Electricity Markets

APPA questions FERC decision on excluding N.Y. public power from self-supply exemption

The Federal Energy Regulatory Commission failed to provide evidence to support its decision to exclude New York State public power entities from a self-supply exemption approved by the Commission in response to a New York Independent System Operator compliance filing, the American Public Power Association said in a March 23 filing at FERC.

APPA made the argument in a request for rehearing of FERC’s Feb. 20 order that accepted in part, subject to condition, and rejected in part an April 2016 NYISO compliance filing that had been submitted in response to an October 2015 order. The 2015 order directed the NYISO to revise its capacity market buyer-side mitigation rules to exempt self-supply and a certain amount of renewable resources.

These exemptions were granted in response to a complaint from the New York Public Service Commission (NYPSC), New York Power Authority (NYPA), and New York State Energy Research and Development Authority (NYSERDA).

APPA’s rehearing request focused on the portion of the February order that removed from the self-supply exemption a public power entity that is “a public authority or corporate municipal instrumentality, including a subsidiary thereof, created by the State of New York that owns or operates generation or transmission and that is authorized to produce, transmit or distribute electricity for the benefit of the public.” This language excludes NYPA and other state public power entities from the exemption.

In the rehearing request, APPA argued that the Commission did not provide evidence to support its decision to exclude such public power state entities.

FERC largely bases its decision to exclude state entities on the fact that NYPA has stated that the provision of electricity to its customers also produces benefits for the state of New York as a whole. Therefore, according to the Commission’s reasoning, NYPA has an incentive and ability to artificially suppress capacity market prices by purchasing more capacity than needed to serve its customers.

But APPA highlighted the following flaws in the Commission’s reasoning:

  • Simply because NYPA’s customer base provides economic benefits to the state as a whole does not support a finding that NYPA has a financial incentive to procure a greater amount of capacity than needed;
  • The order essentially ignores the fact that the NYISO’s compliance filing incorporated net-short and net-long thresholds into the self-supply exemption and it is the latter that was specifically designed to prevent NYPA from purchasing a greater amount of capacity than needed for its projected customer load; and
  • The order ignores other provisions of the exemption that also would prevent the exercise of buyer-side market power.

NYPA, the Long Island Power Authority, the NYPSC and NYSERDA also filed for rehearing of both the exclusion of state entities from the self-supply exemption and the restrictions placed on the renewable energy exemption in the February 20 order.