FERC Filings
COMPLAINT CONCERNING ALLOCATION OF SYSTEM UPGRADE FACILITY COSTS
BACKGROUND
A. Attachment S To The NYISO Open Access Transmission Tariff
On August 29, 2001, the NYISO filed proposed Attachment S, which contains a detailed set of rules to allocate responsibility for the cost of system upgrade facilities required for reliable interconnection of new generation and transmission projects. On October 26, 2001, the Commission accepted the NYISO’s proposed Attachment S, subject to directions to the NYISO to revise its proposal in a number of significant ways. New York Independent System Operator, Inc., 97 FERC 61,118 (2001) (“October 26th Order”). In particular, the Commission directed the NYISO to eliminate any decision-making role of transmission owners.
Under Attachment S, the allocation of the cost of system upgrade facilities is made by conducting two assessments of system upgrade facility costs. The first assessment, the Baseline Assessment, determines the cost of system upgrade facilities that are expected to be needed for the interconnection of sufficient new generating units to comply with applicable reliability requirements for the New York Control Area. Existing units are included in the Baseline Assessment, but not proposed developer projects. To the extent needed to maintain reliability, feasible, least-cost generic generating units are to be included in the Baseline Assessment.
The second assessment, the Reliability Assessment, determines the cost of system upgrade facilities that are required for the reliable interconnection of developers’ projects. Developers’ actual projects are included in the Reliability Assessment instead of feasible generic units. Both the Baseline Assessment and the Reliability Assessment group projects into class years for the purposes of determining and allocating system upgrade costs. The assignment of a developer’s project to a class year is controlled by the project meeting a regulatory milestone and a system planning milestone by March 1st of the class year. The NYISO uses the Reliability Assessment to produce an overall cost of the system upgrade facilities that need to be installed. The costs identified in the Reliability Assessment, up to the level identified in the Baseline Assessment, are for the account of transmission owners. Any additional costs identified in the Reliability Assessment are for the account of project developers. The costs of system upgrade facilities identified in the two assessments are in this manner netted (that is, the costs identified in the Baseline Assessment are subtracted from the costs identified in the Reliability Assessment). The resulting net amount of system upgrade facility costs in the Reliability Assessment is allocated among project developers with projects in the class year according to the electrical impact each project has on the facility requiring upgrading. A copy of Attachment S is attached to this Complaint as Exhibit “2.”
B. The Preparation Of The Cost Allocation Report For System Upgrade Costs For Class Of 2001 Projects
NYISO Staff commenced work on the allocation of the costs of system upgrade facilities for the Class of 2001 at some point following May 1, 2001, although the NYISO did not submit the proposed Attachment S to the Commission until late August 2001. At the outset of the process, NYISO Staff requested New York transmission owners to submit Baseline Assessments to the NYISO. Con Edison prepared a Baseline Assessment which identified six generic generation units for its service territory.
Con Edison’s generic generating units were selected solely with the goal of minimizing its responsibility for fault duty upgrade (i.e., system upgrade) costs. Con Edison described the philosophy it had followed in selecting these six generic generating units in a paper supporting a motion at the NYISO’s Operating Committee meeting on May 23, 2002. In this paper, Con Edison claimed the right to re-optimize the selection of the generic generating units, even up to the point of the Operating Committee’s approval of the Baseline Assessment, in order to minimize the system upgrade costs for which Con Edison would be responsible. Con Edison’s claim that it be permitted to revise its previously-optimized selection of generic generating units, in order to again minimize its allocation of system upgrade costs, simply continued its efforts to minimize its allotted share of system upgrade costs. Con Edison’s motion was rejected by the Operating Committee. A copy of Con Edison’s paper submitted at the Operating Committee is attached to this Complaint as Exhibit “3.”
In order to minimize its allocation of system upgrade costs, Con Edison excluded a number of the existing generation facilities in its service territory from its Baseline Assessment, even though a number of such facilities had been specifically constructed on an emergency basis to meet reliability requirements for Summer 2001. Thus, Con Edison did not include all of the ten gas turbine units installed by NYPA nor did it include a unit that Con Edison itself had brought back from retirement in its Baseline Assessment. Only three of NYPA’s ten gas turbine units were included in Con Edison’s Baseline Assessment, collectively grouped as one of the six “generic generating units.” The other seven NYPA gas turbine units and Con Edison’s own Hudson Avenue No. 10 project, however, were not included in the Baseline Assessment, either as generic generating units or as existing units. Plaskon Affidavit Para. “6.” Further, Con Edison did not specify when each of these six generic generating units was to go into service in order to be available to meet reliability requirements for each year, as required by Attachment S. See Plaskon Affidavit, Para. “8.” A copy of the Plaskon Affidavit is attached to this Complaint as Exhibit “4.”
Con Edison obtained the cost figures for its Baseline Assessment from an earlier Con Edison study of needed short circuit facility upgrades. Specifically, Con Edison reported that the total of system upgrade facility costs required to satisfy the interconnection of Class of 2001 projects was approximately $74.3 million, and that Con Edison, as the transmission owner, would be responsible for approximately $10.0 million of these upgrade facility costs as a result of the interconnection of generic units.
Market participants, including project developers, and NYISO Staff met on a number of occasions throughout 2001 and 2002 concerning (1) the preparation of the NYISO cost allocation rules that became the proposed Attachment S, (2) the changes to Attachment S required by the Commission’s October 26th Order and (3) the preparation of the cost allocation for Class of 2001. During these discussions early in 2002, project developers alerted NYISO Staff to the need to update the representation of the adjacent control areas in the NYISO’s model. Although it was not disputed that the representation of the adjacent systems in the NYISO’s computer model was not up-to-date, NYISO Staff refused to update its model with accurate data.
The NYISO accepted Con Edison’s identification of proposed generic generating units. The NYISO’s Baseline Assessment did increase the capacity figures for two of the units and identified the purported year each generic unit was to go into service. The NYISO’s proposed allocation of costs is set forth in a Report on Cost Allocation of New Interconnection Facilities to the New York State Transmission System (“Cost Allocation Report”) prepared by NYISO Staff and issued on May 15, 2002. The projected total cost of system upgrade facilities in connection with the Class of 2001 projects in the Cost Allocation Report is $72.7 million, with $59.7 million of this sum allocated to project developers. On May 23, 2002, the NYISO’s Operating Committee approved the allocation of the costs of system upgrade facilities to eight proposed generating projects, which constitute the Class of 2001 for the purpose of cost allocation. The table on Page 40 of the Cost Allocation Report details the specific allocations of cost proposed by the NYISO. A copy of the Cost Allocation Report is attached to this Complaint as Exhibit “6.”
Following the Operating Committee’s approval of the Cost Allocation Report on May 23, 2002, Ravenswood appealed the decision to the NYISO’s Management Committee, and requested a stay of the initial period in which Ravenswood and other members of the Class of 2001 had to make a decision to accept or reject their respective cost allocations. Pursuant to Ravenswood’s request, the initial decision period was extended by the NYISO to July 5, 2002. On June 19, 2002, the Management Committee denied Ravenswood’s appeal. The next day, June 20, 2002, Ravenswood appealed to the NYISO’s Board.
On July 9, 2002, the NYISO issued a notice that not all eight members of the Class of 2001 had elected to accept their respective cost allocations. Pursuant to the terms of Attachment S, the NYISO stated that all members of the Class were relieved of their responsibility to post security, that the projects of the members determined to have rejected the cost allocation would be removed from the Class of 2001 and that the NYISO would issue a revised cost allocation and revised Reliability Assessment by July 19, 2002. On July 10, the NYISO followed up its July 9th announcement with an additional notice identifying three members of the Class of 2001 that had been determined by the NYISO to have rejected their respective allocations and identifying the members of the Class that had accepted their allocations. The three Class members determined to have rejected their allocation, including Ravenswood, total 2,100 MW in capacity and $23.46 million in cost allocations. Thus, following the initial decision period, approximately 40% of the total cost amount allocated to members of the Class of 2001 was reallocated. Copies of the NYISO’s July 9, 2002 letter announcing the results of the initial decision period and of its July 10, 2002 letter are attached to this Complaint as Exhibit “7” and Exhibit “8,” respectively.
On July 19, 2002, the NYISO issued an Addendum: First Revised Project Cost Allocation, which reflected the reduced size of the Class of 2001 and set forth the revised allocation of system upgrade facility costs to such remaining developers. The total of costs allocated to project developers in the First Revised Cost Allocation is $58 million, a reduction of $1.7 million from the total allocation in the initial Cost Allocation Report. A copy of the Addendum: First Revised Project Cost Allocation is attached to this Complaint as Exhibit “9.”
On August 13, 2002, the NYISO distributed a list of the five generator-project members of the Class of 2001 that remained after the initial decision period and indicated that membership in the Class of 2001 was “settled.” A copy of the NYISO’s announcement of project developers in the Class of 2001, as well as other information concerning the Class of 2002, is attached to this Complaint as Exhibit “10.”
C. The NYISO Board’s Decision
On July 16, 2002, the Board denied Ravenswood’s appeal to the Board from the Management Committee. While the Board identified Ravenswood’s principal arguments, the Board completely failed to address the merits of these arguments. In fact, the Board’s Decision is riven with internal contradictions, confusion and overlooked issues and facts. A copy of the Board’s Decision is attached to this Complaint as Exhibit “11.”
Although the Board stated that generic units should be selected using “integrated utility planning criteria,” it nevertheless defended the selection of generic units on the basis of one criterion, because those units had the lowest system upgrade costs. The Board also dealt with the infeasibility of the generic units it selected to be on line when needed for reliability purposes by assuming for the purposes of its study that planning of those units had begun years earlier, regardless of the irreality of that assumption. The Board cited nothing in Attachment S or elsewhere suggesting that such a non-existent, imaginary planning process is to be part of the Baseline Assessment or that had such a process been undertaken so that the proposed units would even now be feasible. Such a reading of the Tariff renders the term “feasibility” meaningless because one could always assume in hindsight that a better solution was possible.
As to the exclusion of existing units, the Board misread Attachment S to say that new units which had not paid upgrade costs could not be included, thus precisely begging the question of what is a “new unit.” Attachment S actually states that units which have paid upgrade costs cannot be assessed the costs again. Nothing in the Board’s decision explains why the NYPA units and Con Edison’s unit should be distinguished from other units that were constructed and brought on-line before the implementation of Attachment S, or why these units, like other already-built units ought not be considered “existing” within the meaning of Attachment S.
Finally, the Board missed the point when it states that “available” data was used in the NYISO’s study. The Board ignored the fact that the NYISO’s data was out-of-date and that it had failed to use equally available, more recent data. The NYISO merely used the data it had in its possession without seeking up-to-date available data from adjacent control areas.