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US FERC approves compromise on NYISO retiring unit review time line

Washington — The Federal Energy Regulatory Commission has accepted a compromise offered by New York Independent System Operator that will give power generators more notice of whether they will be charged a physical withholding penalty for retiring generation capacity.

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NYISO's physical withholding determinations are significant because a generator might decide to delay retirement rather than pay the penalty. FERC on Thursday approved a compromise for NYISO to issue the determinations at least 60 days - rather than 30 days - before a generator's planned deactivation date.

When a generator plans to retire, NYISO has the option to do a market power review if a retiring generator is located in a zone subject to NYISO'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 occurring that would increase New York City capacity market clearing prices by 5% or more, 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 NYISO, and nearly 7,000 MW of capacity has retired or suspended operation, according to NYISO's 2018 Power Trends assessment.

FERC in April ordered NYISO to come up with a timeline for doing market power reviews. NYISO in May proposed to issue its final market power determination 30 days before a generator's deactivation date.

But the Independent Power Producers of New York 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, NYISO said it was open to providing the determinations at least 60 days prior to the generator's deactivation date.

FERC on Thursday found this compromise strikes the right balance between generators' need for certainty and NYISO's need to base the determinations on timely data. The commission directed NYISO to submit a compliance filing reflecting this change, according to an order (ER16-120) issued at the commission's monthly meeting.

IPPNY is pleased the 60-days compromise was accepted, Matthew Schwall, director of market policy and regulatory affairs at IPPNY, said Thursday. 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," he said.

-- Kate Winston, kate.winston@spglobal.com

-- Jasmin Melvin, jasmin.melvin@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com