As part of its overall proposal to implement carbon pricing to incorporate the social cost of carbon emissions in the wholesale power market, New York Independent System Operator, Inc. (“NYISO”) staff made a presentation at the Market Issues Working Group (“MIWG”) meeting on April 30, 2019 (“MIWG Presentation”). The MIWG Presentation set forth NYISO’s proposed methodology to calculate the estimated impact of carbon pricing on locational-based marginal prices (“LBMP”). Specifically, the MIWG Presentation provides additional details about how NYISO proposes to calculate the location-based marginal price-carbon (“LBMPc”), which would consider the impact of carbon pricing on LBMPs for purposes of subtracting from an energy supplier’s ultimate bid during the market settlement phase.

The MIWG Presentation builds on the December 7, 2018 Carbon Pricing Proposal developed by the Integrating Public Policy Task Force (“IPPTF”)—a multi-party collaborative forum involving the NYISO, New York State Department of Public Service, New York State Research and Development Authority, and other stakeholders. The IPPTF’s Carbon Pricing Proposal, the result of several years of stakeholder discussions, presented options for aligning NYISO’s wholesale market structure with state of New York’s goal of reducing its carbon dioxide emissions by 40% by 2030 and 80% by 2050.

Consistent with the IPPTF Proposal, the MIWG Presentation explains that NYISO would continue to use the NYISO’s existing offer structure to incorporate a carbon-pricing framework. As part of this framework, NYISO would use an ex post calculation to estimate the LBMPc, which is needed to: (1) allocate carbon dioxide credits to Load-Serving Entities; (2) prevent regional flow leakages and distortions by charging LBMPc imports and crediting LBMPc exports; and (3) provide market transparency.

Additionally, stakeholders in the NYISO’s Installed Capacity and Market Issues Working Group (“ICAP/MIWG”) meetings have recently been focused on other carbon pricing issues, including an ongoing Analysis Group study to provide additional insight into the impact carbon pricing would have on NYISO’s wholesale markets. The Analysis Group reported in an April 23, 2019 ICAP/MIWG meeting that it expects to release a technical report detailing its findings and an executive summary for policymakers at the end of May 2019.

Click here to read the full April 30, 2019 MIWG Presentation. A copy of the IPPTF’s December 7, 2018 Carbon Pricing Proposal can be viewed here.