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NY generators seek alternative timing for market power reviews of retiring units

Generators in New York are pushing back on the electric grid operator's proposed timeline for completing final market power reviews tied to retirement requests.

Such market power reviews are used to determine whether retirement decisions have a legitimate economic basis or are an attempt to affect prices by physically withholding capacity. If physical withholding that would increase New York City capacity market clearing prices by 5% or more is occurring, the New York ISO assesses the generator a monthly fee until the deactivation or de-rate is justified by economic considerations.

But because the NYISO has no deadline for issuing final physical withholding determinations, market participants are left in the dark concerning the likelihood that generation they seek to retire would face penalties, which potentially hinders their ability to make informed deactivation decisions, Federal Energy Regulatory Commission said in an April 23 order. Thus, the commission directed the NYISO to add to its tariff a reasonable timeline for completing market power reviews as part of the generator deactivation process that governs the grid operator's reliability-must-run program.

NYISO's plan

In its subsequent May 23 compliance filing, the NYISO laid out two types of events that would trigger the issuance of a final physical withholding determination.

"The simpler of the two scenarios" applies to generators that submit retirement requests at least 60 days prior to their planned deactivation date and requires the NYISO "to provide its final physical withholding determination to the market participant at least 30 days before the timely deactivation date … specified in its notice," the filing said. Under that scenario, the NYISO's determination only is binding if the generator is actually shut down no more than five days before and no more than 10 days after the requested deactivation date.

"The second, more complex, scenario arises when market participants must make irrevocable deactivation-related decisions well in advance of the date on which a generator actually deactivates," such as a decision by a nuclear generator to procure fuel for its next refueling, the grid operator's filing said.

In those instances, a market participant would notify the NYISO at least 60 days ahead of the event with irreversible consequences. If the NYISO agrees the event would make the generator's deactivation "essentially and practicably irreversible," then the proposal specifies that the grid operator would issue a final physical withholding determination at least 30 days prior to that event.

Proposed timeline 'holds the generator hostage'

In comments filed with FERC, the Independent Power Producers of New York, or IPPNY, said the NYISO's proposed timeline "effectively holds the generator hostage until a month before its intended deactivation date."

IPPNY argued that providing "the physical withholding determination 30 days before the end of the deactivation process does not provide a reasonably adequate amount of time for a market participant to make informed decisions and effectively implement the measures necessary to deactivate its generator." Further, the trade group said, the "NYISO then compounds this unreasonable situation for the generator by requiring that the generator deactivate very close to the intended date without providing any basis for these newly proposed, extremely tight time frames."

The trade group accordingly asked FERC to reject the NYISO's proposed timeline and offered modified deadlines for issuing physical withholding determinations based on a set of different scenarios under which generators may seek to retire.

Under the timeline envisioned by IPPNY, the NYISO would issue a final physical withholding determination "no later than 30 days before the requested deactivation date but no earlier than 90 days after the generator deactivation assessment start date" when retirement notices come in 150 or less days before the requested deactivation date. Retirement notices submitted more than 150 days but within 365 days of the deactivation date would have their final market power review issued "no later than 120 days after the generator deactivation assessment start date."

For retirement requests made more than a year ahead of planned deactivation but with an irreversible decision point in the interim, the final market power determination would be due "no later than 30 days before the date that the market participant could make a decision that is irreversible," IPPNY said. "For all other requested deactivation dates," the final physical withholding determination would be issued "no later than 240 days before the requested deactivation date."

IPPNY contended that its proposed timeline "appropriately balances the market participant's need for certainty of when it can deactivate its generator with sufficient time to align the termination of its business arrangements with the deactivation and the NYISO's need to assess whether the planned deactivation would constitute physical withholding."

Potomac Economics, the market monitoring unit for NYISO, supported the grid operator's proposal, however, saying the timeline it sets forth positions the NYISO "to perform its evaluation based on market conditions that are close to the time of deactivation." (FERC dockets EL15-37, ER16-120)

Jasmin Melvin is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.