Cuomo Directs New York PSC To Begin Review Of NYISO

February 09, 2015

New York Gov. Andrew Cuomo has directed the Public Service Commission to review NYISO, seeking recommendations to make the state’s wholesale market design more customer-friendly and better able to advance policies that are key to his clean energy policies.

The governor’s directive was part of his 2015-2016 budget plan and was accompanied by a document titled “Opportunity Agenda,” a comprehensive series of reforms that reflect the administration’s major policy initiatives. The 550-page paper made it clear that Cuomo has serious reservations about how the state’s energy market is structured, NYISO’s transparency and governance, and the grid operator’s ability to effectively accommodate clean and distributed energy.

It reads in part:

The development of cleaner energy resources requires proper price signals at both retail and wholesale levels, and a marketplace that recognizes their value. The current wholesale market structure is not designed for, nor may be well suited for, the proliferation of clean distributed energy resources. The evidence lies in the limited deployment of demand response in the wholesale energy and ancillary services markets and the eroding penetration of demand response in the capacity market. Renewable energy resources also face financial difficulty operating within the current wholesale market structure.

In designing and administering the wholesale markets, NYISO makes decisions that can have profound impacts on New York’s electricity price and energy resources mix, and thus on consumers, the economy, and the environment. However, NYISO’s board of directors does not have adequate public and consumer representation, and are not subject to the same transparency standards as other governmental organizations.

Given those concerns, the PSC will review NYISO’s current governance and market structure and propose changes that will “better represent consumer interests and facilitate the advancement of the ongoing clean energy policies of New York State,” according to the document.

Cuomo’s focus on NYISO seems to be based, at least in part, on the state’s ambitious Reforming the Energy Vision (REV) initiative, which is designed to transform the way electricity is procured, regulated, and distributed.

Its bottom-line goals include increasing both the penetration of renewable energy and distributed energy resources – two aims that are paralleled in the governor’s Opportunity Agenda.

“By fundamentally restructuring the way utilities and energy companies sell electricity,” PSC Chair Audrey Zibelman said last April when the modernization plan was announced, “New York can maximize the utilization of resources, and reduce the need for new infrastructure through expanded demand management, energy efficiency, renewable energy, distributed generation, and energy storage programs.”

The PSC endorsed the review of NYISO, and added that it plans to begin the process immediately.

“In light of the…REV proceeding and the governor's comprehensive clean energy REV strategy, the PSC agrees with the governor that it is prudent policy and practice to review the full gamut of the state's energy supply and resources and its transmission and distribution channels as we continue to modernize and reform New York's utility regulatory policy and practice,” commission spokesman James Dunn told the Albany Times Union.

For its part, NYISO did not admit any need for extensive changes. Instead, it saw the review as an opportunity to work with the commission and emphasized its previous achievements.

“As always, we look forward to continuing our strong relationship with the Public Service Commission and building on the NYISO’s 15-year track record of open collaboration with our regulators and stakeholders as markets and innovative technologies continue to evolve,” said David Flanagan, manager of media and community relations at NYISO.

“We are proud of the significant value the NYISO provides to consumers through unmatched system reliability, efficient wholesale energy markets and long-term planning.”