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Power & Pipes

FERC, CFTC, and State Energy Law Developments

FERC has issued an order setting aside in part its prior order on New York Independent System Operator, Inc.’s (NYISO’s) buyer-side market power mitigation rules by reversing its decision not to exempt payments received under the Commercial System Distribution Load Relief Programs (CSRPs) submitted for consideration from the calculation of Special Case Resource (SCR) offer floors.

In its October 2020 order in Docket Nos. EL16-92 and EL17-996 (2020 Order), FERC had concluded that payments received under the Distribution Load Relief Programs under consideration qualified for exclusion from the calculation of SCR offer floors, but not permanents received under CSRPs. FERC’s order responded to arguments that the 2020 Order may have a chilling effect on the development of demand response resources, increase costs to consumers, impede the functioning of distribution-level demand response programs, and intrude on state authority over retail sales.

FERC was persuaded by the arguments made in multiple parties’ (the Companies) requests for rehearing. Specifically, upon reconsideration, FERC found that the Companies’ CSRPs assist the Companies “to avoid, or at a minimum defer, construction of costly distribution infrastructure upgrades . . . while maintaining [the Companies’] distribution system reliability.” FERC also found that although the Companies’ CSRPs are triggered based on forecasted system peaks, the relief occurs at the distribution level. Therefore, FERC concluded that the CSRPs under consideration are not designed to address system-wide needs and that any incidental system-wide reliability benefit that the CSRPs might provide is not the result of the programs’ design.

Commissioner Allison Clements issued a concurrence noting that while she did not participate in the previous orders in the proceeding, she agreed with the majority on the discrete question before FERC. However, she expressed a broader concern that NYISO’s buyer-side mitigation rules are “divorced from the objective of mitigating actual monopsony power, and instead now serve only as likely impediments to New York’s public policies in the name of ‘protecting’ markets within the Commission’s jurisdiction.” Commissioner Clements stated that the NYISO’s market rules must acknowledge the state’s exercise of legitimate authority and provide for an efficient wholesale market framework that respects the state’s resource mix choices.