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Gas generators urge FERC to require NYISO to adopt PJM-like mitigation rules

Two natural gas-fired power plant ownership interests are urging the Federal Energy Regulatory Commission to extend a "clean" version of hotly contested market mitigation rules in the PJM Interconnection region to the New York ISO's service area.

The request came in the form of an Oct. 14 complaint (FERC docket EL21-7) filed on behalf of the 1,069-MW Cricket Valley Energy and 675-MW Empire Generating Project gas-fired plants by lawyers who also represent the Electric Power Supply Association, a competitive power producer trade group with significant thermal generator membership, in other litigation.

The complaint claimed that New York's subsidies for clean energy resources part of the state's aggressive push to achieve a 100% carbon-free electric grid by 2040 are artificially suppressing NYISO's capacity market clearing prices.

NYISO's capacity market is designed to ensure enough power is available when needed. It also sends economic signals that help guide new investment and retirement decisions.

FERC has sought to counter the effect of states' clean energy policies in the wholesale power markets it oversees through a series of market mitigation orders issued for PJM, NYISO, and the ISO New England, which all run mandatory capacity auctions.

In the case of PJM, FERC issued an order in December 2019 directing the 13-state grid operator to extend its minimum offer price rule, or MOPR, in its capacity market to all new and some existing resources that receive material state subsidies.

That order is now being challenged in federal appeals court, with several of the lawyers who filed the Oct. 14 complaint also representing the Electric Power Supply Association in that litigation. However, Cricket Valley and Empire Generating are not EPSA member companies and the trade group is still evaluating whether to engage substantively in the NYISO proceeding, EPSA President and CEO Todd Snitchler noted in an Oct. 16 email.

PJM's compliance filing responding to the December 2019 order by proposing to provide unit-specific exemptions for clean energy resources that can demonstrate their actual costs are lower than the administratively-set price floor. While environmental groups have been harshly critical of FERC's MOPR order for PJM, renewable energy developers have been cautiously optimistic that the exemptions in PJM's compliance filing will allow new projects to earn capacity market revenues.

However, the parties behind the Oct. 14 complaint requested that FERC issue a "clean" MOPR for NYISO with "no exceptions or exemptions." Echoing arguments in the PJM proceeding, the complaint asserted that below-market offers from state-subsidized resources are having "a profound impact" on clearing prices in NYISO-administered capacity market auctions.

"The impact will only become more profound as New York state aggressively moves forward with further subsidy initiatives," the complaint said.

According to an attached affidavit, the exclusion of three nuclear generators receiving zero-emission credits from the state would increase the clearing price in the NYISO by $44.27/kW-year compared to average clearing prices of $17.60/kW-year over the last year.

In its 2019 "State of the Market Report," NYISO's independent market monitor reported that capacity market spot prices rose in New York City but fell by 65% across the rest of the state. The drop was primarily due to a 485-MW reduction in NYISO's installed reserve margin and a 519-MW reduction in the grid operator's load forecast.

The Oct. 14 complaint requested that FERC issue an order by the end of the year or, in the alternative, establish a paper hearing to determine a just and reasonable replacement rate in the same way it did in the PJM proceeding.