On February 17, 2022, FERC set aside its September 2020 order rejecting the New York Independent System Operator Corporations (“NYISO’s”) tariff revisions to the “Part A Test,” a component of NYISO’s buyer-side mitigation (“BSM”) rules. The now-approved changes on rehearing permit NYISO to prioritize entry of renewable resources, battery storage, and other zero emission resources (“Public Policy Resources”) in New York’s Installed Capacity (“ICAP”) Market, rather than prioritizing new resources purely on a least-cost basis. FERC also ordered NYISO to submit a compliance filing within 30 days proposing a new effective date for its tariff revisions. Commissioner James Danly issued a separate dissenting statement, arguing that the reversal was a “cynical attempt” to preference renewable resources. Commissioner Mark Christie issued a separate concurring statement, agreeing with the majority that the result was just and reasonable in NYISO after concluding that the costs of the change would be confined to New York.

NYISO originally submitted proposed revisions to its BSM rules, including to the Part A Test, in April 2020 (see September 16, 2020 edition of the WER for more background on the Part A Test and NYISO’s April 2020 filing). As relevant here, NYISO’s April 2020 filing proposed to change the Part A Test by evaluating Public Policy Resources in ascending order of Net Cost of New Entry (“CONE”) before evaluating any non-Public Policy Resources in ascending order of Net CONE. NYISO explained that its proposal was designed to reflect the fact that the development and entry of Public Policy Resources is reasonably certain, even if these resources do not have the lowest Net CONE, as a result of New York’s public policy initiatives, including the Climate Leadership and Community Protection Act (“CLCPA”). The CLCPA requires that 70 percent of energy consumed in New York be produced by renewable resources by 2030 and that all energy consumed in the state be completely emissions free by 2040.

FERC rejected NYISO’s proposal in a September 2020 order on the basis that it was unduly discriminatory. FERC stated that Public Policy Resources were similarly-situated to non-Public Policy Resources and disagreed with arguments that the anticipated prevalence of Public Policy Resources in New York justified disparate treatment.

FERC’s February 17 order on rehearing modified the discussion in its September 2020 order, set the order aside in relevant part, and accepted NYISO’s proposed revisions to the Part A Test. In re-examining the record, FERC found sufficient evidence to conclude that Public Policy Resources and non-Public Policy Resources are not similarly situated for purposes of applying the Part A Test and thus, that disparate treatment of such resources is justified. FERC agreed that in light of the CLCPA, Public Policy Resources are more likely than their non-Public Policy Resource counterparts to be constructed due to more favorable laws and policies governing siting, operation, and financing. FERC also stated its agreement with the New York Transmission Owners’ arguments that while Net CONE has historically been the best indicator of whether a resource would be constructed, the better indicator in New York now is whether the resource is a Public Policy Resource.

In addition, the February 17 order reversed FERC’s prior conclusion that Public Policy Resources and non-Public Policy resources are similarly-situated in that they must adhere to similar requirements for interconnection and for participation in the NYISO ICAP Market. FERC stated that on reconsideration, such similarity is not dispositive, and that the language in the September 2020 order was overbroad and contrary to FERC precedent. FERC also pointed to evidence presented by NYISO’s Market Monitoring Unit indicating that the revisions to the Part A Test would produce more efficient, lower-cost outcomes that will benefit consumers in the long run.

Commissioner Danly’s separate dissenting statement began with the premise that discrimination is undue when there is a difference in rates or services among similarly-situated customers that is not justified by some legitimate factor. Commissioner Danly concluded that New York’s favorable laws and policies for Public Policy Resources are not “a material, lawful or legitimate factor” and “cannot justify the proposal’s disparate treatment of Public Policy Resources before non-Public Policy resources.” Commissioner Danly stated that FERC’s decision “is obviously the majority’s cynical attempt to justify (however unconvincingly) the approval of a tariff that just happens to advance their preferred public policy objectives.”

Commissioner Christie submitted a separate concurring statement. Commissioner Christie characterized the majority’s reasoning as employing “certain unnecessarily overreaching language,” but acknowledged that New York has enacted legislation making clear its preference for certain types of generating resources. Commissioner Christie stated that each state has the sovereign authority to choose the generation resources necessary to meet its own power supply needs, and that the FPA does not pre-empt states from exercising this authority even if its utilities enter a Regional Transmission Organization (“RTO”). In the absence of any evidence that citizens of other states will bear the costs of New York’s policy decisions, Commissioner Christie concluded that NYISO’s proposal was not unjust and unreasonable. However, Commissioner Christie emphasized that a similar analysis could lead to a different outcome in a multi-state RTO.

FERC’s February 17 order is available here.