connection

SECOND QUARTER 2012
New York ISO
CO
NNE
CTIO
N
A Newsletter for Market Par ticipants
In this issue
Joint Board of Directors/Management
Committee Meeting
Annual session focuses on capacity markets and planning
Demand Response
4
Power Trends
7
State of the Market
8
On Monday June 11, the NYISO Board of Directors and Management Committee
gathered for a joint meeting to discuss two of the important issues facing New York’s
electric system. The annual session is an important component of the NYISO’s strategic
planning process.
This year’s agenda was focused on capacity markets and planning – specifically looking
at the efficacy of New York’s capacity markets and the NYISO’s role in emerging planning
issues.
Capacity Markets
The conversation touched on a range of topics including system planning, local reliability,
rules for plant retirements, and the challenges of new resource development.
A number of views were shared on how well the current capacity markets are working.
While neighboring ISOs have moved to longer-term capacity markets, the NYISO
continues to administer auctions based around six-month summer and winter capability
periods. Comments were voiced in support of the current timing, as well as in favor of
both lengthening and shortening the time frame.
One of the primary issues underlying the discussion of capacity market timing is
generator retirements. An increasing number of generators have indicated their intent
to retire due to insufficient revenue. Various Generator representatives expressed
continued on page 3
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Letter from Steve Whitley
President and CEO
Stephen G. Whitley
Dear Market Participants:
This is an exciting time in the energy industry, as ambitious plans are being
considered to help transform New York’s energy infrastructure. In April, I was
pleased to be part of the Energy Highway Summit, which set the stage for progress
on the “Energy Highway” initiative Governor Cuomo announced in his 2012 State of
the State Address.
In contrast with the “generation gap” that faced New York a dozen years ago,
New York now has a statewide surplus of electric energy. However, we are limited
in our ability to transmit that electricity from areas of surplus to areas of need. This
“Energy Highway” initiative represents an opportunity to make forward-looking
plans that reduce transmission system congestion and deliver power to the state’s
load centers.
The future of the power system is also being considered in other venues. The
New York State Energy Planning Board (where the NYISO serves as a non-voting
member) is working on the next State Energy Plan, scheduled to be completed in
2013. In addition, the NYISO continues to work closely with our neighboring control
areas, as well as the Eastern Interconnection Planning Collaborative (EIPC).
The broad array of challenges facing the grid is detailed in the NYISO’s annual
Power Trends report, which was released in May. Power Trends 2012: State of the Grid
notes that the outlook for resource adequacy remains good, but there are a host
of potential challenges that could impact the outlook for the power system going
forward.
In June, the NYISO Board of Directors and the Management Committee held a
joint meeting to discuss two of those potential challenges. The meeting featured
engaging discussions on the effectiveness of the NYISO’s capacity markets and our
approach to addressing new planning requirements.
I’m always encouraged when diverse interests come together to discuss their
concerns and work together on solutions. At the NYISO, we are committed to such
collaborative endeavors and we are proud to contribute objective information to
the ongoing debates about our energy future.
CONNECTION
Joint Board of Directors/Management Committee Meeting
continued from page 1
frustration that units which should otherwise be retired
are remaining online due to reliability concerns that are
unrelated to resource adequacy.
While some suggested adding granularity to the
locational requirements in order to better address the
retirement issue, it was noted that the capacity market
was established for resource adequacy and was not
designed to address local reliability concerns.
One area of consensus was the need for additional
clarity around the rules for retiring units. Transmission
Owner representatives noted that the “mothballing” of a
unit is problematic given the fact that they have to plan
for a generator being unavailable, despite the fact that
it could potentially come back on line.
Planning Issues
The discussion of the NYISO’s role in emerging planning
issues also brought out a wide variety of viewpoints.
Discussions focused on FERC Order 1000 and its
stipulation that the planning process take public policy
goals into account.
A significant part of the discussion centered around
the definition of “public policy” as it relates to energy
planning. For example, it was noted that New York’s
Renewable Portfolio Standard is based on policy goals
rather than state law. Support was voiced for the
position that public policy should be backed up by
legislation or regulation for it to be considered in the
planning process.
While some expressed concern about the impact of
public policy mandates on the markets, others noted
that the role of public policy is to fulfill needs that the
market can not address.
Building a Strategic Plan
The deliberations of the Joint Meeting, in addition to
the Sector Meetings conducted in April, will help to
inform the development of the NYISO’s five-year 20132017 Strategic Plan.
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Demand Response Active in Early Summer
Demand response resources were called on to
reduce load and assist in addressing system
conditions on May 29, when heat from the long
Memorial Day weekend seeped into the work
week, causing electric usage to surge beyond the
forecasted load. By the noon hour, the load had
grown to the day’s peak of 28,241 MW. Demand
response activation was called for all zones. While
activation was called without the typical day-ahead
notice, resources responded and load dropped
to under 28,000 MW in the 1:00 p.m. hour and
remained there for the duration of the afternoon.
The NYISO activated demand response resources
three consecutive days in June on the 20th, 21st
and 22nd, as another heat wave sent temperatures
soaring across the state. The peak on June 21
reached 32,127 MW. It would have been much
higher; however, demand response resources
helped to reduce the load by 1,700 MW, according to
preliminary estimates.
New Customer Survey Discussed in Focus Group
The Customer Support Focus Group met on June 20
to discuss changes to the NYISO customer survey.
The survey vendor has changed for 2012, and the
session provided an opportunity for stakeholders
to discuss potential changes to the survey with the
new vendor.
The NYISO selected Telesight to replace Opinion
Dynamics which had administered the customer
survey for the past six years. The change was made
with the goal of developing a continuous feedback
process that will better understand and address the
concerns of market participants.
One of the concerns raised in the session was that
there was no mechanism to track changes resulting
from the survey. Other comments included the
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lack of opportunities for verbatim comments, and
the difficulty in understanding what the values
represent on a seven-point scale.
While the 2012 survey will be administered by
Telesight, the survey itself will remain similar to
the surveys of recent years. Plans for 2013 include
adding a real-time feedback process along with
web-based metrics that will be viewable by
stakeholders. In 2014, the NYISO will launch a newly
redesigned annual survey.
Additional feedback on the NYISO’s annual survey
is welcome and should be sent to Mark Seibert,
Manager of Member Relations, at: mseibert@nyiso.com
CONNECTION
NYISO CEO at Energy Highway Summit
On April 4, NYISO President and
CEO, Stephen G. Whitley told
policy makers and industry
representatives gathered at
Governor Andrew M. Cuomo’s
New York Energy Highway Summit
that the future of New York State’s
transmission grid is at a crossroads.
He said that there is an opportunity
to make strategic, cost-effective
investments that will provide
numerous benefits for the state
over the next several decades.
“We must decide if we simply
replace aging facilities ‘as is’ and
continue to operate the system
within its current limits, or if we
make cost-effective, incremental
upgrades and additions to improve
statewide reliability,” he said.
In his remarks during the summit’s
Setting the Stage for Successful
Investment panel, Mr. Whitley noted
that a robust transmission system is
critical for system reliability and that
addressing statewide transmission
constraints will enhance New York’s
competitive wholesale electricity
market.
“Today, New York has a statewide
surplus of electric energy, but we
are limited in our ability to transmit
that electricity from areas of surplus
to areas of need,” Whitley said. “The
congested transmission system has
led to significant price disparity for
wholesale electricity across the state,
hinders the ability of generation
owners in the northern and western
parts of the state to sell their power
to areas of need during peak
demand periods, limits the growth of
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renewable resources and frustrates
our ability to fully realize the
advantages of the diverse generation
options we have in New York.”
In his 2012 State of the State
Address, Governor Cuomo proposed
an “Energy Highway” initiative to
enable delivery of economical
surplus upstate and renewable
power to the downstate region,
where the need is greatest.
The Governor appointed a task
force to implement the Energy
Highway initiative, naming as CoChairs Gil C. Quiniones, President
and Chief Executive Officer of the
New York Power Authority; and
Joseph Martens, Commissioner of
the New York State Department of
Environmental Conservation. The
other task force members include
Kenneth Adams, President, Chief
Executive Officer and Commissioner
of Empire State Development;
Garry A. Brown, Chairman of the
New York State Public Service
Commission; and Francis J. Murray,
Jr., President and Chief Executive
Officer of the New York State
Energy Research and Development
Authority.
The task force organized the April 4
summit. In April, the task force also
issued a Request for Information
(RFI) seeking ideas for potential
projects from private developers,
investor-owned utilities, the financial
community, and others. The RFI
sought proposals in support of
an energy highway that would
simultaneously promote clean
energy supplies, job creation and
economic growth.
In June, the task force reported that
85 entities responded with proposals
for more than 25,000 megawatts
of capacity from new and existing
transmission and generation.
The RFI, responses, and other
information on the initiative can
be found on the Energy Highway
website:
www.nyenergyhighway.com
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State Energy Planning Process Underway
Under the provisions of a 2009 law, a new State
Energy Plan is adopted every four years, with the
next iteration of the plan scheduled for completion
by March 2013. The law also requires a supplemental
study of the overall reliability of the state’s electric
transmission and distribution system to be
completed by September 2012.
New York State Energy Planning Board
ƒƒ New York Department of State
ƒƒ New York Empire State Development Corporation
ƒƒ New York State Energy Research and Development
Authority
ƒƒ New York State Department of Public Service
The NYISO, named as a non-voting member of the
New York State Energy Planning Board by the 2009
law, is actively participating in the completion of
that study, providing technical data and system
modeling expertise.
ƒƒ New York State Department of Environmental
Conservation
The State Energy Plan will focus on reliably
meeting projected future energy demands,
while balancing economic development, climate
change, environmental quality, health, safety and
welfare, transportation, and consumer energy cost
objectives.
ƒƒ New York State Department of Transportation
For more information, please visit the State Energy
Planning Board’s website: www.nysenergyplan.com
ƒƒ New York Independent System Operator (nonvoting)
ƒƒ New York State Department of Health
ƒƒ New York State Department of Labor
ƒƒ New York State Division of Homeland Security and
Emergency Services
ƒƒ Department of Agriculture and Markets
ƒƒ Appointments by the Governor, Assembly, and
Senate
NYISO “View on Renewables” in Power Engineering
The May issue of Power
Engineering magazine
featured a guest “View
on Renewables” column
by NYISO COO Rick
Gonzales. In “Balancing
Act: Protecting Grid
Reliability and Building
Energy Sustainability,” Mr.
Gonzales discussed how
Rick Gonzales
the NYISO is successfully
meeting the challenges posed by variable renewable
resources such as wind power.
Noting that the issues surrounding wind integration
have undergone extensive study in New York, Mr.
Gonzales reviewed some of the regulatory and
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technical innovations the NYISO has implemented
to facilitate the growth of wind and other renewable
energy resources while maintaining grid reliability.
These include improved wind forecasting, enhanced
operational controls, and market design changes.
Mr. Gonzales also highlighted the steady
development of wind power in New York and
concluded that the NYISO’s experience has shown
that competitive markets are helping to cultivate the
growth of renewable energy resources.
The full column is available on the Power Engineering
website: http://www.power-eng.com
CONNECTION
NYISO Reports on State of the Grid
In May, the NYISO issued its annual review of the forces
and factors affecting New York State’s electric system.
Power Trends 2012 reports that the state of the grid is
good and the near-term outlook for New York’s electric
system is positive. However, a complex and interrelated
array of factors affecting future supply and demand
require close attention, including:
Natural Gas — The significantly increased
availability of natural gas, which has already
begun to transform the electric power
industry. Power produced from natural gas in
New York State grew from 27,000 gigawatthours (GWh) in 2004 to more than 50,000
GWh in 2011.
Aging Infrastructure — With various
components of the system requiring
upgrading or replacement, efforts are
underway to address this pressing concern.
Over 40% of New York’s high-voltage
transmission lines will require replacement
within the next 30 years, at an estimated cost
of $25 billion.
Policy Coordination — The cumulative
effect of various energy and environmental
policy initiatives has the potential to impact
power system reliability as well as electricity
market dynamics. New York State’s energy
planning process provides a valuable venue
for coordination of policy considerations.
Regional Collaboration — New York State
has long played a central role in the electric
power system serving the Northeast. Efforts
to optimize resources with a regional,
collaborative focus continue to strengthen
the state’s connections with its neighbors.
Power Trends 2012 serves as a reference to facilitate
informed decision-making about the future of our
electric system. It is issued along with the 2012 Load
and Capacity Data Report, also known as the “Gold
Book”, which presents up-to-date transmission and
generation data, as well as load forecasts for the next
ten years.
Figure 13. Prop
osed Power Proj
ects in New York
State: 2012
Proposed Pow
er Projects
(Megawatts by
Project Type)
4,000
3,500
3,000
Megawatts
2,500
2,000
1,500
1,000
500
0
POWER
T R E N D S 2012
Wind
Nat Gas
SOURCE: New
d
State of the Gri
Figure 14. Gene
60,000
Dual Fuel
York Independen
t System Operator
ration by Natu
ral Gas and Oil
Nuclear
Energy
Storage
Interconnection
Queue, April 2012
Biomass*
Hydro
* includes methan
e, wood, and solid
in New York Stat
e: 2000 – 2011
50,000
Gigawatt Hour
s
40,000
30,000
20,000
10,000
2000
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7
2001
SOURCE: U.S.
2002
2003
Energ y Informatio
2004
2005
2006
Natural Gas
Oil
n Administration
2007
2008
2009
2010
2011
waste
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The State of the Market
Market Monitor Issues Annual Report
In April, the NYISO’s Market Monitoring
Unit (MMU), Potomac Economics,
published and presented its annual
assessment of the NYISO’s markets.
The 2011 State of the Market Report
found that the markets performed
competitively in 2011.
the Market Rep
Figure A-74: Reg
ort
istration in NYI
Appendix – Dem
and Response
SO Demand Res
ponse Reliabil
ity Programs 135
2001 - 2011
RT
T REPO
THE MARKE
2011 STATE OF
FOR THE
TS
KE
AR
M
NEW YORK ISO
“Overall, we find that the NYISO markets
performed competitively in 2011,
producing market outcomes that were
generally efficient and consistent with
the fundamental supply and demand in
New York,” the report stated.
The report noted the recent trend of lower
electricity prices across all zones. Prices
were down 6% to 8% from 2010 levels.
The pricing trend was the result of reduced fuel
prices, generation capacity additions, and a decrease
in demand that was driven by warmer than usual
winter temperatures.
According to the report, “The seasonal patterns
of electricity prices and natural gas prices were
typical in 2010 and 2011 as electricity prices rose
in the winter months as a result of tight natural gas
supplies and in the summer months as a result of
high electricity demand. However, energy prices
were unseasonably low in December 2011 due
to mild winter weather, which contributed to low
electricity demand and low natural gas prices.”
The report noted that while load averaged 18.6 GW
in 2011 (down slightly from 2010), there were more
hours with extreme high load conditions (periods
when load exceeded 32 GW) in 2011 than in recent
years. Last year, the peak load was 33,865 MW on
July 22, 2011, just 74 MW lower than the all-time
peak set on August 2, 2006.
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2011 State of
By:
Key Observation
Ph.D.
David B. Patton, , Ph.D.
Schaick
Pallas LeeVan
.
Jie Chen, Ph.D
s: NYISO Dem
and Response
Reliability Pro
grams
SCR program
registration has
steadily grown
registration has
since 2001, whil
gradually declined
e EDRP program
since 2002.
- These trends
reflect
the SCR program that many resources have swit
ched from the
in order to earn
EDRP program
revenue from the
• In 2011, total
to
capacity market.
registration in
the EDRP and
locations enrolled,
SCR programs
providing a total
included 5,80
resources acco
of 2,173 MW of
unted for 97 perc
demand response 7 end-use
ent of the total
percent of the
capability. SCR
reliability prog
enrolled MWs.
ram enrollments
and 93
- Total enrolled
MW in the relia
bility program
fell 13 percent
- The NYISO
from
2010 to 2011.
made
year 2011, whic tariff changes for the SCR base
h accounted for
line from APM
nearly all of the
D
reduction in regi to ACL in midstered capacity.
•
ring Unit
Market Monito
rk ISO
for the New Yo
April 2012
135
The figure is repro
Demand Response duced from the NYISO’s Janu
ary 25, 2012 filing
Compliance Repo
to the Commiss
rt.
ion
related to the
Page A-120
Potomac Economics also reported a significant
decrease in capacity prices – down from 2010 levels
by 35% in New York City and 80% in other areas
of the state – due to the entry of new suppliers
and a lowered peak forecast. The report concludes
that price signals do not currently support the
development of new peaking generation in New
York.
“Overall, our evaluation indicates that prices in all of
the NYISO’s markets taken together in 2011 were far
below levels that would support investment in new
peaking generation anywhere in New York. This is
expected because there are large capacity surpluses
in New York City, Long Island, and statewide.
Therefore, this fact alone raises no significant
concerns. However, the report identifies changes
in both the energy market and capacity market
that will improve the efficiency of the long-term
economic signals provided by the NYISO markets,”
the report said.
The full report is available on the NYISO’s website.
CONNECTION
New Data Center is Up and Running
First Phase of NYISO Infrastructure Plan Complete
On May 17, the final piece of equipment was moved by NYISO
employees to the newly-constructed data center at the Power Control
Center (PCC) in Guilderland, New York. The project, which is the first
phase of the NYISO’s Infrastructure Master Plan, was completed on time
and on budget.
The new data center was built at the PCC to alleviate existing space
constraints, enable expansion of systems required for the Broader
Regional Markets and Smart Grid initiatives, and remediate some risks
of the existing data center related to cooling, cable management, and
power supply. Construction of the new data center was completed in
February 2012 and work to prepare for migrating all of the services and
systems began immediately thereafter to ensure that a majority of the
equipment would be in place prior to the summer operating season.
The new data center is more energy efficient, and it is anticipated that
it will save an estimated $100,000 - $200,000 in annual cooling and
operating costs.
The data center project is part of the NYISO’s Infrastructure Master Plan,
which includes construction of a new, 64,000 square-foot, primary power
control center adjacent to the Krey Corporate Center (KCC). The new
facility will replace the existing, 42-year-old PCC as the NYISO’s primary
control center. In addition to hosting the new data center, the PCC will
serve as a backup control center when the new primary control center is
completed.
Connection is published electronically
by the External Affairs Group of
the New York Independent System
Operator (NYISO) for the benefit of
NYISO Market Participants. For more
information, or to make comments and
suggestions, please contact NYISO
External Affairs.
Gregor Wynnyczuk, Editor
Senior Writer & Communications Specialist
gwynnyczuk@nyiso.com
Marilyn Albright
Digital Media Specialist
malbright@nyiso.com
Gary Paslow
Manager, Corporate Communications
gpaslow@nyiso.com
Mark Seibert
Manager, Member Relations
mseibert@nyiso.com
Richard Barlette
Sr. Manager, Market Participant &
Government Relations
rbarlette@nyiso.com
Tom Rumsey
Vice President, External Affairs
trumsey@nyiso.com
Disclaimer: Connection is for
informational purposes only. The NYISO
does not warrant the information
contained herein, and Market
Participants are referred to NYISO
tariffs, manuals, and other technical
documents for complete statements of their
contents.
The New York Independent System Operator
(NYISO) is a not-for-profit corporation responsible
for operating the state’s bulk electricity grid,
administering New York’s competitive wholesale
electricity markets, conducting comprehensive
long-term planning for the state’s electric
power system, and advancing the technological
infrastructure of the electric system serving the
Empire State.
NYISO Governance roster, schedule,
and agenda information can be found
in the Committee section of the NYISO
website.
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CONNECTION
NYISO Mourns Loss of Wayne Bailey
On April 25, the NYISO, its Market Participants and
stakeholders lost a great friend and respected
leader with the passing of Wayne M. Bailey, Vice
President – Enterprise and Customer Services.
Wayne Bailey
Mr. Bailey came to the NYISO in June 2000 as a
project coordinator. He subsequently worked as
the Manager of Strategic Planning, Manager of
Enterprise and Risk Management, and Director of
Compliance and Enterprise Risk Management.
In January 2009, he was named as Vice President
- Compliance & Enterprise Risk and Chief Compliance Officer. That
position evolved into Vice President – Enterprise and Customer
Services.
Among his wide array of accomplishments during his tenure at the
NYISO, he led the development and implementation of the NYISO’s
enterprise-wide Compliance and Enterprise Risk Management (ERM)
Program. In 2008, the NYISO’s ERM program was recognized by the
American Productivity and Quality Consortium (APQC) as one of five
“best practice” programs in the country.
A native of Troy, NY, Mr. Bailey graduated in 1983 from Georgetown
University School of Foreign Services, Washington, D.C., with a
Bachelor of Science Degree. In 1988, he received a Master of Science
degree from the Defense Intelligence College, also in Washington.
After graduating from Georgetown, Mr. Bailey joined the U.S. Army
and worked in military intelligence. He rose to the rank of captain
before completing his military service. In 1991, he became a senior
analyst at SAIC (Science Applications International Corporation)
in McLean, VA. He later became chief project manager and system
engineering architect at Litton TASC in Annapolis Junction, MD,
where he worked until joining the NYISO.
Mr. Bailey and his wife, Kate, were married for 25 years. He was the
son of Sidney J. Bailey, Jr. and the late Joan T. Bailey; brother to
James T. Bailey and Blaise P. Bailey; uncle and friend to many.
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