109 FERC ¶ 61,372

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Pat Wood, III, Chairman;

Nora Mead Brownell, Joseph T. Kelliher,

and Suedeen G. Kelly.

+--------------------------------------------+----------+-------------+
| New York Independent System Operator, Inc. | Docket   | ER          |
|                                            | Nos.     | 04-1144-000 |
|                                            |          |             |
|                                            |          | ER          |
|                                            |          | 04-1144-001 |
+--------------------------------------------+----------+-------------+

ORDER ACCEPTING IN PART AND REJECTING IN PART TARIFF AMENDMENTS

(December 28, 2004)

1.  In this order, we accept in part and reject in part the proposed
    tariff amendments and agreement between New York Independent System
    Operator, Inc. (NYISO) and the New York Transmission Owners (NYTOs)
    [^1] filed by NYISO, to become effective October 19, 2004. The
    proposed tariff amendments establish a comprehensive planning
    process (Planning Process) for reliability needs for New York. We
    also direct NYISO to make a compliance filing. This order benefits
    customers by implementing measures to improve reliability in New
    York.

# [Background]{.underline}

2.  NYISO proposes a formal mechanism by which NYISO, its market
    participants, and the New York State Public Service Commission (New
    York Commission) will work together to address long-term planning
    for reliability.[^2] Under the NYISO plan, reliability needs for the
    bulk power system will be determined over a ten year planning
    horizon. The essential steps in the Planning Process include the
    identification of system needs, the development of proposals for
    both market-based and regulated solutions, NYISO evaluation of these
    proposed solutions, and the implementation of regulated solutions by
    the NYTOs as a backstop when market-based projects do not resolve
    anticipated reliability deficiencies.

3.  Under the proposed planning process, NYISO is responsible for
    evaluating the bulk power system over a ten year horizon and for
    identifying violations or potential violations of reliability rules
    that result or could result from inadequate bulk power
    infrastructure.[^3] The base case for the first five year period
    will represent the New York State power system as reflected in the
    annual transmission reliability assessment conducted under
    Attachment S of the NYISO OATT. NYISO will publish the results of
    this evaluation annually in the Reliability Needs Assessment (RNA).
    The proposed Planning Process also provides for action beyond the
    normal planning cycle where NYISO identifies an imminent threat to
    reliability. The RNA will be reviewed by stakeholders[^4] and voted
    on and approved by the NYISO Board of Directors.

4.  NYISO states that the planning process is designed to ensure that
    when a reliability need is first identified by the NYISO there is a
    parallel process initiated to seek both market-based and regulated
    backstop proposals at the same time. NYISO emphasizes that the
    market-based proposals are open to all resources, including
    generation, demand response providers and merchant transmission
    developers. In the event that no viable market-based solution comes
    forward, there is an opportunity for developers (both transmission
    owners and non-transmission owners) to submit alternative regulated
    solutions. The staff of the New York Commission will screen
    alternative regulated solutions proposed by non-transmission owners
    to facilitate the determination as to which response is the most
    effective. NYISO will evaluate the market-based and regulated
    solution proposals and present the results in the Comprehensive
    Reliability Plan (CRP), which is aimed at matching reliability needs
    and appropriate market-based and/or regulated solutions.

5.  Dispute resolution issues are addressed in sections 5.3,[^5] 8.3[^6]
    and 12.0 [^7] Sections 5.3 and 8.3 describe the process to resolve
    disputes relating to the final conclusions or recommendations of the
    RNA and final determination in the CRP. Sections 5.3 and 8.3 provide
    that participants seeking further review "shall refer such dispute
    to the New York Commission for resolution." Both proposed sections
    further state that the final

    determination of the New York Commission shall be binding, subject
    only to judicial review in the courts of the State of New York.
    Section 12.0 addresses the Commission's role in dispute resolution.

6.  NYISO will monitor the status of market-based projects through
    subsequent annual planning cycles, but will take no further action
    as long as it is satisfied that the projects are on schedule to meet
    the underlying reliability concerns. However, if NYISO finds that
    market-based proposals will not resolve a reliability need, and if
    the timing requires action to be taken, NYISO will identify (in the
    CRP) the backstop regulated solution that will meet the reliability
    need, and the transmission owner responsible for implementing it. At
    that point, the responsible transmission owner will submit its
    backstop solution to state regulators for approval under state law.

7.  The proposed Planning Process also contains a means of addressing
    time-critical reliability needs through gap solutions. If NYISO
    determines that "there is an imminent threat to the reliability of
    the New York power system," the NYISO Board may request that the
    applicable NYTOs propose a gap solution outside of the normal
    planning cycle. The gap solution proposals will be designed to be
    temporary and to be compatible with market-based proposals.

8.  Cost recovery is addressed in section 11.0, which provides that
    NYTOs will be entitled to full recovery of all reasonably incurred
    costs related to the preparation of proposed regulated solutions and
    the development, construction, operation and maintenance of
    regulated solutions undertaken at the request of NYISO pursuant to
    the Planning Process, including a reasonable rate of return and any
    applicable regulatory incentives. NYISO states that NYISO and its
    stakeholders agreed on several key principles to guide the
    development of a cost allocation methodology. The specific
    methodology for cost allocation is, however, not complete. NYISO
    states that there is a strong consensus among stakeholders for a
    "beneficiaries pay" approach, which is supported by the New York
    Commission and other state agencies. NYISO's proposal requires it to
    develop, with participants, the criteria for identifying
    beneficiaries and other details. NYISO indicates that this
    development process may take some time but asserts that there is no
    pressing reliability need that outweighs the potential benefits of a
    stakeholder deliberation.

9.  NYISO also submits an agreement to be executed by NYISO and the
    NYTOs, entitled Agreement Between the New York Independent System
    Operator, Inc. and the NYTOs on the Comprehensive Planning Process
    for reliability needs (Agreement). The Agreement specifies the
    rights and obligations of the NYTOs associated with their
    participation in the NYISO Planning Process. The Agreement provides
    that any incremental costs would be recovered under a separate rate
    recovery mechanism that would be designed to be limited to the
    recovery of such costs (i.e., a limited Federal Power Act (FPA)
    section 205 rate recovery mechanism). The Agreement also calls for
    any such proposed rate filings to become effective pending
    Commission review as part of an expedited approval process.
    Therefore, in order to implement this aspect of the proposed tariff
    and Agreement, once approved, the NYTOs will file separate rate
    schedules under the NYISO Open Access Transmission Tariff (OATT)
    that will provide for recovery of the costs of projects implemented
    in accordance with the Planning Process through the limited section
    205 rate recovery mechanism described above.

10. Finally, NYISO will coordinate its planning activities under this
    tariff with those of its neighboring Independent System Operators
    (ISOs), Regional Transmission Organizations (RTOs), and other
    control areas. Thus, NYISO will administer the Planning Process to
    enhance the consistency of reliability determinations across the
    Northeast region. NYISO states that it has already initiated
    discussions with its stakeholders to begin this process and has
    begun implementing the Northeastern ISO-RTO Coordination of Planning
    Protocol which is planned to be executed shortly with PJM
    Interconnection, LLC (PJM) and ISO-New England, Inc.

# [Notices and Responsive Pleadings]{.underline}

11. Notices of the filing and amendments were published in the *Federal
    Register*, 69 Fed. Reg. 53,430 (2004); 69 Fed. Reg. 65,419 (2004),
    with protests and interventions due on or before November 19, 2004.
    NRG,[^8] the New York Municipal Power Agency (NYMPA), Public Service
    Electric and Gas Company (PSEG),[^9] Keyspan-Ravenswood, LLC
    (Ravenswood), the New York Municipals,[^10] and Calpine Eastern
    Corporation (Calpine) filed motions to intervene and protests.
    Niagara Mohawk Power Corporation, the NYTOs, and the New York
    Commission filed motions to intervene and supporting comments. PJM
    and the Pace University Energy Project (Pace) filed comments. On
    September 27, 2004, NYISO and the NYTOs filed answers to the
    comments and protests. On September 28, 2004, the New York
    Commission filed an answer to the comments and protests. On December
    6, 2004, NYISO filed an answer to Calpine's protest.

#  [Discussion]{.underline}

## [Procedural Matters]{.underline}

12. Pursuant to Rule 214 of the Commission's Rules of Practice and
    Procedure, 18 C.F.R. § 385.214 (2004), the timely, unopposed motions
    to intervene serve to make the entities that filed them parties to
    this proceeding. Rule 213(a)(2) of the Commission's Rules of
    Practice and Procedure, 18 C.F.R. § 385.213(a)(2) (2004), prohibits
    an answer to a protest unless otherwise ordered by the decisional
    authority. We will accept the answers of NYISO, the NYTOs and the
    New York Commission because they have provided information that
    assisted us in our decision-making process.

## [Tariff Amendments]{.underline}

### [Jurisdiction]{.underline}

#### [Protests and Comments]{.underline}

13. Ravenswood, PSEG, NYMPA, NRG, and the New York Municipals protest
    the filing on the grounds that there would be too little federal
    oversight if the filing is accepted as it is. NRG states that the
    New York Commission should not have the final authority on the
    resolution of reliability problems and requests that dispute
    resolution sections 5.3 and 8.3 of the proposed Planning Process be
    eliminated because the FPA empowers the Commission to regulate the
    bulk power system operated by the utilities. PSEG, NYMPA and the New
    York Municipals share NRG's concern regarding these two sections.
    PSEG states that decision-making authority cannot be delegated to a
    state agency or state courts as proposed here. NYMPA states that
    disputes about NYISO's determinations are appropriately before the
    Commission, especially in instances when NYISO's determinations
    could dictate the Commission's treatment of transmission rates.
    NYMPA points to precedent where the Commission stated that disputes
    between NYISO

    and the New York State Reliability Council affecting matters subject
    to the Commission's jurisdiction must be resolved directly by the
    Commission, and not submitted first to the New York Commission.[^11]

14. The New York Municipals state that there is too little federal role
    in the Planning Process and points to section 12.0 that outlines the
    extent of Commission oversight. Section 12.0 states that disputes
    related directly to NYISO's compliance with its tariffs that are not
    resolved in the internal NYISO appeals process shall be resolved by
    the Commission if review is sought by a market participant.

15. Ravenswood states that it is concerned that the proposal expands the
    New York Commission's role in system planning and that the
    Commission should also have opportunities to evaluate proposals
    designed to maintain reliability. Ravenswood states that projects
    that would result from this proposal will significantly affect the
    operations of wholesale markets, and, therefore, are within the
    Commission's jurisdiction. Ravenswood further states that if the
    execution of NYISO's Planning Process skews the balance in favor of
    regulated projects and jeopardizes wholesale market functions,
    parties should have the opportunity to seek Commission intervention.

16. The New York Commission states that it has jurisdiction over
    reliability, which authorizes it to resolve reliability related
    disputes. The New York Commission points to a statement that there
    is currently no direct federal authority for responsibility for the
    reliability of the transmission grid and that the FPA contains only
    limited authorities on reliability. The New York Commission states
    that, as a neutral third party with familiarity with the local and
    bulk power systems in New York, it is the appropriate forum to
    address disputes concerning the validity of NYISO's RNAs.

17. PJM states that it is concerned that New York Commission's role
    under the Planning Process might jeopardize the independence that
    NYISO should have as an ISO or RTO. PJM states that state regulatory
    bodies, such as the New York Commission, should not have final
    decisional and veto authority as proposed here. PJM states that the
    process should encourage input by the state regulatory body early in
    the process. PJM also states that the proposal should be modified in
    order to define a clear decision-making process that allows NYISO to
    be more than a coordinator.

#### [Commission Determination]{.underline}

18. The Commission recognizes that the New York Commission has siting
    authority and a statutory charge to maintain reliability in New York
    and thus in the NYISO region, and therefore has a critical part to
    play in the transmission planning process. At the same time, we
    recognize that matters within our jurisdiction may also arise in the
    transmission planning process, particularly the ratemaking treatment
    that would be given to transmission facilities built pursuant to the
    planning process. Further, the NYISO, as a Commission-regulated
    utility, is providing the transparent forum for the multi-utility
    regional planning process envisioned by Order No. 2000. Our goal is
    to appropriately recognize the respective state-federal authorities
    over transmission matters and to dovetail our regulation in a way
    that supports timely, efficient reliability solutions. In our April
    2004 *Policy Statement on Matters Related to Bulk Power System
    Reliability,* we stated our intent to work closely with the states
    to address reliability-related issues of mutual concern.[^12] This
    filing presents that opportunity.

19. Since the footprint of NYISO is contiguous with the State of New
    York, we believe the New York Commission is singularly suited to
    address certain disputes relating to the final conclusions or
    recommendations of the RNA or NYISO's final determination in the
    CRP.[^13] We also believe that this level of involvement will not
    jeopardize NYISO's independence and could potentially expedite the
    siting of new facilities. NYISO will continue to take the lead
    responsibility in the planning process. Therefore, we will accept
    the dispute resolution process at the state level, contained in
    sections 5.3 and 8.3 of the proposed Planning Process tariff
    amendment, for matters that are not within this Commission's
    exclusive jurisdiction. To the extent that disputes regarding
    matters over which all the participating commissions have
    jurisdiction and responsibility for action, the Commission will
    entertain a request from the New York Commission or the parties for
    a joint or concurrent hearing to resolve the dispute, consistent
    with our regulations.[^14] We direct NYISO to amend sections 5.3 and
    8.3 accordingly. Further, we direct NYISO to amend sections 5.3 and
    8.3 of the Planning Process to provide that only disputes within the
    New York Commission's jurisdiction may be subject to judicial review
    in the courts of the State of New York, since matters within our
    jurisdiction under the Federal Power Act may only be appealed to a
    Circuit Court of Appeals of the United States. We applaud NYISO and
    interested parties for devising a workable, efficient process to
    facilitate transmission planning and expansion.

### [Reliability Needs Assessment]{.underline}

#### [Protests and Comments]{.underline}

20. Referring to section 4.3(d)[^15] of the proposed tariff, NRG asserts
    that, once a reliability need has been identified, NYISO should list
    possible solutions (e.g., transmission upgrades, or additional
    generation, or demand response). NRG argues that merely defining the
    total deficiency relative to reliability criteria is inadequate as
    it will not inform market participants how the reliability need may
    be resolved in the most efficient manner. Moreover, NRG argues, a
    non-exclusive list of possible solutions would enhance the ability
    of participants to construct market and regulated solutions in a
    more efficient manner. NRG contends that disclosing possible
    solutions at the same time the need is defined will enable buyers
    and sellers of reliability solutions to understand the relative
    costs thereof.

#### [Commission Determination]{.underline}

21. The Commission will not direct NYISO to compile a non-exclusive list
    of possible reliability solutions. The Commission interprets NRG's
    comments to suggest that NYISO provide a preliminary list of
    possible solutions to the identified reliability need---prior to the
    presentation of regulated backstop solutions, or proposals from
    merchant transmission developers, proposals for generation, and
    demand response and any other solutions. In its answer, NYISO states
    that it "does not itself propose or design solutions" in the
    proposed Planning Process.[^16] The Commission believes that were
    NYISO to compile a list of solutions prior to the presentation and
    evaluation (by stakeholders and the NYISO Board) of proposed
    solutions, NYISO would be violating its stated objective to avoid
    proposing solutions to reliability needs that may impede market
    solutions. Moreover, the Commission believes that the proposed
    Planning Process achieves the objectives NRG seeks without requiring
    NYISO to identify proposals on its own.

### [Independent Market Advisor]{.underline}

#### [Protests and Comments]{.underline}

22. Section 5.2 of the proposed tariff changes provides that a draft of
    the RNA will be provided to the Independent Market Advisor (IMA) for
    review and consideration to determine whether market rule changes
    are necessary to address an "identified failure" in the NYISO
    markets. NRG argues that this review is too limited and that the
    IMA's analysis should encompass whether the existing market design
    or rules provide insufficient incentives for market participants to
    resolve bulk power reliability concerns. NRG asserts that this would
    not lead the IMA to consider broader market failures, which may
    limit the effectiveness of market solutions.

#### [Commission Determination]{.underline}

23. The IMA is, generally speaking, responsible for monitoring and
    assessing the performance of NYISO markets and advising the NYISO
    Board. Article 4.3 of the market monitoring plan states that the IMA
    may at any time bring any matter to the attention of the NYISO Board
    as the IMA deems appropriate.[^17] The Commission finds that the IMA
    has the opportunity to provide input or advice to the NYISO Board
    (which will ultimately approve the RNA) and thus there is no need to
    require NYISO to expand the role of the IMA.

### [Discrimination]{.underline}

#### [Protests and Comments]{.underline}

24. NRG states that proposed sections 6.4 and 7.3 addressing alternative
    regulated responses are inconsistent and discriminatory because,
    under the proposal, solutions proposed by NYTOs are to be reviewed
    by NYISO, while other proposed solutions for the same reliability
    problem must first be submitted to, and approved by, the staff of
    the New York Commission before NYISO can consider the proposed
    solutions.

#### [Commission Determination]{.underline}

25. The Commission has previously concluded that the ISO should be the
    entity to evaluate and develop an expansion plan and have the
    responsibility to decide which projects to include in the plan, and
    any participant should be able to contribute.[^18] Here NYISO
    proposes to take the lead responsibility in the planning process.
    However, the Commission finds the process to be unduly
    discriminatory because non-transmission owners would be required to
    seek state approval in advance of bringing proposed solutions to
    NYISO, while transmission owners would not. Therefore we will
    require NYISO to revise the proposal to remedy this unduly
    discriminatory treatment to treat non-transmission owners solutions
    comparably to transmission owners solutions. If transmission owners
    are not required to seek state approval before submission to NYISO,
    then non-transmission owners should likewise not be required to seek
    such approval.

### [Cost Recovery]{.underline}

#### [Protests and Comments]{.underline}

26. NYMPA states that the proposal allows NYTOs earning at or above
    their cost of service after new construction to forego filing for
    rates relating to new construction but retain rates for existing
    facilities, even if those rates result in earnings far beyond the
    NYTOs cost of service. NYMPA requests that the Commission reject the
    proposal to allow NYTOs to file separately for new facilities. The
    New York Municipals share NYMPA's concern regarding cost recovery
    and argue that the proposal includes provisions that are not proper
    rate-making. NYMPA is concerned that, under the Agreement, each
    Transmission Owner would recover transmission related costs,
    including a reasonable rate of return and any applicable regulatory
    incentives, without any examination of its pre-existing transmission
    revenue requirement.

27. The New York Commission states that the cost recovery principles are
    reasonable and appropriate and ensure that costs will not be
    recovered twice.

#### [Commission Determination]{.underline}

28. In accordance with our April 2004 *Policy Statement on Matters
    Related to Bulk Power System Reliability*,[^19] we will accept the
    proposed provisions setting up a rate mechanism separate from the
    transmission service charge and the transmission adjustment charge
    that is limited to the recovery of transmission-related costs
    incurred to meet a reliability need included in the CRP.[^20] The
    proposal provides full recovery of all reasonably incurred costs
    related to the regulated solutions and development undertaken
    pursuant to the Planning Process. The Commission recognizes the
    concerns of municipal customers in New York with regard to the
    potential for NYTOs to over-recover their transmission costs. Thus,
    if a concern arises regarding over-recovery of transmission costs,
    such parties are free to seek relief by filing a complaint with the
    Commission pursuant to section 206 of the FPA.

29. We support NYISO's plan to develop a full cost allocation
    methodology and also encourage the parties to explore whether
    adopting formula rates for recovery of the costs of both the NYTOs'
    existing facilities and new transmission facilities would be a more
    reasonable rate design.

### [Promoting Market and Regulated Solutions]{.underline}

#### [Protests and Comments]{.underline}

30. Calpine argues that NYISO's proposal is structured in a manner that
    will have the effect of promoting regulated solutions over market
    solutions. Calpine states that there is a bias towards reliance on
    transmission owner solutions in the CRP in the way that NYISO
    intends to develop the RNA "Five Year Base Case." Calpine states
    that the CRP report will overstate the degree of reliability assured
    over the five-year period by applying resources to future
    reliability needs where there is no reasonable basis to do so and,
    thus, market participants will not be provided with incentive to
    act. Calpine further states that if the CRP assumes the existence or
    construction of market resources that will in fact not be in
    existence when a reliability need arises, it will skew the perceived
    need for additional resources and will result in the NYISO
    defaulting to regulated backstop solutions. Calpine states that
    Commission guidance is needed on the assumptions of what resources
    are reflected in the CRP report base case, and ultimately on all of
    the details that go into selecting resources, and these planning
    criteria should be filed for Commission approval and not left to the
    discretion of NYISO.

31. Calpine also states that the timing for market support of generation
    under the NYISO UCAP market design does not match the planning
    assumptions in the CRP reliability analysis, and the CRP does not
    appear to provide any other incentive for load serving entities to
    commit to purchase from generator developers to avoid the need for a
    regulated backstop solution.

32. To prevent regulated backstop solutions from being promoted over
    market-based solutions, Calpine states that NYISO should be
    obligated to attempt to cure market inadequacies rather than just
    monitor the progress of market-based solutions. Calpine states that
    NYISO should diagnose why the market solutions are failing to
    develop in a timely fashion and, if necessary, propose market rule
    changes to provide load serving entities with adequate incentive to
    enter into longer-term purchases of capacity to meet those needs
    before the regulated backstop trigger is ultimately reached.

#### [Commission Determination]{.underline}

33. Contrary to Calpine's claims, we do not believe that the Planning
    Process over-promotes regulated solutions at the expense of market
    solutions. Rather, we see it as properly balancing the two\--
    relying on the former should the latter prove inadequate. And, we
    add, it is certainly a substantial improvement over planning
    processes that traditionally have depended largely or even solely on
    transmission owner developed, regulated solutions. The Commission
    will not provide guidance as to assumptions that contribute to
    formulation of the CRP. Calpine argues that assumptions made by the
    NYISO in developing the RNA and CRP may overestimate future levels
    of generation in the NYISO and thus would not appropriately alert
    the region to reliability needs. In this order, the Commission is
    approving, with modifications, dispute resolution mechanisms
    regarding the RNA and CRP. Where Calpine has a dispute regarding the
    RNA or CRP, it is free to pursue the resolution thereof through
    those mechanisms.

34. With regard to the UCAP Market, Calpine's ultimate concern appears
    to be that "there is not much interest in forward purchases of
    capacity to support future generator development" and that the
    present UCAP market design and proposed CRP planning assumptions do
    not encourage greater purchases thereof.[^21] The Commission finds
    that the NYISO's Planning Process is appropriate. The Commission
    finds that this filing is not the appropriate venue to address UCAP
    market design. Calpine is encouraged to raise the issue within the
    applicable NYSIO processes or appropriate Commission filings.

### [The NYISO/NYTOs Agreement]{.underline}

#### [Protests and Comments]{.underline}

35. The New York Municipals argue that the proposed Planning Process
    does not result in a "must build" obligation on the NYTOs. The New
    York Municipals contrast this with section 2.02 of the Agreement,
    which states that the NYTOs agree to develop and construct (or cause
    to be constructed) projects necessary to meet reliability needs
    identified in the CRP. The New York Municipals protest that the
    Planning Process does not more clearly describe the obligation of a
    NYTO to build the projects that result from the Planning Process.

36. PSEG argues that there is no provision within the proposal that
    specifies the obligation or obligations of the NYTOs with regard to
    projects such as third party generation, demand response and
    transmission project proposals. PSEG asserts that section 2.02 of
    the Agreement should be clarified for such projects so that the
    Transmission Owner will be obligated to cooperate and provide
    reasonable assistance on construction. PSEG suggests modifying
    section 2.02 of the Agreement.[^22] PSEG asserts that its suggested
    language is similar to a provision in the PJM OATT.

37. In their answer, the NYTOs argue that the proposed Agreement
    provides a clear obligation to build, subject to certain conditions,
    and thus there is no need to place similar language within the
    tariff. The NYTOs also argue that they should not have to agree to
    "some vague promise"[^23] with respect to the promotion of
    generation alternatives. The NYTOs state that they support a
    planning process that relies upon market solutions, including the
    use of unregulated and market-based generation alternatives to meet
    reliability needs. The NYTOs state that they have agreed to build
    interconnection facilities for generators in accordance with Order
    No. 2003 and that concerns regarding interconnection are resolved by
    Order No. 2003.[^24]

#### [Commission Determination]{.underline}

38. The Commission will not require NYISO to include a more detailed
    description of the obligations of NYTOs. The Commission finds that
    the language proposed for the Agreement adequately obligates the
    NYTOs to develop and construct necessary facilities.

39. The Commission will not require NYISO to include PSEG's suggested
    language. PSEG refers to PJM's OATT, which states that a
    transmission owner shall assist in obtaining necessary permits
    (section 83.2.3.2 (a)) or in acquiring land rights (section
    83.2.3.2(b)). However, the suggested language is not limited to
    assistance in obtaining permits or land rights. PSEG's suggested
    changes require assistance and cooperation in "development and
    construction of projects necessary to meet reliability needs,"[^25]
    and arguably could even be read to place significant responsibility
    on the NYTOs for development and construction of what are, in
    essence, someone else's projects for use of which someone else will
    receive the revenues. The Commission does believe, though, that
    NYTOs should provide reasonable assistance, where possible, to those
    parties that are responsible for developing and constructing
    upgrades approved in the CRP. Therefore, we direct NYISO to include
    such language in the agreement.

### [Timeframes]{.underline}

#### [Protests and Comments]{.underline}

40. Niagara Mohawk requests that the Commission require a six month
    deadline for Phase II of the Planning Process, which includes
    consideration of economic needs. Niagara Mohawk also states that it
    favors the development of a clear and streamlined cost allocation
    methodology that is based on the premise that beneficiaries of
    projects are responsible for the costs of those projects, rather
    than a case-by-case determination as currently provided for in the
    proposal.

41. In its answer, NYISO explains that the timeframe suggested by
    Niagara Mohawk is not sufficient, and that there are no eligible
    facilities currently in the pipeline that would require NYISO to
    modify its current stakeholder deliberation process regarding cost
    allocation. NYISO also suggests that it would submit a progress
    report covering cost allocation procedures within 90 days after the
    Commission approves the Planning Process. [^26]

42. PJM suggests that NYISO should establish enforceable time frames for
    its decisional review processes. Specifically, PJM points out that
    there are no timeframes in section 4 for the NYTOs to submit plans
    to NYISO for determining whether reliability needs are met, no
    timeframe for NYISO to complete the RNA draft, and in section 5.1
    there is no time specified for stakeholder review of the regional
    plan. Additionally, PJM notes that timeframes are lacking in
    sections 6.0 and 7.0 that deal with market based or backstop
    solutions, preparation and approval process for the CRP. PJM states
    that markets need certainty and predictability in order for
    investors to have confidence that they can invest in infrastructure
    development, and, as in section 8.0, a "reasonable period of time"
    is too vague of a timeframe.

#### [Commission Determination]{.underline}

43. We support NYISO's commitment to follow a thorough stakeholder
    review process to develop Phase II of the Planning Process and its
    cost allocation methodology and support its commitment to submit
    within 90 days a progress report regarding implementation of these
    steps. However, we share the protestor's concern regarding lack of
    timetables for implementation of various stages of RNA and CRP and
    we direct NYISO to propose and file such timetables within 60 days.
    This will help to ensure that the critical reliability needs of the
    New York bulk power system are met in a timely manner.

### [Management Committee Approval]{.underline}

#### [Protests and Comments]{.underline}

44. NYMPA argues that the proposal was not appropriately considered by
    the NYISO Management Committee because the Committee did not review
    and approve the actual language and instead approved only a
    principle.

#### [Commission Determination]{.underline}

45. Section 14.4 of the NYISO Tariff states that amendments may be made
    in accordance with the ISO Agreement. The ISO Agreement permits an
    amendment to the NYISO OATT to be filed with the Commission if both
    the Management Committee and the NYISO Board of Directors agree to
    the proposed amendment. However, there is nothing in the ISO
    Agreement that requires approval of the specific language. NYISO
    responds to NYMPA's protest explaining that a motion was considered
    in the Management Committee to defer consideration of the Planning
    Process until tariff language was available. This motion received
    only 17.75 percent affirmative votes. Approval of the amendment also
    required that the specific tariff language be reviewed by the ESPWG
    within NYISO, as well as be approved by the Chairs and Vice Chairs
    of the Management, Business Issues and Operating Committees and the
    Chair of the ESPWG prior to filing with the Commission. Based on
    this process, we find that the proposed amendment was submitted to
    the Commission with the appropriate approvals.

###  [Facilities Included]{.underline}

#### [Protests and Comments]{.underline}

46. The proposed Planning Process is designed to meet the reliability
    needs of the New York State Bulk Power Transmission Facilities,
    which encompasses all of the facilities in the Area Transmission
    Review submitted to the NPCC.[^27] The New York Municipals argues
    that the proposed Planning Process is not \"comprehensive\" unless
    it addresses all portions of the \"NYS Transmission System\" defined
    in NYISO\'s OATT.[^28] The New York Municipals assert that NYISO
    needs to provide a backstop to the NYTOs' local planning efforts and
    thus requests that the Commission require a lower voltage planning
    process in a compliance filing.

47. In its answer, NYISO states that it currently performs various
    short-term planning analyses in accordance with NERC, NPCC and New
    York State Reliability Council requirements. NYISO states that these
    analyses apply to the defined New York State bulk power transmission
    facilities. NYISO argues that since the same reliability criteria
    will be applicable to the proposed long-term Planning Process, the
    applicable facilities should remain the same.

#### [Commission Determination]{.underline}

48. The Commission will not require a lower voltage planning process of
    NYISO. A number of parties cooperated in the development of this
    proposal, including the New York Commission. The New York Commission
    is, among other things, charged with ensuring that residents of the
    state have access to reliable utility service. NYISO and the New
    York Commission believe that the scope of the Planning Process is
    appropriate and is adequate to meet the reliability needs of New
    York. The Commission considers the New York Commission's support of
    this feature of the Planning Process important in making its
    finding. Moreover, the Commission finds that this is consistent with
    prior NYISO planning efforts, which were also focused on Bulk Power
    Transmission Facilities and the NYISO OATT which includes only bulk
    power facilities rated at 115 kV or above. The Commission finds that
    NYISO's proposal is adequate in this regard.

[The Commission orders:]{.underline}

\(A\) NYISO's filing is hereby accepted in part, and rejected in part,
as discussed in the body of this order.

\(B\) NYISO is hereby directed to submit a compliance filing, within 60
days of the date of this order, as discussed in the body of this order.

By the Commission. Commissioner Kelliher dissenting in part with a
separate statement

to be issued later.

Linda Mitry,

Deputy Secretary.

[^1]: The NYTOs include Central Hudson Gas & Electric Corporation,
    Consolidated Edison Company of New York, Inc., Long Island Power
    Authority, New York Power Authority, New York State Electric & Gas
    Corporation, Rochester Gas and Electric Corporation, Orange and
    Rockland Utilities, Inc., and Niagara Mohawk Power Corporation, a
    National Grid Company.

[^2]: There will be an additional filing addressing planning for
    economic reasons (Phase II of NYISO's Planning Process). According
    to NYISO documents, Phase II is currently being discussed within the
    Electric System Planning Working Group (ESPWG) meetings, which are
    planned through December 2004.

[^3]: These reliability rules include the operating and planning
    criteria standards developed by North American Electric Reliability
    Council (NERC), the Northeast Power Coordinating Council (NPCC) and
    the New York State Reliability Council.

[^4]: The draft RNA will be submitted to the Transmission Planning and
    Advisory Subcommittee and ESPWG for review and comment. The RNA will
    be voted on by the Operating Committee and then the Management
    Committee.

[^5]: Section 5.3 states: "Notwithstanding any provision to the contrary
    in this Attachment, the NYISO Open Access Transmission Tariff
    (OATT), or the NYISO Services Tariff, in the event that a Market
    Participant raises a dispute relating to the final conclusions or
    recommendations of the RNA, a Market Participant may refer such
    dispute to the \[New York Commission\] for resolution. The \[New
    York Commission's\] determination shall be binding, subject only to
    judicial review in the courts of the State of New York pursuant to
    Article 78 of the NYCPLR \[New York Civil Practice Law and Rules\]."

[^6]: Section 8.3 states: "Notwithstanding any provision to the contrary
    in this Attachment, the NYISO OATT, or the NYISO Services Tariff, in
    the event that a Market Participant disputes the NYISO's final
    determination in the CRP that a proposed solution will or will not
    meet a reliability need, a Market Participant seeking further review
    shall refer such dispute to the \[New York Commission\] for
    resolution. The \[New York Commission's\] final determination shall
    be binding, subject only to judicial review in the courts of the
    State of New York pursuant to Article 78 of the New York Civil
    Practice Law and Rules."

[^7]: Section 12.0 states: "Disputes directly relating to the NYISO\'s
    compliance with its tariffs that are not resolved in the internal
    NYISO appeals process shall be reviewed at the Federal Energy
    Regulatory Commission pursuant to the Federal Power Act if such
    review is sought by a Market Participant."

[^8]: "NRG" collectively refers to the following indirect subsidiaries
    of NRG Energy, Inc.: NRG Power Marketing, Inc.; Arthur Kill Power
    LLC, Astoria Gas Turbine Power LLC; Dunkirk Power LLC; Huntly Power
    LLC; and Oswego Harbor Power LLC.

[^9]: "PSEG" collectively refers to Public Service Electric and Gas
    Company, PSEG Power LLC, and PSEG Energy Resources & Trade LLC.

[^10]: The New York Municipals filing this joint motion to intervene and
    protest are: the Village of Bergen, Freeport Electric Department;
    Green Island Power Authority; Greenport Municipal Utilities; City of
    Jamestown Board of Public Utilities; Town of Massena Electric
    Department; Village of Rockville Centre; Salamanca Board of Public
    Utilities, Village of Sherburne; City of Sherrill Power & Light;
    Village of Solvay; and Village of Tupper Lake.

[^11]: *See Central Hudson Gas & Electric Corp.,* 83 FERC ¶ 61,352
    (1998) (*Central Hudson*).

[^12]: *See Policy Statement On Matters Related to Bulk Power System
    Reliability,*\
    107 FERC ¶ 61,052 at P 29 (2004).

[^13]: The New York Commission has no authority to resolve matters
    within this Commission's exclusive jurisdiction. Questions of
    jurisdiction can be brought directly to this Commission with a
    petition for declaratory order.

[^14]: 18 CFR § 385.1305 (2004).

[^15]: In reference to the preparation of the RNA, section 4.3(d) states
    that NYISO will evaluate the bulk power transmission facilities over
    years 6-10 of the study period to determine whether they meet all
    reliability criteria for both resource and transmission adequacy in
    each year. The section states that "\[R\]eliability needs will be
    defined in terms of total deficiencies relative to Reliability
    Criteria and not necessarily in terms of specific facilities."

[^16]: NYSIO Answer at 5.

[^17]: NYISO submitted its Market Monitoring Plan to the Commission in
    July of 1999 in Docket Nos. ER97-1523-010, OA97-470-009, and
    ER97-4234-007. The Commission approved in part and rejected in part
    this plan in *New York Independent System Operator, Inc.,* 89 FERC ¶
    61,196 (1999).

[^18]: In *ISO New England, Inc.*, 91 FERC ¶ 61,311 (2000), *order on
    reh'g,* 95 FERC ¶ 61,384 (2001), the Commission addressed ISO-NE's
    proposed transmission planning process. The plan called for ISO-NE
    and the transmission owners to jointly develop and later expand a
    regional transmission plan, and determine which upgrades would
    qualify as reliability upgrades and receive pool support. The
    Commission stated that under the proposed plan transmission owners
    would have the ability and incentive to bias ISO-NE's planning
    process in favor of their competitive interests.

[^19]: *See Policy Statement On Matters Related To Bulk Power System
    Reliability,*\
    107 FERC ¶ 61,052 (2004) (where the Commission assured public
    utilities that it will stand by its policy to approve applications
    to recover prudently incurred costs necessary to ensure bulk
    electric system reliability).

[^20]: Section 3.03 of the Agreement provides that transmission owners'
    would have a rate mechanism that is "designed to be limited to the
    recovery of transmission related costs incurred to meet a
    reliability need included in the Comprehensive Reliability Plan."
    This separate rate mechanism would allow any NYTO to make a filing
    under section 205 of the FPA limited to a request for recovery of
    reasonable costs incurred pursuant to the CRP, including a
    reasonable return on investment and any applicable regulatory
    incentives.

[^21]: Calpine Protest at 9.

[^22]: PSEG's suggested modifications appear in italics:

    > Transmission Owner agrees to develop and construct (or cause to be
    > developed and/or constructed) projects necessary to meet
    > reliability needs on the bulk power facilities identified in the
    > Comprehensive Reliability Plan *as the responsibility of the
    > Transmission Owner* and which the NYISO has determined will
    > address the identified reliability needs. *Transmission Owner
    > agrees to cooperate in a reasonably commercial manner and to
    > provide commercially reasonable assistance in connection with the
    > development and construction of projects necessary to meet
    > reliability needs on the bulk power facilities identified in the
    > Comprehensive Reliability Plan as the responsibility of a party
    > other than Transmission Owner and which the NYISO has determined
    > will address the identified reliability needs.*

[^23]: NYTOs' answer at 8.

[^24]: *See* *Standardization of Generator Interconnection Agreements
    and Procedures*, Order No. 2003, 68 Fed. Reg. 49,845 (Aug. 19,
    2003), FERC Stats. & Regs., ¶ 31,146 (2003) (Order No. 2003), *order
    on reh'g*, Order No. 2003-A, 69 Fed. Reg. 15,932 (Mar. 26, 2004),
    FERC Stats. & Regs., ¶ 31,160 (2004) (Order No. 2003-A); *reh'g
    pending; see also Notice Clarifying Compliance Procedures*, 106 FERC
    ¶ 61,009 (2004).

[^25]: PSEG Protest at 10.

[^26]: NYSIO Answer at 12.

[^27]: These facilities are primarily composed of 765, 345 and 230 kV
    transmission; a portion of the 138 and 115 kV transmission is
    considered to be bulk power transmission. *See* NYISO's *2002 Area
    Transmission Review of the New York State Bulk Power Transmission
    System in the Year 2007*, available at
    \[http://www.nyiso.com/services/documents/planning/trans_planning_reports/2002/study_report.pdf\].

[^28]: NYISO OATT defines the NYS Transmission System as : The entire
    New York State electric transmission system, which includes: (1) the
    Transmission Facilities Under ISO Operational Control; (2) the
    Transmission Facilities Requiring ISO Notification; and (3) all
    remaining transmission facilities within the New York Control Area.