Minutes of the Annual Meeting of the Power - New York Power ...

Staff Analysis:
1. The Authority’s Proposed Cost-Based Credit is Consistent with
the 2003 Rate Plan, and Based on Principles Agreed to by the
Customers.
There is no basis to augment the amount of ancillary services-related credits in
the derivation of the preference hydro rates. The cost-based crediting
methodology, which provides for a full credit for all the costs of producing the
ancillary services associated with needs of NYPA’s Hydro Project load, is fully
consistent with the Authority’s current rate plan approved in 2003. 12 All of the
Public Customers agreed in their settlement or contracts that the Authority may,
without their objection, continue to employ the 2003 cost-based crediting
methodology in future rate cases. The method adopted in 2003 will result in
annual credits to the CoS with respect to ancillary services of $13.0 million in
Rate Year 2007 and $13.7 million in Rate Year 2008. NYPA’s instant proposal
would also continue its practice of making cost-based credits for all sales of
ancillary services in the annual reconciliation of the RSR, which the Public
Customers also agreed may continue in future rate proposals. Notably, no
customer states that it is being denied either the cost-based ancillary services
production credit in the derivation of the base hydro rates, or the cost-based
crediting to the RSR of all ancillary services (as well as energy) sales. Instead,
NYAPP claims a larger “cost-based” credit due to the fact that the Authority’s
quantity of regulation service and operating reserves sales into the NYISO
exceeds the amount needed to meet the requirements of our contract
customers. 13
12
NYPA’s methodology for the CoS credit for the costs of producing ancillary services was
included in the report by Frank C. Graves of the Brattle Group, which can be found at
http://www.nypa.gov/Trustees/2003%20minutes/apr/6%20-%20Appendix%20B.pdf
13
NYAPP makes no mention of NYPA’s inclusion of cost-based credits associated with the
production of two other ancillary services, voltage support and black-start service. Though these
credits are not large, they are proposed to continue in the 2007-08 Rate Years.
16