The Federal Energy Regulatory Commission accepted a compromise the New York ISO offered that will give power generators more notice of whether they will be charged a physical withholding penalty for retiring generation capacity.
The NYISO's physical withholding determinations are significant because a generator might decide to delay retirement rather than pay the penalty.
FERC approved a compromise March 21 under which the NYISO will issue the determinations at least 60 days before a generator's planned deactivation date, rather than 30 days.
When a generator plans to retire, the NYISO has the option to conduct a market power review if a retiring generator is in a zone subject to the grid operator's capacity market power-mitigation measures.
The market power reviews determine whether retirement decisions have a legitimate economic basis or are an attempt to affect prices by physically withholding capacity. If physical withholding is occuring that would increase New York City capacity market clearing prices by 5% or more, the NYISO assesses the generator a monthly fee until the deactivation or de-rate is justified by economic considerations.
Since 2000, more than 10,000 MW of capacity has been added in the NYISO region, and nearly 7,000 MW of capacity has retired or suspended operation, according to the grid operator's 2018 Power Trends assessment.
In April 2018, FERC ordered the NYISO to come up with a timeline for conducting market power reviews. The following May, the NYISO proposed to issue its final market power determination 30 days before a generator's deactivation date.
But the Independent Power Producers of New York, or IPPNY, said that timeline was too tight. Generators need time to take steps to wind down operations, including reaching out to local communities, ending labor agreements and making decisions to sell equipment, the group said.
In light of IPPNY's concerns, the NYISO said it was open to providing the determinations at least 60 days prior to the generator's deactivation date.
FERC found March 21 that the compromise strikes the right balance between generators' need for certainty and the NYISO's need to base the determinations on timely data. The commission also directed the NYISO to submit a compliance filing reflecting the change.
IPPNY is pleased the 60-days compromise was accepted, Matthew Schwall, director of market policy and regulatory affairs at IPPNY, said March 21. But the group maintains that "the closer the determination is to the retirement date, the greater the risk to the generation owner and the more difficult it is to make reasoned financial, operational, and contractual retirement decisions." (FERC docket ER16-120)
Kate Winston and Jasmin Melvin are reporters for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.