On February 18, 2021, FERC denied a rehearing request for an order it issued in October of 2020 that stated that payments received under the Commercial System Distribution Load Relief Programs (“CSRPs”) may not be excluded from the offer floors for Special Case Resources’ (“SCR”) calculation under the New York Independent System Operator, Inc.’s (“NYISO”) buyer-side market power mitigation (“BSM”) rules. Although FERC denied the request for rehearing, FERC modified and set aside the October 2020 Order in part, finding that the identified CSRPs should be excluded from the calculation of SCR offer floors in NYISO. Commissioners Clements and Christie issued concurring opinions.

As relevant to the order on rehearing, unless exempted, NYISO’s BSM rules require resources in certain geographic zones to be subject to a specified price floor to minimize entry of uneconomic resources that might artificially suppress prices in NYISO’s capacity market. SCRs are demand response resources that are eligible to provide capacity and are generally subject to BSM rules. Among the various types of SCRs at issue in the proceeding are two sets of retail-level programs from 2016: CSRPs and Distribution Load Relief Programs (“DLRPs”). In the October 2020 Order, FERC concluded that payments under the identified DLRPs qualified for exclusion from the SCR-specific BSM rules, but not payments under the identified CSRPs.

Various companies filed for rehearing, arguing among other things that FERC provided an insufficient basis for exempting the identified 2016 DLRPs, but not the identified 2016 CSRPs. In particular, the Companies argued that FERC mistakenly relied on certain expert testimony and that, in any event, the record makes clear that the CSRPs in question were designed to benefit distribution-level facilities, not address broader system-wide needs. Thus, they argued that the identified CSRPs should not be subject to buyer-side mitigation requirements because, as FERC observed in the October 2020 Order, “demand response programs that are designed to address and predominantly address distribution-level reliability needs are not properly considered as providing Installed Capacity.” Finally, the Companies argued that the October 2020 Order was “poor policy” that will have a “chilling effect” on demand response resources development, which will increase costs for consumers.

In denying the request for rehearing, FERC held that the identified CSRPs should be excluded from the calculation of SCR offer floors in NYISO. After reviewing the record evidence again, FERC agreed that the CSRPs were “designed to address” and were “address[ing] solely distribution-level reliability needs.” FERC also agreed that the CSRPs helped the certain entities “avoid, or at a minimum defer, construction of costly distribution infrastructure upgrades . . . while maintaining [the companies’] distribution system reliability.” Accordingly, FERC agreed that the CSRPs under consideration should be exempt from the BSM restrictions, as they were not designed to address system-wide needs, and that any incidental system-wide reliability benefit that the CSRPs might provide was not the result of the programs’ design.

Commissioner Allison Clements issued a concurring opinion in which she agreed with FERC’s decision to set aside, in part, its October 2020 order. However, Commissioner Clements wrote separately to express her concern about NYISO’s buyer-side market power mitigation rules and disagreement with FERC’s earlier findings in the proceeding. As Commissioner Clements argued, NYISO’s buyer-side mitigation rules are “divorced from the objective of mitigating actual monopsony power,” and serve only as “likely impediments to New York’s public policies in the name of ‘protecting’ markets within the Commission’s jurisdiction.”

Commissioner Christie also issued a concurring opinion to reiterate that the issues attendant to the intersection of state public policies and RTO/ISO markets need to be considered comprehensively in a general proceeding where all interested groups and entities can offer their views.

Click here to read the order.