Commissioner James Danly Statement
February 17, 2022
Docket No. ER20-1718-002
I dissent from this order[1] because it approves an unduly discriminatory tariff.
FPA section 205(b) prohibits the Commission from approving unduly discriminatory tariffs.[2] This standard has been described in both Commission and court precedent. “Discrimination is undue when there is a difference in rates or services among similarly situated customers that is not justified by some legitimate factor.”[3] Note that the majority in this case speaks of “differences that are material to the inquiry at hand”[4] rather than “legitimate” factors. Our duty is to ensure just and reasonable rates pursuant to the FPA, and not to determine whether NYISO’s proposal is consistent with federal, state, or municipal renewable energy policies.[5]
And the factor relied upon here cannot support such transparent discrimination. The majority cites New York State’s “favorable laws and policies” for Public Policy Resources,[6] declaring that “differences in their respective likelihoods of being successfully developed”[7] stand as a sufficient basis upon which to discriminate between otherwise similarly situated entities “for the purposes of the Part A test.”[8] This is not a material, lawful or legitimate factor. This cannot justify the proposal’s “disparate treatment”[9] which would prioritize the evaluation of Public Policy Resources before non-Public Policy Resources, independent of any other consideration, including cost.[10]
Can it be that the majority really believes its own reasoning? Could anyone now make this showing? Could, for example, a NYISO market participant now come before the Commission with a complaint and plead facts that it should be preferenced over competitors because it could secure better financing terms, or perhaps have a better credit rating? Would the majority show the same solicitude toward and enthusiasm for the more-likely-to-be-developed Public Policy Resources were they in a state that, for example, promoted coal generators? The analysis should be just the same. No. This is obviously the majority’s cynical attempt to justify (however unconvincingly) the approval of a tariff that just happens to advance their preferred public policy objectives.
The primary point of the FPA is to ensure that tariffs are non-discriminatory and that costs are not overly burdensome. It does not permit us to approve tariff provisions that baldly favor a state’s preferred resources without regard to other considerations. The FPA certainly does not allow us to sacrifice one of its core purposes in the pursuit of a goal like that of ensuring that NYISO’s proposal compliments state and municipal energy policies.[11] What does that have to do with the FPA? NYISO’s existing approach for evaluating resources in sequential cost order of lowest to highest, based on the net cost of new entry is just and reasonable; it should not be replaced.
The justifications offered in this order are simply unconvincing. First, the majority announces the need for a new standard for analyzing undue discrimination that does not ignore “material differences, such as a resource’s likelihood of being developed and entering service,” thereby rejecting arguments that resources are similarly situated which have similar interconnection and market participation requirements.[12] This is not a legitimate analytical standard—it is discriminatory and unlawful. Second, the majority justifies prioritizing Public Policy Resources because doing so will minimize artificial capacity surpluses and reduce inefficient incentives for future investment.[13] Recognizing public policy choices may cause inefficiencies: the courts have recognized this and have long held that states “are free to make their own decisions regarding how to satisfy their capacity needs, but they ‘will appropriately bear the costs of [those] decision[s],’ . . . including possibly having to pay twice for capacity.”[14] Third, the majority asserts that the Commission itself has granted exemptions based on whether resources were renewable.[15] The majority misapprehends these cases which were narrowly tailored to strike a balance between the potential risk of price suppression and the purpose of not impeding the entry of renewable resources unlikely to cause artificial price suppression.[16] Fourth, the majority points to ISO New England Inc.’s Competitive Auctions with Sponsored Policy Resources mechanism.[17] Those cases are inapposite because they address tariff provisions aimed at the mitigation of the market impacts of Public Policy Resources.[18]
I have determined that NYISO’s proposal is unduly discriminatory. That is dispositive, and I see no need to address the merits of the remaining provisions of NYISO’s filing. We should reject.
For these reasons, I respectfully dissent.
[1] N.Y. Indep. Sys. Operator, Inc., 178 FERC ¶ 61,101 (2022) (NYISO). The majority wrongly reverses the Commission’s prior rejection of a Federal Power Act (FPA) section 205 filing by the New York Independent System Operator, Inc. N.Y. Indep. Sys. Operator, Inc., 172 FERC ¶ 61,206 (2020) (September 2020 Order); 16 U.S.C. § 824d.
[2] 16 U.S.C. § 824d(b).
[3] El Paso Natural Gas Co., 104 FERC ¶ 61,045, at P 115 (2003), reh’g denied, 106 FERC ¶ 61,233 (2004) (emphasis added) (footnote omitted); see also Ark. Elec. Energy Consumers v. FERC, 290 F.3d 362, 367 (D.C. Cir. 2002) (“A rate is not ‘unduly’ preferential or ‘unreasonably’ discriminatory if the utility can justify the disparate effect.”); Cities of Bethany v. FERC, 727 F.2d 1131, 1139 (D.C. Cir. 1984) (“Rate differences may be justified and rendered lawful by ‘facts-cost of service or otherwise.’”) (footnote omitted); Pub. Serv. Co. of Ind., Inc. v. FERC, 575 F.2d 1204, 1211 (4th Cir. 1978) (differences may be justified when predicated upon individual characteristics and market impacts).
[4] NYISO, 178 FERC ¶ 61,101 at P 16 (“To say that entities are similarly situated does not mean that there are no differences between them; rather, it means that there are no differences that are material to the inquiry at hand.”) (emphasis in original) (quoting ISO New England Inc., 162 FERC ¶ 61,205, at P 44 (2018)).
[5] See N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 154 FERC ¶ 61,088, at P 12 (2016) (citing 18 U.S.C. § 824d).
[6] NYISO, 178 FERC ¶ 61,101 at P 18 (“In light of New York State legislation, including enactment of the Climate Leadership and Community Protection Act . . . we agree that Public Policy Resources are now more likely to be constructed than their non-Public Policy Resource counterparts due to favorable laws and policies governing siting, operation, and financing.”) (emphasis added) (footnotes omitted). The majority’s contention that its determination turns on the likelihood of development and not any particular state preference is not compelling. It is precisely because of state preferential treatment that Public Policy Resources are more likely to be developed and constructed. Id. P 18 n.40.
[7] Id.
[8] See id.
[9] Id. P 16.
[10] Id.
[11] See N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 154 FERC ¶ 61,088 at P 12 (citing 18 C.F.R. § 824d (“All rates and charges . . . subject to the jurisdiction of the Commission . . . shall be just and reasonable . . . .”)).
[12] NYISO, 178 FERC ¶ 61,101 at P 22.
[13] See id. P 23.
[14] N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74, 96-97 (3d Cir. 2014) (quoting Conn. Dep’t of Pub. Util. Control v. FERC, 569 F.3d 477, 481 (D.C. Cir. 2009)).
[15] See NYISO, 178 FERC ¶ 61,101 at P 21.
[16] See, e.g., N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,121 (2020), order on reh’g and compliance, 172 FERC ¶ 61,058 (2020). The proposed Part A modifications would indeed undermine the purpose of NYISO’s buyer-side market power mitigation rules, in their current construct, notwithstanding the majority’s arguments otherwise. NYISO, 178 FERC ¶ 61,101 at P 21 n.53.
[17] See, e.g., NYISO, 178 FERC ¶ 61,101 at P 19.
[18] See ISO New England, Inc., 162 FERC ¶ 61,205 at P 45 (“ISO [New England, Inc.’s (ISO-NE)] proposed definition of Sponsored Policy Resource is narrowly tailored to meet ISO-NE’s objective of limiting the impact of out-of-market state procurements on the [Forward Capacity Market].”); see also N.Y. Indep. Sys. Operator, Inc., 162 FERC ¶ 61,124, at P 10 (2018) (“[C]ourts have explained that entities are similarly situated if they are in the same position with respect to the ends that the law seeks to promote or the abuses that it seeks to prevent, even if they are different in many other respects.”) (citation omitted); id. P 11 (“The relevant inquiry in this respect is whether NYISO will evaluate the proposed transmission projects of these entities using the same criteria for the purpose of identifying the more efficient or cost-effective solution and thus for selection in the regional transmission plan for purposes of cost allocation.”) (emphasis added).