and solar energy forecasts.

NYISO also proposed a pricing mechanism within its operating reserve demand curves, using shortage pricing values to set the price of reserves procured for uncertainty reserve requirements. Prices would be lower to reflect the lower priority of uncertainty reserves compared with reserves needed to meet other reliability requirements.

FERC accepted the proposal, finding it just and reasonable, not unduly discriminatory or preferential and capable of addressing NYISO's operational challenges stemming from load and intermittent resources. The commission also granted NYISO's request for a flexible effective date for the new requirements.

The NYISO said that the effective date could be as soon as June 1, 2026, but that it needed time to finish, test and deploy software changes needed to implement the new reserve requirements. It added that it filed the proposal more than 120 days before implementation, in contradiction to FERC regulations, to offer it and its stakeholders more certainty regarding the upcoming market rule changes.

FERC granted NYISO a waiver of the 120-day notice rule, citing "for good cause," and directed the grid operator to notify the commission through an informational filing at least two weeks prior to the date the market rule changes will take effect.