NYISO Dispute Resolution

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Frederick Shepherd
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1 NYISO Dispute Resolution Market Issues Working Group October 10,

2 Introduction The purpose of this presentation is to: Review the NYISO s process for the review, challenge, and correction of customer invoices; Discuss the circumstances in which the NYISO would consider entering into a settlement agreement to resolve a dispute; Clarify the role of the NYISO s Dispute and Claims Committee; and Propose certain actions that the NYISO will take to clarify and reinforce the distinction between the process for the review, challenge, and correction of customer invoices and the resolution of a dispute through the use of a settlement agreement. 2

3 MC Motion #3 (September 25, 2008) The Management Committee ( MC ) hereby recommends that the NYISO Board of Directors authorize the NYISO to file with the Federal Energy Regulatory Commission, pursuant to Section 205 of the Federal Power Act, tariff revisions to the Open Access Transmission Tariff and the Market Administration and Control Area Services Tariff to shorten the NYISO settlement cycle through the elimination of the six month settlement adjustment, as is more fully described in the presentation made to the MC meeting on September 25, (1) Some Market Participants have expressed concern that the NYISO s dispute resolution process is being used to settle issues that should be subject to the NYISO s tariffs billing and settlement procedures, the cost of which settlements is being recovered under Rate Schedule 1. The NYISO agrees that the Dispute Resolution Settlement process should not be used to circumvent the tariffs billing and settlement procedures and agrees to address Market Participant concerns at the appropriate NYISO committee and to better define the relationship between the billing and settlement tariff procedures and the NYISO Dispute Resolution Settlement Process. (2) The NYISO will make a presentation at the next Market Issues Working group to explain the roles and responsibility of the DAC and to consider how to make its activities more transparent to Market Participants. 3

4 Summary of the NYISO Process for the Review, Challenge, and Correction of Customer Invoices 4

5 NYISO Process For Reviewing, Challenging, and Correcting Customer Invoices Section of the Services Tariff and Section 7.2A.2 of the OATT establish the process by which the NYISO and its customers review, challenge, correct, and finalize customer invoices. The NYISO and its customers have seven months to review and challenge the information in customer invoices. Within this seven month period, there are discrete timeframes in which metering data is reviewed, corrected, and finalized. Generator and tie-line metering data is finalized sixty (60) days after the initial invoice is issued. LSE bus metering data is finalized one hundred fifty (150) days after the initial invoice is issued. 5

6 NYISO Process For Reviewing, Challenging, and Correcting Customer Invoices The NYISO then has two months to make a determination regarding customer challenges and to make any necessary adjustments or corrections to customer invoices. Customers then have twenty-five days to review the NYISO s implementation of corrections or adjustments. If a customer identifies an error in the NYISO s implementation of a correction or adjustment within the twenty-five day comment period, the NYISO will correct the error and re-post the invoice for an additional twenty-five day review. At the conclusion of the final twenty-five day review period, the NYISO will issue a finalized close-out invoice. 6

7 NYISO Process For Reviewing, Challenging, and Correcting Customer Invoices Once the NYISO finalizes a customer invoice in accordance with its tariffs, no party, including the NYISO, can adjust this invoice absent an order from the Commission or a court of competent jurisdiction. NYISO s Proposed Tariff Revisions Regarding the Review, Challenge, and Correction of Customer Settlement Information, Docket No. ER (March 24, 2006) The NYISO stated that its provisions regarding the review, challenge, and correction of customer invoices have been revised to more clearly establish the finality of a Close-Out Settlement by explicitly prohibiting the NYISO from making changes to an invoice after the issuance of a Closed-Out Settlement for that month absent Commission or judicial intervention. Niagara Mohawk Power Corporation, Order Granting Petition for Declaratory Order, Docket No. EL (June 30, 2008) The Commission stated that the NYISO correctly interpreted its tariff as precluding the NYISO s ability to make further adjustments to finalized invoices except pursuant to an order by this Commission (or a court of competent jurisdiction). 7

8 Summary of NYISO Dispute Resolution Authority 8

9 NYISO Dispute Resolution Authority The NYISO is a duly-formed corporation under New York State law. NYISO management has the responsibility to determine the most prudent course of action for dealing with claims against the company. Section 3.0 of Schedule 1 of the OATT provides that the NYISO shall recover the costs identified in Section 3.0 through the Rate Schedule 1 charge. These costs include costs associated with the operation of the New York State transmission system and administration of the NYISO tariffs, including Dispute Resolution. (OATT, Schedule 1, Section 3.A). Such costs are recovered in accordance with Section 2.B of Schedule 1 of the OATT. 9

10 NYISO s s Determination to Settle a Dispute 10

11 NYISO s s Determination to Settle a Dispute Any party may assert a claim against the NYISO whether pertaining to a market transaction or any other legal theory. When presented with such a claim, the NYISO evaluates the merits of the claim, the risk of litigation, and the associated costs. If NYISO staff determines that the merits of the claim, the hazards of litigation, and the amount in controversy warrant settlement of the claim in lieu of formal adjudication, NYISO staff may dispose of the matter through a written stipulation of settlement, release, and waiver. 11

12 NYISO s s Determination to Settle a Dispute If every claimant were required to commence a formal proceeding or action, the total cost of resolving such claims likely would be significantly higher, increasing Rate Schedule 1 charges. The determination to settle a dispute allows the NYISO to avoid incurring additional legal costs and, potentially, a portion of the underlying amount in controversy. If incurred, these costs would be passed on to market participants. 12

13 NYISO s s Determination to Settle a Dispute Settlement of a dispute is not an alternative means of correcting a finalized invoice. The NYISO will not correct or re-issue a finalized invoice. See Niagara Mohawk Power Corporation, Order Granting Petition for Declaratory Order, Docket No. EL (June 30, 2008). Niagara Mohawk discovered that its metering data was erroneous after the time period in which the NYISO was permitted to correct the affected invoices. Niagara Mohawk was required to seek an order from the Commission requiring that the NYISO correct the erroneous data. 13

14 NYISO Disputes and Claims Committee 14

15 Disputes and Claims Committee ( DAC( DAC ) The DAC was initially entitled the Discretionary Acts Committee. The DAC began as a committee composed of NYISO staff to review NYISO actions in circumstances where the tariffs provide the NYISO with discretion (i.e., the NYISO may ). The DAC was later used to examine certain claims against the NYISO. Some issues are referred to Customer Settlements for correction of an invoice, others are referred to the General Counsel s office for potential settlement, and others are determined not to require further action because they are without merit. The DAC s consideration of an issue is not an alternative to the NYISO s process for the review, challenge, and correction of customer invoices. 15

16 Proposal to Address Issues Raised by Market Participants 16

17 Resolution of Disputes Related to Settlements The NYISO will not settle disputes brought by a Market Participant regarding its invoice when the dispute is based upon information that was available to the Market Participant during the timeframes for challenging its invoice and the Market Participant failed to present a timely challenge. The merits of the Market Participant s claim are not relevant to this determination. The NYISO will consider settling a dispute if a Market Participant brings a dispute regarding its invoice when: the dispute is based upon information that was not available to the Market Participant during the timeframe for challenging its invoice and where the Market Participant s claim has merit. the tariff does not provide a remedy or resolution to the underlying issue (e.g., there is a fundamental inconsistency in the NYISO tariffs that cannot be reconciled through a reasonable interpretation of the tariff or the settlement error cannot be addressed through a bill correction - such as an incorrect auction input). 17

18 Providing Transparency The NYISO will provide additional information regarding disputes related to transaction settlements to the extent permitted by the confidentiality provisions in the NYISO tariffs. If the NYISO identifies material inconsistencies or ambiguities in its tariffs pertaining to the calculation of information in customer invoices that are likely to give rise to future disputes with the NYISO or among NYISO customers, the NYISO will notify Market Participants within a reasonable time and take appropriate action to address the underlying issue. Charges associated with dispute settlement agreements will be identified as such in the Rate Schedule 1 charges allocated to customers. 18

19 Addressing Underlying Tariff or Software Errors Where a dispute arises from an underlying tariff ambiguity or inconsistency, the NYISO will address the tariff issue through an amendment to the tariffs with input from stakeholders. Where a dispute arises from an underlying software or administrative error, the NYISO will move expeditiously to address the issue. The NYISO has already taken such steps to resolve the two categories of disputes that represent the substantial majority of the disputes related to customer invoices (SRErelated BPCGs and uneconomic virtual bidding). 19

20 Procedural Changes All bill challenges will be directed to Customer Settlements. Customer Settlements will refer matters to the General Counsel s office as necessary. Any settlement agreements will be handled by the General Counsel s office with appropriate technical and financial input from NYISO staff. 20

21 Questions? For Discussion Purposes Only 21

FINAL SETTLEMENT CHALLENGES POLICY AND PROCEDURE

May 8, 2002 BAWG Conference Call FINAL SETTLEMENT CHALLENGES POLICY AND PROCEDURE The NYISO tariffs provide Market Participants with a twelve-month time frame after the issuance of final billing invoices