FERC Filings
COMPLAINT CONCERNING ALLOCATION OF SYSTEM UPGRADE FACILITY COSTS
ARGUMENT
A. The Generic Units In The Baseline Assessment Must Be Both Prudently Selected And Feasible On A Year-By-Year Basis
The NYISO incorporated generic units into the Baseline Assessment without determining whether they were cost-effective on a total cost basis or could be feasibly constructed in time to meet reliability requirements. First, with respect to the NYISO’s limitation of selection criteria to a single factor, minimization of system upgrade facility costs to Con Edison, the purpose of including the generic units is to establish a reasonable baseline cost for meeting reliability requirements. Attachment S adopts the criterion of good utility practice in the definition of system upgrade facilities and, moreover, provides that a transmission owner may only recover “reasonably incurred costs” in connection with system upgrade facilities. While the Board asserted that the NYISO evaluated the generic generating units from an integrated utility’s planning perspective, it nevertheless simply disregarded this standard when it claimed, without analysis or support, that the selection of generic generation units can be based simply on which system upgrade facilities have the least system upgrade costs. “Least-cost,” as the Board uses it, refers only to least cost to Con Edison, the transmission owner. To use an example, the Board argues for selecting a plant that would have lifecycle costs of, say, $500 million, and no system upgrade costs, over an alternative plant with lifecycle costs of $100 million, and system upgrade costs of $10 million. This absurd result is wholly inconsistent with “good utility practice” as required by Attachment S and sensible integrated utility planning, which the NYISO relies on elsewhere in defending its Baseline Assessment. Moreover, such a choice is flatly inconsistent with the “not-in-Central-Park” requirement that selection of the generic units be realistic. Indeed, in the stakeholder discussions of cost allocation, which led to the NYISO’s filing of the proposed Attachment S, it was agreed by all parties that generic units should not be unreasonably sited, which agreement was referred to for simplicity as “not-in-Central-Park.” Plaskon Affidavit, Para. “4.”
Clearly, if transmission owners or the NYISO had to arrange for the construction of such units, they would do so on the most cost-effective basis, taking into account the total costs of constructing and operating the units, not just transmission system upgrade costs. The NYISO, however, did not determine whether any of the six generic generating units identified in the Cost Allocation Report were reasonable choices, considering the overall costs associated with the units and the time required to bring the units online. As a result, the Baseline Assessment is not a realistic cost estimate of meeting reliability requirements, but a cost estimate designed to shift, to the maximum extent possible, the cost of system upgrade facilities to developers.
Second, with respect to feasibility requirements, NYISO Staff’s selection of units which cannot meet the in-service schedule needed to satisfy reliability requirements, violates the requirement of Attachment S that the facilities must be feasible solutions for the year they are needed. Attachment S requires the NYISO to add sufficient generic generating units that are “feasible” on a “year-by-year” basis to the Baseline Assessment in order to satisfy the applicable reliability rules. Generic Unit Nos. 1 and 5 included in Table 1.2 of the Cost Allocation Report, however, do not exist and are not feasible in the time frame required to meet year-by-year reliability needs due to New York State siting requirements and any reasonable construction schedule. Specifically, these plants cannot be on line for at least the years 2001, 2002 and 2003. Thus, the NYISO’s Baseline Assessment is not based upon feasible solutions for the years 2001, 2002 and 2003, as required by Attachment S and good utility practice.
The Board attempts to justify this approach to siting with an unrealistic hypothesis: if generic units can’t be built on the schedule needed to meet reliability, the NYISO may simply imagine that a model integrated utility would have undertaken adequate planning to build the units. In other words, if the NYISO would have been in existence three or four years ago, it would have worked with Con Edison to ensure that these generic units would have been built. Rather than engage in such an artifice, the Board should have instead faced the fact that almost 50% of the generic generating capacity proposed in the Baseline Assessment for 2001 and 2002 has not come on-line yet, and given the environmental, siting and other barriers to development, will not be built anytime soon. This reality check demonstrates that the NYISO’s artificial limitation of siting factors to a single factor produced a decidedly unfeasible Baseline Assessment.
While the NYISO claims that its staff evaluated the feasibility of generic solutions from an “integrated utility’s planning perspective,” the NYISO’s exclusion of seven of the ten NYPA units is unexplained as NYPA is an integrated utility and selected its sites based on an integrated utility’s planning perspective. In building its gas turbine units, NYPA had to take into consideration all of the various factors in building new generation such as access to fuels, environmental, site permitting, as well as system upgrade costs. Moreover, it worked with Con Edison to ensure they were feasible. Their units clearly were feasible since they were actually built. The requirement of feasibility in Attachment S was intended to result in a more accurate reflection of the costs of maintaining system reliability. The NYISO’s approach to siting completely disregards this crucial requirement.
B. The Baseline Assessment Must Include All Existing Units
Attachment S requires the NYISO to include existing plants which are already in service in the Baseline Assessment. While the NYISO is directed to identify the system upgrade facilities that are expected to be needed on a year-by-year basis, Attachment S specifies that the NYISO is to use existing units in its analysis and should select generic units only if “existing” facilities are insufficient to meet reliability requirements:
If the existing transmission or generation facilities, combined with previously approved and accepted System Upgrade Facilities, are insufficient to meet Applicable Reliability Requirements, then the NYISO staff will develop feasible solutions that include the identification of System Upgrade Facilities that are sufficient to either interconnect additional generic generation and/or increase transmission transfer capability in order to satisfy the Applicable Reliability Requirements. (emphasis added)
Since existing units are available in Con Edison’s service territory – and were needed to meet reliability requirements in Summer 2001, such units must be selected for the cost allocation simulation – not the hypothetical units included in the Baseline Assessment.
The Board obviously could not assert that NYPA’s gas turbine units and Con Edison’s Hudson Avenue No. 10 did not exist, as those units were on-line during the Summer of 2001 to meet reliability requirements and continue to be used today. They were, in fact, brought into service on an emergency basis with the support of the NYISO and transmission owners. Rather, the Board claimed that it did not have to include these units in the Baseline Assessment since the costs to interconnect these units to the grid had not “been allocated and accepted by the Developers of those projects [i.e., NYPA and Con Edison] in accordance with these rules.” This misconstrues the plain language of the Tariff and has the effect of skewing the results to benefit transmission owners. The purpose of the Baseline Assessment is to take a snapshot of what would have been needed if developers had never shown up. Such a “snapshot” must include all existing units, particularly those that were brought into service specifically to meet reliability, such as the NYPA gas turbine units and Hudson Avenue No. 10. While the provision relied upon by the Board distinguishes existing projects from new projects, it does not require the NYISO to exclude existing units from the Baseline Assessment. Rather, this provision and the following sentence in Attachment S simply provide a process for adding developer-sponsored proposed projects to the baseline for future years. The provision should not be unreasonably read in order to exclude existing plants, including all the NYPA units and Hudson Avenue No. 10, from the baseline just so that system upgrade costs to transmission owners can be reduced. This elevates rhetorical artifice over reality.
The NYISO can hardly argue against such a reading, as the NYISO itself reads Attachment S as permitting the inclusion of some developer-sponsored proposed projects in the Baseline Assessment. The NYISO included five developer-sponsored proposed projects in the Baseline Assessment for the Class of 2001, namely, (1) the Astoria No. 2 Restart Project (Generic Unit No. 2), (2) Con Edison’s East River Repowering Project (Generic Unit No. 5) and (3) three of the NYPA gas turbine units (Generic Unit No. 6). Each of these projects is a developer-sponsored project which is included in the Class of 2001, for which interconnection costs have not been previously allocated and accepted. The Board completely failed to explain how it can use Attachment S to exclude seven of the NYPA units and Hudson Avenue No. 10 from the Baseline Assessment – while five units in exactly the same position are included in the Baseline Assessment. This internal, unexplained inconsistency is hardly support for an overall bar on the inclusion of hypothetical units sited at developer-sponsored sites in the Baseline Assessment. The NYISO’s after-the-fact attempt to justify its flawed preparation of the Baseline Assessment is a classic example of “too little, too late.” Rather, the Board should have adopted a common sense approach rather than its absurd, untenable interpretation and included these existing units.
C. The Baseline And Reliability Assessments Must Be Based On Current Data
The Board asserts that the NYISO used data available at the outset of the studies for cost allocation to the Class of 2001. This claim completely misses the point that additional, readily available, more up-to-date data existed at the time that the NYISO commenced the Class of 2001 allocation study. As set forth in the Waldron Affidavit, the representation of the PJM system used by the NYISO in support of the Cost Allocation Report was at least one – and possibly more – years out of date when the NYISO began its preparation of the cost allocation report. In particular, PJM distributes yearly updates of their short circuit model. The NYISO either did not know these updates existed or chose for unexplained reasons to use seriously out-of-date data instead. As such, the Board looked at the system on May 1, 2001 but did not consider data about the PJM system that existed at that time. The Board should have made an inquiry of what data were known or available on May 1, 2001, when the studies for the Class of 2001 commenced.
The NYISO has refused to disclose the vintage of the short circuit data that it relied upon to prepare the Baseline Assessment. Both in the stakeholder meetings earlier this year, and in a separate written request to the NYISO, Ravenswood attempted to learn just how old is the NYISO’s short circuit database for the PJM service territory. Among other matters, Ravenswood wrote the NYISO’s General Counsel on July 17, 2002 requesting information on the vintage of the NYISO’s database for the PJM service territory. The NYISO has not responded to this request. A copy of this letter is attached to this Complaint as Exhibit No. “13”.
The NYISO did not even seek this information when it began the cost allocation process or when it discovered portions of the transmission system were at or near their reliability limits. The NYISO merely relied upon Con Edison’s short circuit studies and used an outdated database prepared by Con Edison. Even Con Edison recognized the problem caused by the dated quality of the database, as it included a sensitivity case, with updated data for the PJM service area, in its November 2000 Fault Plan. See Waldron Affidavit, Para. 16. The Board’s assertion that a requirement of up-to-date data introduces a potential for a moving target is wrong. The Board should have reviewed what was available on May 1, 2001. If the Commission upholds the Board’s decision, it will effectively approve a conscious decision by the NYISO to prepare the Cost Allocation Report with out-of-date data.
Attachment S explicitly permits the NYISO to obtain information during the course of the preparation of the Cost Allocation Report, as market participants are provided an opportunity to contribute such information. Moreover, while Attachment S provides that the reliability rules to be applied to a particular year’s cost allocation are those in effect when the particular assessment is commenced, there is no comparable “cutoff” with respect to data and information.
At a minimum, the NYISO needs to perform the fault current analysis using data that represents the system as it existed on May 1, 2001. The fact that Con Edison included a sensitivity analysis in its Fault Plan in November 2000 should have put NYISO Staff on notice, well in advance of the time it began work on the Cost Allocation Report, of the need to update the databases for adjacent control areas. Regardless, there is no reason now to continue to exclude information that could have significant impacts on both reliability and cost allocation. Good utility practice requires the NYISO to seek out relevant data concerning impacts from adjacent control areas at the outset of its study process and to refine such data if system conditions appear to be extremely close to their limitations, as is the case in the Baseline Assessment.
The NYISO’s preparation of the Reliability Assessment without updating the pertinent databases is also inconsistent with the NYISO’s System Reliability Impact Study Criteria and Procedures (“SRIS Criteria Procedures”). The SRIS Criteria and Procedures provide that all currently existing facilities, within and outside New York State and all proposed facilities sited outside New York State, that have completed an evaluation comparable to a NYISO SRIS, have reached a comparable stage of state regulatory review and that may reasonably be expected to affect the results of the SRIS must be assumed as Baseline Study Assumptions by project developers. Attachment S, in turn, requires the NYISO to update in the Reliability Assessment the results of the plant-specific System Reliability Impact Studies that have previously been performed for proposed interconnection projects, consistent with the SRIS Criteria. Attachment S, Tariff Sheet 674 (Sections IV.F.5.a and IV.F.5.b). Thus, the SRIS Criteria and Attachment S together require the NYISO to prepare the Reliability Assessment based on existing and projected plants inside and outside New York State. The pertinent pages of the SRIS Criteria are attached to the Complaint as Exhibit “14.”
The results of the NYISO’s decision to use out-of-date data, together with its misapplication of the Tariff in preparing the Baseline Assessment, are significant. The Cost Allocation Report indicates that a number of Con Edison’s breakers are very close to their rated capacity, that is, with less than 100 amperes margin. Ravenswood has prepared an impact report summarizing the impacts of updating the representation of the PJM database and correcting the NYISO’s misapplication of the Tariff. Ravenswood’s Impact Report presents a demonstration of the conditions that existed with respect to the cost allocation to the Class of 2001. The Impact Report indicates that the changes in the representation of PJM (which essentially adds 3,848 MW of new generation to PJM, with 6,040 MW of additional capacity under construction) produces significant impacts upon two substations on the Con Edison system, Sprainbrook and Farragut. Specifically, the fault current on a number of Con Edison’s circuit breakers rises significantly. The increases are significant because, as noted above, many of the Con Edison circuit breakers are being operated at a level very close to their manufacturer’s rated capacity. A copy of Ravenswood’s Impact Report is attached to this Complaint as Exhibit “15.”