WHITEMAN Elizabeth A.

Grisaru
Of Counsel
Attorneys at Law
OSTERMAN 518.487.7624 phone
wu'tu.wo}a.com egrisaru na woh. com
E HANNA LLP

One Commerce Plaza

Albany, New York 1226o
518.487.76oo phone
518.487.7777 fax

August 24, 2009

VIA HAND DELIVERY AND ELECTRONIC FILING

Hon. Jaclyn A. Brilling, Secretary

Public Service Commission of the State of New York
Three Empire State Plaza, 14t11 Floor
Albany, New York 12223-1350

Re: Subject: Case 09--E--0497 - In the Matter of Generator-Specific Economic

Deliverability Study Methodology

Dear Ms. Brilling:

Enclosed for filing in the above-captioned proceeding are an original and five copies of
the Comments of the New York Independent System Operator, Inc. ("NYISO") in response to
the Commission's June 23, 2009 Notice Seeking Comments. Should you have any questions,
please contact me by phone at (518) 487-7624 or by e-mail at egrisaru@woh.com.

Resp ct 11 submitte

Elizabeth A. Grisaru
Whiteman Osterman & Hanna
Counsel to the New York Independent System
Operator, Inc.
One Commerce Plaza
Albany, New York 12260
mailto:egrisaru@woh.com

X'\FGrisaru\NYISO docs\Brilling Itr 08.24.09.doc

 STATE OF NEW YORK

PUBLICE SERVICE COMMISSION

Case No. 09-E-0497 - In the Matter of Generator-Specific Economic Deliverability Study

Methodology

COMMENTS OF THE NEW YORK INDEPENDENT SYSTEM OPERATOR, INC

The New York Independent System Operator, Inc. ("NYISO") submits these comments

in response to the Commission's June 23, 2009 Notice Seeking Comment in the above-captioned

proceeding (the "Notice").'

In the Notice and the accompanying Appendices, the Commission considers the

possibility of requiring transmission owning utilities and renewable project Developers to

conduct energy deliverability studies, and requests comment on the study methodology

submitted by New York State Electric & Gas ("NYSEG") and Rochester Gas & Electric

("RG&E") in Case 07-M-0906. The Commission states that it intends to evaluate (1) whether

such a study would assist the Commission in a licensing proceeding under Public Service Law s

68 for a renewable generation facility; (2) whether this type of study would provide information

on potential future congestion; and (3) whether the Commission should include the results of

such a study in the evaluation of projects for purposes of the Renewable Portfolio Standard

("RPS") program. The Commission also expresses concern that project Developers may not

have adequate information on which to base their investment decisions and suggests that

renewable Developers, in particular, may not be able to recover their costs without significant

transmission upgrades.

' The NYISO also attaches its Responses to the Commission's list of questions.
 As discussed more fully below, the NYISO submits that aspects of the Commission's

proposal appear duplicative of study efforts already underway, including various studies

conducted pursuant to the NYISO's FERC-approved interconnection and planning tariff

procedures, and thus would not appear to enhance the information that is being developed. In

addition, Staffs comments relating to a possible transmission system upgrade requirement

appear to raise jurisdictional issues and may contribute to confusion among renewable

Developers and increased risks to the State's renewable policy objectives.

1. THE PROPOSED DELIVERABILITY STUDY COULD OVERLAP WITH OR

DUPLICATE EXISTING STUDY EFFORTS.

The Commission and Staff have suggested that the proposed energy deliverability studies

would provide data on transmission system constraints that might curtail energy production from

renewable facilities. In its prior order on the Marble River application, and in Staffs comments

at the Technical Conference in this docket, the Commission has raised a concern about the

accuracy of wind Developers' predictions of environmental benefits.2 The Notice also questions

whether local system conditions might lead to over generation and price collapse in regions with

significant renewable generation supply, thus potentially frustrating the State's efforts to

incentivize construction of renewable generation.

2 In the matter of Petition of Marble River, LLC for an Order Granting Lightened Regulation and for an Original
Certificate of Public Convenience and Necessity Under Public Service Law Section 68, Case No. 07-E-1343 (June
19, 2008).

x:Aegrisaru\nyiso docs\psc comments noon draft.doc

2
 The NYISO already conducts several types of studies that evaluate similar issues. The

Commission should note the possibility that a new energy deliverability requirement could

duplicate existing study efforts and requirements, with the potential for inconsistent results.

Furthermore, the timing of an energy deliverability study could conflict with established study

procedures. The existing study processes include generator interconnection studies, the Wind

Integration Study, the CARIS economic planning program under Attachment Y of the Open

Access Transmission Tariff ("OATT"), the STARS study conducted by the Transmission

Owners ("TOs"), and system studies under sections 19 and 32 of the NYISO's tariff. Details on

each of these are presented below.

II. THE NYISO STUDY PROCESSES PROVIDE IMPORTANT DATA TO

DEVELOPERS AND HAVE RESULTED IN THE SITING OF SUBSTANTIAL
NEW GENERATION CONSISTENT WITH MARKET SIGNALS.

1. The NYISO interconnection studies evaluate both reliability and deliverability.

The NYISO's current interconnection process was developed in compliance with a series

of FERC orders establishing generator interconnection cost allocation procedures and standard

rules for interconnection studies.3 Under Attachments X, S, and Z of the Open Access

Transmission Tariff ("GATT"), the NYISO evaluates proposed interconnections to the New

York Transmission System and FERC jurisdictional distribution for both reliability and

3 Standardization of Generator Interconnection Agreements and Procedures, Order No. 2003, FERC Stats. &
Regs. ¶ 31,146 (2003), order on reh'g, Order No. 2003-A, FERC Stats. & Regs. ¶ 31,160 (2004), order on reh'g,
OrderNo. 2003-B, FERC Stats. & Regs. ¶ 31,171 (2004), order on reh'g, Order No. 2003-C, FERC Stats. & Regs. ¶
31,190 (2005), affirmed sub nom. Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir.
2007).

x:\egrisaru\nyiso docs\psc comments noon draft.doc

3
deliverability.4 The tariff requires NYISO to determine whether new projects meet the minimum

interconnection standard. That standard ensures the new generator can be reliably

interconnected to the transmission system at the point of interconnection proposed by the

Developer.5

Every Developer subject to the rules undergoes up to three interconnection studies: a

Feasibility Study, a System Reliability Impact Study, and a Facilities Study, undertaken with a

group of similarly-advanced projects in a Class Year. The results of these studies determine the

specific system upgrade facilities that a Developer will be required to build in order to satisfy

reliability requirements, as well as the costs of those facilities. The NYISO's tariff contains a

detailed procedure indicating how costs of upgrades are allocated first between Transmission

Owners and Developers, and then among Developers in a given Class Year. Where more than

one new project contributes to a need for an upgrade, the costs are shared between the

Developers of those projects according to a formula that holds a Developer responsible only for

those costs that are necessitated by the addition of the project to the system - a "but for" test that

fixes a new project's cost responsibility at the level of its individual impact. Once the project's

cost responsibility has been determined, the Developer is obligated to post security in the full

4 Capitalized terms that are not otherwise defined herein shall have the meaning specified in Article 2 of the Services
Tariff and Article 1.0 of the NYISO Open Access Transmission Tariff OATT.

5 See New York Independent System Operator, Inc., New York Transmission Owners, et al., 122 FERC ¶ 61,267
(2008).

x:\egrisaru\nyiso docs\psc comments noon draft.doc

4
amount of the estimated costs of the required system upgrade facilities if it chooses to proceed

with the project. This security may be non-refundable under certain circumstances.

Pursuant to several FERC orders, the NYISO has recently implemented a capacity

deliverability standard.6 The NYISO developed the standard after extensive discussion and

negotiation with its Market Participants, culminating in FERC's March 21, 2008 order approving

the NYISO's methodology. Under the new rules, which were first applied to the Developer

projects in Class Year 2007, Developers who are seeking to supply installed capacity ("ICAP")

to the New York Control Area must first demonstrate that they satisfy the Deliverability

Interconnection Standard. The tariff defines deliverability for these purposes as the ability to

deliver the aggregate of New York control area capacity resources to the aggregate control area

load under summer peak conditions. The NYISO determines whether the proposed project is

capable of delivering its capacity throughout the capacity region in which it is interconnected,

but not outside of that region. The NYISO currently recognizes three distinct capacity regions:

New York City, Long Island, and Rest-of-State. A project locating in the very western portion

of the state (Load Zone A), and intending to participate in the ICAP market, is required to

demonstrate that its expected capacity would be deliverable throughout the Rest-of-State

Capacity Region, including down to the lower Hudson Valley (Load Zone G).

' New York Independent System Operator, Inc. and New York Transmission Owners, 126 FERC ¶ 61,046 (2009).

x:Aegrisaru\nyiso docs\psc coninients noon draft.doc

5
 If a project is found not to be deliverable or only partially deliverable, the NYISO will

identify the System Deliverability Upgrades ("SDU") necessary to meet the standard. The tariff

includes provisions allocating the costs of these upgrades. Both Developers and Load Serving

Entities ("LSE") may potentially share in the costs of an SDU that is necessary to resolve

congestion on a "Highway" facility.7 Developers bear the full cost of upgrades to other

transmission facilities ("Byways"). The NYISO will also assess and allocate to a Developer

opting to participate in the ICAP markets the costs of restoring the transfer capability of certain

facilities and interfaces that may be degraded as a result of the project. However, the Developer

retains the option to forego participating in the ICAP markets and provide energy only; in

contrast to the Commission's proposal, it is not required to accept the allocation of costs for

SDUs.

The NYISO performs the capacity deliverability study in conjunction with the Class Year

Facilities Study, so that Developers understand both their system upgrade responsibility under

the minimum interconnection standard and the extent of the SDUs they will be required to fund

in order to qualify for ICAP revenues before they post security for their obligations and begin

negotiating an Interconnection Agreement. With this information in hand, Developers have the

tools to quantify the total costs of the upgrades they will need in order to participate in the

NYISO's energy, ancillary services, and capacity markets.

Highways are transmission facilities at 115kV or higher that comprise the interfaces between certain load zones,
although they do not include the interfaces between the capacity regions or between the NYISO and external control
areas.

x:Aegrisaru\nyiso docs\psc comments noon draft.doc

6
 The NYISO notes that, because its Deliverability Interconnection Standard differs from

the Commission's proposal, there is a significant possibility that the upgrades resulting from

studies may be different in their wider system impact and cost, creating the potential for both

redundancies and conflicts. In some cases, a renewable project may meet the standard suggested

by the Commission but fail the NYISO's capacity deliverability test. The possibility of

inconsistent results and uncertain cost responsibility may hamper Developers' efforts to bring

additional renewable generation projects to New York.

2. Developers can Obtain Additional Information about Congestion

The NYISO OATT includes a "Transmission Expansion process" codified in sections 19

and 32. These provisions allow a customer - such as a wind Developer - to obtain detailed

information about the costs and benefits of particular system modifications. As a first step, the

customer may request a System Impact Study ("SIS") through the NYISO. The customer may

be seeking information about congestion, the value of incremental transfer capability, or any

other reliability-related or operational issue. The goal of the SIS is to determine what new

facilities or transmission upgrades might be needed to meet the customer's objective. The

customer may then request a Facilities Study in order to develop a detailed design for the new

facilities under consideration and to estimate their costs and the time required for construction,

among other details. Several parties have availed themselves of this option, and the NYISO

submits that the process provides renewable Developers with another avenue to solidifying their

assumptions about the performance of the transmission system.

x:\egrisaru\nyiso docs\psc comments noon draft.doc

7
 3. The NYISO Interconnection Process Has Facilitated the Siting of New Generation

Since the early days of the NYISO, Developers, transmission owners, and the financial

community have worked through and grown familiar with the NYISO interconnection process,

and over 7,600 MW of new generation has been built by public and private power suppliers. The

NYISO notes in particular that over 80% of the new supply has been sited in locations where

demand is greatest (New York City, Long Island, and the Hudson Valley).

The NYISO's locational market design is intended to encourage the development of new

supply and merchant transmission in response to market signals. The interconnection process

carefully balances the need to maintain reliability with the recognition that new entrants must

compete on an economic basis. The evidence to date suggests that the process is working,

benefiting the competitiveness of the markets and system reliability, and that Developers are able

to make informed decisions about where to put their investments.

III. THE NYISO'S PLANNING STUDIES PROVIDE DATA ON FUTURE

CONGESTION AND TRANSMISSION INFRASTRUCTURE NEEDS

1. The CARIS Study Examines Congestion and Provides a Cost Allocation and
Recovery Process for Transmission Solutions

FERC Order 890 required the NYISO to undertake local transmission planning,

reliability planning, and economic planning for the bulk power transmission system. The

NYISO and its Market Participants developed, and FERC has conditionally approved, a three-

stage Comprehensive System Planning Process ("CSPP") that includes a Local Transmission

x:\egrisaru\nyiso docs\psc comments noon draft.doc

8
Owner Planning Process; a Comprehensive Reliability Planning Process; and an economic

planning process known as the Congestion Assessment and Resource Integration Study

("CARIS"). 8

CARIS consists of two phases. In the first phase, the NYISO in collaboration with its

Market Participants conducts three studies of 10 years of forecasted congestion on the most

congested elements on the New York Bulk Power System, and analyzes the costs and benefits of

alternative transmission and resource solutions to alleviate that congestion.9 These studies will

not recommend specific transmission upgrades or resource additions, but will provide objective

factual information on the nature of congestion in New York that Developers, TOs, and policy-

makers can use to decide whether to proceed with congestion solutions. The CARIS report will

also analyze scenarios based on input from interested parties, including the Commission.

Depending on available NYISO resources, they NYISO may undertake to analyze scenarios

examining load forecast uncertainty, new resources, retirements, emissions changes,

environmental regulation, and energy efficiency programs.

The NYISO is currently developing its report on this first phase, and will present the

results to stakeholders and all interested parties, including the Commission and other policy-

8 The FERC conditionally approved the NYISO's December 7, 2007 and June 18, 2008 compliance filings on
October 16, 2008. New York Independent System Operator, Inc., Order on Compliance Filing, 125 FERC ¶ 61,068
(October 16, 2008). The NYISO made additional compliance filings on January 14, 2009 and May 19, 2009 to
address the directives in the FERC's October 18, 2008 Order. Final approval from FERC remains pending.

9 Stakeholders may also request additional studies of system congestion at their own expense.

x:\egrisaru\nyiso docs\psc comments noon draft.doc

9
makers. The report will be presented to NYISO governance committees in October and to the

Board in November or December of this year.

In the second phase of CARIS, which will take place in 2010, Developers can choose to

invest and build projects on their own, based on the economics of those projects in the NYISO's

markets. Developers can also propose transmission projects for cost recovery under the

NYISO's tariff. If such a transmission project is approved for cost allocation, the costs will be

allocated based on a "beneficiaries pay" approach under which those entities that economically

benefit from a project will bear its costs, and the cost allocation among them will be based upon

their relative economic benefit from such upgrades.

The NYISO submits that the CARIS study will provide valuable data on solutions to

congestion issues and establish a basis for allocating the costs of transmission upgrades.

2. The Wind Integration Study Addresses Many of the Commission's Concerns

The NYISO's ongoing Wind Integration Study examines many of the issues raised in the

Notice and discussed at the Technical Conference. In 2008, the NYISO and Market Participants

determined to analyze the impact of installed wind generation above 3,300 MW on the NYISO's

operating protocols, planning practices, and market structures. To accomplish this, the NYISO has

developed a study consisting of six tasks, the objective of which is to provide projections of overall

system performance, costs, and environmental benefits at different levels of wind penetration

evaluated at both peak and light loads. The results will identify transmission constraints along with

x:Aegrisaru\nyiso docs\psc comments noon draft.doc

10
the following information: (1) quantification of the level of congestion resulting from these

constraints; (2) a recommended list of potential upgrades to relieve the constraints: and (3)

measurements of the benefits these upgrades could provide in terms of the reduction in wind energy

"bottling" and overall reduction in congestion. The results will also include evaluation of the

impacts on the system of the different wind penetration scenarios by fuel types, emissions, and

generation displacement.

A report on the results of the Wind Integration Study is due in late 2009.

3. The STARS Study

In addition to the NYISO's wind study, the New York State Transmission Owners are

conducting a joint study of the state's bulk power system to help meet future electric needs and

support the growth of renewable energy sources. Called the New York State Transmission

Assessment and Reliability Study ("STARS"), its aim is to develop a thorough assessment of the

transmission system and suggest long-range plans for coordinated infrastructure investment.10

The study will identify zones of potential "bottled" generation on the bulk power system, and

identify limitations of the current transmission system to meet future renewable generation

development. The study will propose various strategies for upgrading, refurbishing, and building

new transmission in New York State. Specifically, if the Wind Integration Study identifies

10 Both NYSEG and RG&E are members of the STARS working group.

x:Aegrisaru\nyiso docs\psc comments noon draft.doc

11
constraints that limit the energy output of renewable resources, the STARS study will review

those results and identify transmission fixes that may alleviate the problems. i i

A draft of the STARS study is expected in late 2009.

The scope of the studies already underway through the NYISO's processes suggests that

the study methodology followed by NYSEG and RG&E in response to the Commission's order

may not materially enhance the future congestion data that these ongoing studies will provide.

The modeling parameters and assumptions included in the NYISO and joint Transmission Owner

studies are consistent and have been approved through rigorous stakeholder review. Under these

circumstances, the NYISO submits that broadening the NYSEG/RG&E study to evaluate rest-of-

state conditions would be redundant and possibly produce inconsistent results.

IV. STAFF'S PROPOSAL TO REQUIRE TRANSMISSION UPGRADES AS A

SITING CONDITION CONFLICTS WITH FERC'S EXCLUSIVE JURISDICTION

It is well-established that FERC's jurisdiction over the terms of the interconnection of a

wholesale electricity supplier to the transmission system is exclusive.'2 The Commission's

proposal to require construction of transmission system upgrades as a condition to licensing a

11 The NYISO suggests that the Commission consider utilizing the results of the Wind Integration Study and the
STARS study in making decisions about the RPS auction program, and further recommends that the issues raised
here be referred to the proceeding underway in Case No. 03-E-0 188.

" 16 U.S.C. § 824(b); See Tenn. Power Co., 90 F.E.R.C. ¶ 61,238, at 61,761-62 (2000) (interconnection is part of
transmission service and is subject to FERC pro forma tariff); Standardization of Small Generator Interconnection
Agreements and Procedures, Order No. 2006-A, 113 FERC ¶ 61195 at P. 105 (a state interconnection program
cannot displace federal rules for interconnections).

x:\egrisaru\nviso docs\psc comments noon draft.doc

12
renewable project would likely intrude on that jurisdiction, even without an explicit requirement

to allocate the costs to the Developer. The NYISO's tariff establishes the standards and

requirements that a Developer must meet in order to interconnect and participate in the wholesale

market. The tariff also allocates the costs of the interconnection and system upgrades. While the

Federal Power Act does not alter the State's core siting jurisdiction, the Commission may not

regulate the terms of transmission service or the functions of the wholesale markets through a

condition to a siting certificate.13

V. LINKING AN ADDITIONAL DELIVERABILTY STUDY TO THE LICENSING

PROCESS COULD DETER DEVELOPMENT OF RENEWABLE ENERGY
FACILITIES

The NYISO is concerned that the addition of a deliverability study and upgrade

requirement to the state licensing process could create uncertainty for Developers. Developers in

the NYISO interconnection process are required to commit to paying for reliability-related

system upgrades by posting security for the costs of those facilities within a short period of time

after the conclusion of the Facilities Study.14 Under some circumstances, a Developer may forfeit

that security if he or she does not proceed on schedule with the project. From a Developer's

point of view, the addition of a deliverability study to the Public Service Law process, even if it

does not result in additional upgrade costs, could put its NYISO security posting at risk if the

'3 PSEG Power Cross Hudson Corporation, 100 FERC ¶ 61,162 at ¶ 16 (2002)(New York Public Service
Commission may not impose conditions on a siting certificate that infringe on FERC's exclusive
jurisdiction).

14 OATT Attachment S, at VIII.B.1.

x:\egrisaru\nyiso docs\psc comments noon draft.doe

13
Commission's action on the section 68 application is not coordinated with the publication of the

Facilities Study results.15

Conditioning a state siting certificate on a deliverability study could create economic

uncertainty for the Developer; a siting condition requiring transmission upgrades could conflict

with the Developer's tariff obligations. Under the NIYSO tariff, the system upgrades a

Developer must pay for in order to interconnect are those identified through the NYISO

interconnection process. The Commission's proposal raises the possibility that the Developer

might have to pay more to access the transmission system than the NYISO requires, or have to

construct upgrades that might not be electrically compatible with those identified in the NYISO

process. The prospect of a potential conflict between the State's and the NYISO's thresholds for

interconnection is likely to dampen Developers' interest in building in New York.

The Commission could mitigate these uncertainties by conducting an open stakeholder

process to consider how the energy deliverability requirement will be coordinated with the

NYISO interconnection studies. The Commission could also use such a proceeding clarify the

assumptions and technical parameters it will expect Developers to use and to consider how to

manage possible inconsistencies between the results of the studies. Even if the Commission can

identify a jurisdictional basis for requiring an energy deliverability study, the potential for

15 Under the Commission's present interpretation of its section 68 authority, Developers can submit applications for
certificates of Public Convenience and Necessity once their projects have received NYISO Operating Committee
approval. This approach makes it possible for Developers to receive a certificate prior to reaching the security
posting milestone. Uncertainty about the potential for additional deliverability upgrade requirements would lead
Developers to delay their applications to the Commission and would tend to add more time to an already extended
process.

x:\egrisaru\nyiso docs\psc comments noon draft.doc

14
conflict between the studies and harm to the prospects for further development of renewables in

New York require the Commission to proceed with the utmost caution, if at all.

VI. THE GOAL OF STAFF'S PROPOSAL TO ENSURE COST RECOVERY OF

RENEWABLE GENERATION IS UNCLEAR AND MAY CONFLICT WITH THE
NYISO MARKET DESIGN

The NYISO wholesale markets are designed to provide a level playing field for suppliers'

competition. A new entrant takes the system as it is, and thus takes the risk that system

conditions may not always permit him to run. The new supplier is not required to do more to

access that system on the same basis as other generators than pay for project-specific upgrades

necessary to meet the minimum interconnection standard. In contrast, Staffs statements in the

Appendices to the Notice and comments made at the Technical Conference seem to arise from a

concern that renewable suppliers may not be able to recover "all" their costs in the NYISO

markets if transmission constraints lead to curtailments under some conditions. However,

nothing in FERC policy or the NYISO's market design is intended to guarantee any supplier cost

recovery, and to prefer one class of generation by ensuring recovery of costs would be contrary

to the fundamental principles at the basis of the wholesale markets.

Staff also expresses concern for avoiding a possible decline in market prices under

conditions of over-generation. Those market prices are a matter of FERC jurisdiction, and state

action to prop up - or lower - the prices resulting from the bid-based markets could infringe on

an area in which federal policy governs.

x:\egrisaru\nyiso docs\psc continents noon draft.doc

15
 CONCLUSION

The Commission's proposal to undertake studies of the type submitted by NYSEG and

RG&E appears to overlap with the studies already underway through the NYISO's processes and

could create conflicts with the NYISO's interconnection rules. In particular, the NYISO's

CARIS and Wind Integration studies, and the TOs' STARS study, will provide data that should

allow the Commission to project future congestion and estimate the level of transmission

investment that may be necessary to integrate renewable resources with the markets. The

NYISO notes that the proposal may raise conflicts with FERC's jurisdiction and with existing

FERC transmission cost allocation principles. Finally, the NYISO submits that the

Commission's proposal could have the unintended consequence of discouraging the investment

needed to help the State reach its renewable energy goals.

Respectfully submitted,

li^'abetfi i(,.6r1isa
Whiteman Osterman & Hanna
Counsel to the New York Independent System Operator,
Inc.
One Commerce Plaza
Albany, New York 12260
mailto:egrisaru@woh.com

x:\egrisaru\nyiso docs\psc comments noon drat4.doc

16
 RESPONSES TO APPENDIX A QUESTIONS

The NYISO submits the following responses to the questions included on

Appendix A to the Commission's Notice. Both the numbered questions and the NYISO's
answers are given below.

1. Does the NYSEG/RG&E filing appropriately cover the requirements outlined in

the Commission Orders? If no, please discuss.

NYISO RESPONSE: The NYSEG/RG&E study methodology appears to comport

generally with the terms of the Commission Orders. The NYISO notes, however, that it
is not clear how this approach satisfies the concern expressed in the Iberdrola order for
avoiding the potential exercise of vertical market power. Nor does the methodology
provide a reasonable calculation of the amount of environmental benefits achieved with
the addition of renewable generation, a concern raised in the Marble River order.

At the same time, the NYISO believes the study provides a possible screening
approach to identify local transmission constraints on the Transmission Owner's system
which can then be used as input to more detailed economic transmission studies such as
CARIS. The NYISO would caution the Commission against relying on this method for
identifying potential remedies for congestion, since an approach focused solely on one
Transmission Owner's system may not find the most cost effective system-wide
transmission upgrades.

2. Is the NYSEG/RG&E filing appropriate for use by other investor-owned utilities in

New York? If no, please discuss.

NYISO RESPONSE: As described above, this methodology can be effectively used to

screen for potential local constraints on individual Transmission Owner systems, but a
comprehensive, statewide evaluation is necessary to identify the most cost effective
solutions to relieve congested renewable generation. The NYISO submits that the
ongoing STARS and CARTS studies will enable development of such solutions.

3. Should the performance of the studies be required of the investor-owned utilities only
or is it reasonable to allow other entities, such as contractors or the NYISO, to provide
this study service? Please explain.
NYISO RESPONSE: The NYISO believes that the utilities should be encouraged to
perform such studies afforded to them by Sections 19 and 32 of the OATT, and to
participate in system-wide NYISO studies such as CARTS.

4. Rather than intending to assure 100% of available renewable energy output can be
delivered, it may be useful to review applicable load duration curves along with
anticipated generator output availability. From this, it may be reasonable to perform an
Energy Deliverability Test in which (for example) 90% of maximum simultaneous
available generator energy can be delivered rather than 100%, and/or the test is conducted
for a load of 110% of minimum load rather than the actual expected minimum. Should
this modification be included in the study methodology? If yes, please explain.

NYISO RESPONSE: In order to provide both the developers and Transmission Owners
with the best information, the expected simultaneous level of load and wind generation
should be modeled. Representing wind at 100% output for all hours of the year is overly
conservative and may result in over-investment in transmission. A combined power flow
and production costing simulation may be a more appropriate approach to handle the
modeling issue and to provide a range of bottling information at different time frames
(hourly, daily, monthly, seasonally, etc.). The NYISO Wind Integration Study does
exactly that, implementing over thirty wind profiles measured throughout the state to
evaluate a full year of production costing simulations.

5. If renewable output can be expected to be higher when load is higher, less transmission
will be needed to insure energy deliverability. In the extreme (albeit unlikely) case, if the
available energy from a renewable generator having a 20% capacity factor coincides with
the highest loads, then much less transmission will be needed. To the extent correlations
can be made between load and renewable output (e.g., on-peak hours versus off-peak
hours for winter, spring, summer, fall, etc.), it would facilitate dividing a year into
different segments and conducting a set of separate energy deliverability tests under a
variety of expected generation versus load correlations. Should this modification be
included in the study methodology? If yes, please explain.

NYISO RESPONSE: See response to (4). The NYISO also notes that wind generation
output changes throughout the day and throughout the year, and in fact often does so
inversely to load (e.g. peak wind output during off-peak load hours). Therefore, the
NYISO supports in part the approach taken by NYSEG/RG&E, where the year is divided
into segments for a variety of load levels. However those segments should also consider
the simultaneous levels of renewable generation, as is being done in the NYISO Wind
Integration Study.

6. In some instances, a new generator may be locating upstream of a transmission

constraint that is also impacted by a renewable resource external to New York. It should
be noted that - unless an external resource is providing firm ICAP - the NYISO will not
likely include the impact of external renewable resources when it performs a capacity

x:\egrisaru\nyiso does\nyiso answers final.doc

2
deliverability test on a new generator. In the case of an energy deliverability test, if
external renewable resources lie upstream of a transmission constraint along with a new
renewable resource (that is internal to New York), those external resources would impact
energy deliverability as well. Should consideration of external renewable resources be
included in the study methodology? If yes, please explain.

NYISO RESPONSE: Yes, the NYISO believes external renewables that are being
counted on to meet RPS requirements should be modeled in a study such as the one the
Commission has proposed. Also, as noted, the NYISO's capacity deliverability test only
includes external capacity with firm long term contracts. The NYISO would recommend
taking the same approach in any energy deliverability test that is adopted. However, it
should be noted that there will be resources which are neither ICAP providers nor RPS
contractors that will be competing for the use of the transmission system on an economic
basis.

An energy deliverability test conducted using a production cost model that

simulates security constrained unit commitment and real-time dispatch can model both
internal and external resources and quantify how resources compete for the use of the
transmission system. The ability of external resources to compete with internal resources
will be a function of the external resources' marginal cost and the "hurdle rate" the
external resources faces. The hurdle rate incorporates the costs the external generator
encounters in delivering its energy to the appropriate New York interface, such as any
transmission service charges, scheduling costs, and other potential costs that impact the
delivery of the energy to the New York system. These costs are the result of "seams"
between markets and control areas. Such a tool could also be used to quantify the
potential impact on transmission system utilization of all resources that may be
competing to use the New York transmission system for energy deliveries. The NYISO's
Wind Integration Study and CARIS are designed to accomplish this.

7. In comparison to a more sophisticated model such as security constrained

commitment and dispatch production costing software (e.g., the NYISO SCUC or
GEMAPS), the Energy Deliverability Study performed using a power-flow model can
provide a more intuitive, more insightful indication of important drivers. This may also
provide a less iterative, more straightforward analysis, particularly if detailed generator
output versus load data is sparse. Having said that, if detailed estimates of generator
output, load and energy bid prices are available (particularly if they can be correlated to
one another on a hourly basis) and/or the transmission topography is exceedingly
complex, then use of the more sophisticated models to perform an energy deliverability
test may be useful. If so, rather than producing a single point outcome, the analysis would
likely be more useful if a range of outcomes were produced using optimistic and
pessimistic assumptions. Should this approach be included in the study methodology? If
yes, please explain.

x:\egrisaru\nyiso docs\nyiso answers final.doc

3
 NYISO RESPONSE: See comments for (4) and (5). In terms of an energy deliverability
study at the Transmission Owner level, a power flow model could provide results
adequate to screen for transmission constraints. Wind profiles for various regions
throughout the state should be considered, as well as historical merit order of dispatch for
other generation, in order to provide a realistic power flow case.

Output from such a power flow analysis done by Transmission Owners could then
be fed into production costing simulations such as CARIS to provide the most cost
effective solutions to relieve transmission constraints for wind energy delivery.

8. The relative performance of a generator in an Energy Deliverability Test is

dependent upon the transmission study criteria used, and needs to be stated in that
context. For example, if a generator passes an energy deliverability test under an "all
lines-in" criteria, its energy will not necessarily be deliverable if a single contingency
occurs. Based upon the probabilities that a single or multiple contingency might occur,
the generator could be evaluated under more stringent criteria to increase its assurance
that its energy will be deliverable even under more restrictive conditions. In any event, it
would need to accept a certain probability that its energy may not always be deliverable.
Should the results of the study be qualified in the context of the evaluation criteria used?
If yes, please explain.

NYISO RESPONSE: Yes. Any generating unit is subject to security constrained

dispatch which includes consideration of contingencies. Any evaluation associated with
security constrained dispatch such as energy deliverability should include design
contingency analysis.

9. While the Energy Deliverability Study proposed could be performed on a

specifically proposed new generator, it could also be performed for a certain location in
the following alternative ways: (a) test the proposed new generator plus potential
additional new generators at the same location (which might lead to the need or desire for
a more global comprehensive transmission upgrade); (b) test the maximum sized
generator whose energy can be generally delivered with the existing transmission system
configuration; or (c) test the maximum sized generator whose energy can be generally
delivered with one or more specific transmission upgrades. Should this expansion of
scope be included in the study methodology? If yes, please explain.

NYISO RESPONSE: The NYISO's Class Year and capacity deliverability studies take
an approach similar to that suggested in (a). The Wind Integration Study addresses to an
extent both (b) and (c), by modeling the system with and without potential system
upgrades. Further, the CARIS is capable of providing the information targeted by all
three alternative tests.

10. Co-generators providing steam service improve the overall efficiency of

x:\egrisaru\nyiso docs\nyiso answers final.doc

4
 generators burning fossil fuel. Therefore in performing an Energy Deliverability Test,
should generators serving as steam hosts be treated as "must run" at the minimum output
required for maintaining steam production, and/or should their anticipated levels of
curtailment be noted? Please explain.

NYISO RESPONSE: Co-generators should not be the only must-run consideration.

Because of physical and contractual limitations, the transmission system must
accommodate a certain amount of minimum generation at all load levels. PURPA units
are not necessarily economically committed, but run based on a contract commitment,
and a number of other plants have minimum down times and long start-up times, such as
nuclear plants, making it uneconomic to shut them down. A production costing
simulation model, such as that being used in NYISO's CARIS and Wind Studies, can
properly model reliability must-run and which units are to be committed/dispatched
economically. A separate reliability study should be performed to designate if a unit
should be a reliability must-run.

11. Although low or negative Real-Time energy prices can be caused by transmission
constraints as identified in the proposed Energy Deliverability Test, some low or negative
Real-Time prices may also be caused by temporary over-generation problems caused by
momentary upward excursions of out-of-merit generation and/or rapid drops in load to
which generation can not adequately respond in the short term. Thus, for a more
"complete picture", it may be useful to provide a renewable energy developer with both
(a) an estimate of energy curtailment and/or low or negative prices due to transmission
constraints (which presumably can be determined with the Energy Deliverability Test and
can be mitigated with transmission upgrades); and (b) an estimate (based upon historical
data) of low or negative LBMPs caused by temporary out-of-merit over-generation
(which presumably can't be mitigated with transmission upgrades). Therefore should the
proposed Energy Deliverability Test be supplemented with an estimate of expected
negative energy price conditions caused by temporary over-generation conditions? If so,
please explain.

NYISO RESPONSE: The NYISO submits that the complexity of the study Staff is
suggesting may not materially enhance the information available to developers. A robust
planning study, such as CARIS, should be capable of providing information on expected
energy curtailment and the price impacts of transmission constraints. A historical
statistical analysis of negative LBMPs does not illuminate the impacts of transmission
congestion relief. A change in the transmission systems, coincident load in the system,
fuel prices, or any other factors will change the statistics which in turn would make such
statistical analysis irrelevant.

x:\egrisaru\nyiso docs\nyiso answers final.doc