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NY state regulators start review into NYISO's resource adequacy programs

New York State's regulators commenced a review to examine the alignment of the state's resource adequacy programs with its renewable energy and emissions reduction goals.

In an Aug. 8 order, the New York State Public Service Commission voted 4-1 to initiate the review of the state's capacity market products for ensuring resource adequacy, or the power system's ability to supply and deliver the total quantity of electricity demanded at any given time accounting for scheduled and unscheduled outages of system elements.

Through a seven-question survey, the PSC will ask stakeholders whether the state's resource adequacy programs, via the New York ISO's capacity market, are effective in ensuring resource adequacy needs, given the state's clean energy mandates.

Under the Cuomo administration's Reforming the Energy Vision strategy, or REV, the PSC is committed to aligning compensation for owners of renewable and distributed energy resources for the various attributes they provide to the grid, including carbon-free power.

However, according to David Drexler, the State Department of Public Service's managing attorney, NYISO's installed capacity market is "an incomplete resource adequacy instrument because it does not recognize the value of many important factors, such as environmental benefits, local reliability benefits, and fuel diversity. Because of this, there is no guarantee that the resources that clear the capacity auctions are the same ones needed to meet the state's clean energy [goals] and other mandates," he said during an Aug. 8 PSC meeting.

Drexler also cautioned that some renewables and other resources cannot clear capacity auctions because the grid operator's treatment of them may raise their minimum bid offers, which can raise costs for customers. These issues raise questions about the "compatibility of market mechanisms with the state's energy policies," he said.

Commissioner Diane Burman voted no without prejudice. Describing it as "the elephant in the room," Burman expressed concerns that the inquiry into resource adequacy in NYISO's capacity market might undermine its responsibility to ensure adequate electricity supply.

Warren Myers, DPS Director of Market and Regulatory Economics, countered that Burman had "prematurely" raised that "elephant," while Drexler said the inquiry has no preconceived outcome.

The review will focus on assessing the policy position that the PSC should take on resource adequacy; considering how policies can best be aligned under existing mechanisms such as NYISO's installed capacity approach auctions or whether new alternative approaches should be pursued. In addition, the review will consider the cost impacts and benefits to consumers under various resource adequacy mechanisms.

"Achieving the state's clean energy goals requires the continued development and maintenance of a strong market for the development of clean distributed energy resources," the PSC said in a news release. "Likewise, New York must ensure resource adequacy."

Currently, NYISO uses its installed capacity approach, or ICAP, to promote resource adequacy by providing a pricing signal for new investment. Utilities, community choice aggregators, and third-party retail electricity suppliers are required to purchase adequate ICAP to meet peak load demand plus excess amounts, as required in the NYISO's federally-approved wholesale tariff.

Drexler acknowledged that the July 18 signing into law of the Climate Leadership and Community Protection Act, or CLCPA, by Gov. Andrew Cuomo is a large impetus behind the inquiry into the state's resource adequacy programs. The CLCPA builds upon Cuomo's REV and Clean Energy Standard by establishing programs to ensure at least 70% of load served by jurisdictional load-serving entities is from eligible renewable resources by 2030.

Given the CLCPA's new clean energy goals and the requirement that the PSC establish a program to meet a statewide goal of zero emissions from the power sector by 2040, Drexler said the DPS determined that the time was right to commence the review as a means of ensuring that the full benefit of New York's clean energy resources are properly valued and compensated.

According to the PSC, an effective resource adequacy program needs to meet two goals: to ensure sufficient power generation resources are available for the safe and reliable operation of the grid in real time and to provide appropriate incentives for the siting and construction of new resources needed for reliability in the future.

The PSC said the review is premised upon its authority and statutory responsibility for ensuring safe, adequate and reliable service at just and reasonable rates, and to encourage regulated energy companies to develop long-range programs for ensuring resource adequacy while meeting state mandates.

(Case Number 19-E-0530)