FERC greenlight changes to NYISO's demand response pricing

Dive Brief:

The Federal Energy Regulatory Committee on March 1 accepted tariff revisions proposed by New York's grid operator to alter the underlying logic of the region's scarcity pricing mechanism, in order to better reflect the value of demand response.
The changes include boosting the value of Southeastern New York 30-minute reserves from $25 per MW to $500 per MW at all times, a move the ISO believes will recognize that the grid has historically called on Special Case Resources and its Emergency Demand Response Program (SCR/EDRP) to protect reserves in that area.
The changes have the backing of several trade groups, including the Electric Power Supply Association, the Independent Power Producers of New York and the New York Transmission Owners, RTO Insider reports.

Dive Insight:

Changes to demand response pricing had wide approval from generators and transmission owners, but New York Department of State’s Utility Intervention Unit said it was concerned about the efficiency of generation dispatch under the proposal. Regulators responded that gains in transparency and more accurate pricing signals trumped those possibilities.

"We find that the benefits of increasing price transparency and incorporating scarcity pricing in the real-time market software outweigh such concerns," the commission wrote. "NYISO’s proposal increases price transparency by ensuring consistency between resource schedules and pricing outcomes in real-time when NYISO activates SCR/EDRP resources, thereby reducing the potential for uplift costs."

The problem, FERC outlined in its order, is that NYISO's existing ex post scarcity pricing logic had the potential to cause "inconsistencies between resource schedules and pricing outcomes, which could result in uplift costs."

The changes will increase the value of Southeastern New York 30-minute reserves from $25 per MW to $500 per MW, as well as increasing the New York Control Area 30-minute reserve demand curve values "priced at less than $500 per MW to $500 per MW, effective in real-time during any SCR/EDRP resource activation."

The increase in Southeastern New York 30-minute reserves also means reducing the target level for Southeastern New York 30-minute reserves to zero during storm watch events, FERC said. And finally, the tariff changes will increase the New York Control Area 30-minute reserve demand curve values priced at less than $500 per MW to $500 per MW, effective in real-time during any SCR/EDRP resource activation.