NYISO Defends ‘Social Cost Of Carbon’ Plan

To The Reader’s Forum:

In response to the paper’s editorial on the New York Independent System Operator’s (NYISO) role with regard to pricing the “social cost of carbon” into the wholesale electric markets, we feel it is incumbent upon us, as the independent operator of the state’s electric grid, to clarify certain details.

First, the paper identified the NYISO as a state agency. We are not a government entity but rather an independent, apolitical, non-profit organization. Under federal law, our employees are prohibited from having any financial interest in, or other affiliation with, any NYISO market participant. The NYISO is heavily regulated by the Federal Energy Regulatory Commission which must approve the rules under which we operate.

Second, your readers should understand that the average potential costs you reference are short-term in nature. It is also important to note that customers are already paying for renewable and zero-carbon emitting resources through the state’s Zero Emissions Credit and Renewable Energy Credit subsidies. The NYISO’s proposal is designed to make those programs more cost-effective. Our analysis shows that, over time, incorporating carbon pricing into the wholesale electric markets would lower the need for existing state subsidies, thereby limiting the overall price impact and eventually saving consumers money.

The NYISO fully recognizes that the prospect of increasing short term costs, even by as little as $1.50 a month, is something that may concern consumers. However, it is important to note the figures cited in your editorial were based on a very conservative set of assumptions. The NYISO’s analysis has not yet accounted for ancillary benefits related to the proposal, such as improved public health impacts and other emissions reductions. The NYISO is continuing to carefully evaluate the proposal to make sure all costs and benefits are accounted for before stakeholders weigh in on whether it should move forward.

Third, it is inaccurate to paint the proposal as something being discussed in secret and outside of the public view. In fact, the opposite is true. Press coverage of the proceedings has been extensive. It is important to understand that the carbon pricing proposal would require approval by federal regulators in Washington before it could be implemented.

From the beginning, the process of devising a way to incorporate the social cost of carbon into the wholesale electric markets has been open and completely transparent with input and participation from a wide variety of stakeholders. They include, consumer advocates, transmission owners, large-scale industrial customers, public power companies, environmentalists, the Public Service Commission and the state Utility Intervention Unit.

The carbon pricing proposal is designed to shift risk away from customers and onto private investors like power plant owners looking to repower older inefficient facilities with cleaner, cutting-edge plants or renewable generation. Contrary to your editorial, this proposal will spur competition and investment by sending the proper price signals and encouraging local development where it is needed most.

Complicated problems require innovative solutions and thoughtful dialogue. Certainly, more work must be done on the proposal in our stakeholder process. We welcome attention to the transparent process where that work and constructive dialogue is taking place.

Kevin Lanahan

Vice President of External Affairs

New York Independent System Operator

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