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Update NY Capacity: New Zone Starts in May 2014

On January 28, 2014 the Federal Energy Regulatory Commission (FERC) accepted the NYISO’s tariff to implement the new NY load zone (subject to condition) and denied the waiver to phase in the new load zone. We have several prior articles that cover this regulatory and market change.

The New Capacity Zone Combines Current Zones G, H, I

What this means to businesses and institutions in Zones G, H and I

According to the FERC  decision:

In this Order, the Commission accepts NYISO’s proposed tariff revisions, subject to NYISO refiling to reflect the Demand Curve parameters without any phase-in adjustment. The Commission rejects NYISO’s proposed phase-in of the new demand curve parameters for the G-J Locality and NYISO’s associated request for waivers.

In an earlier post, found here, The Megawatt Hour estimated the impact of the new capacity zone on customers in these geographies. At that point, we assumed that FERC would accept the NYISO’s request to phase the new capacity zone in over 3 years. Now that FERC has rejected that request, we have revised our numbers to reflect the full implementation starting in May 2014.

So, here are some revised numbers, based on no phase-in of the new capacity zone.

Here, we are using NYISO projections on cost of ICap in the new capacity zone (load zones G-J) as filed at FERC. (The reference point is to the rest-of-state — non- NYC–auction clearing prices for Summer 2013 and Winter 2013-2014. These numbers reflect the fact that the new load zone will not be phased in over three “capacity” years.)

Projected cost increases: capacity in new zone

To give you an idea of the effect of these changes in capacity prices on the overall cost of electricity, we re-analyzed a sample of accounts in our database.  Below, we show the changes in a full requirements fixed price for each of the next three calendar years. These fixed price estimates are based on the current forward market for energy and our best estimate of future costs (such as ancillary services, etc). Each of the sample accounts have different mixes of load profiles and load factor. Here we define load factor as the relationship between annual energy and the current ICap obligation (the “ICap Tag”). The percentage changes are relative to a full requirements rate using 100% rest-of-state ICap costs as if the new zone did not exist.

Impact of revised capacity costs (new zone) on overall electricity costs

Bottom line for businesses and institutions: It appears that the NY ISO will implement the new capacity zone in May 2014. Look for ways to mitigate the impact of increased capacity costs on your business. These may include: participation in demand response programs, targeted demand reductions, and different approaches to capacity procurement in order to minimize the impact of these cost increases.