 Objective and Key Assumptions

 Resource Planning: History, NYSRC/NYISO, and LIPA
 Planning Results
 Findings and Conclusions
 Recommendations
 Next Steps


2
 Objective
◦ Recommend which resource planning methodology should form the basis for
LIPA’s resource needs assessment.
 Key Assumptions
◦ No unit in LIPA’s current resource base, with minimal exceptions, faces
imminent mandatory retirement for operational, environmental, economic or
safety reasons.
◦ No proposed project was singled out for examination.
◦ Results of planning model runs were assumed accurate.
3
 In NYS:
◦ Market restructuring in NYS in the late 1990s and early 2000s was unsettled; market rules,
operating procedures, and planning processes, for example, were far from finalized.
◦ Capacity markets at that time were not fully functional or liquid, particularly on LI (and remain so
today). Demand curve concept not introduced until mid-2000’s.
◦ Locational capacity requirements (LCRs) were a new concept and the calculation of LCRs was
rudimentary. For example, LCR calculations at that time (i.e., early to mid 2000’s) did not allow for,
among others:
 Zonal load forecast uncertainty
 Ambient temperature deratings of generating units
 Tie-line forced outages
 Dynamic transmission constraints
 Unified IRM/LCR calculations
 Multiple load shape considerations
4
LIPA’s current resource planning approach reflect antecedents in NYS market restructuring,
LIPA operations, and a management preference for high confidence that sufficient on-
island generation would always be available, irrespective of the NYSRC/NYISO criterion.
 On Long Island:
◦ Confidence that the NYISO LCR targets adequately represented on-island resource needs was low in
the early 2000s.
◦ The early 2000s saw on-island capacity resources barely equal on-island demand.
◦ Long Island had limited and poor performing inter-ties.
◦ Reliability on Long Island had high exposure to a single, major operating event.
◦ Lacking effective capacity markets, LIPA felt compelled to install simple cycle gas turbine units on an
emergency basis to meet anticipated demand, thereby…
◦ …spurring LIPA senior management to direct that LIPA plan conservatively for future resource
needs.
 Consequently, over time LIPA developed planning methods that it believed reflected its
somewhat unique environment.
 The Locational Capacity Requirement (LCR) is a Zone K (Long Island) requirement (i.e., not a
LIPA-only requirement).
o LIPA load on Long Island is about 95% of the total Zone K load. LIPA also plans for municipal utilities
on Long Island (Freeport, Greenport and Rockville Center and NYPA load).
5
6
1. NYSRC Reliability Rules, Version 33, April 10, 2004, pg. 13-14.
 The New York State Reliability Council (NYSRC) Reliability rule A-R1
1
determines and sets the Installed
Reserve Margin (IRM) requirement for the New York Control Area (NYCA).
◦ Compliance with the IRM is evaluated probabilistically “such that the loss of load expectation (LOLE) of
disconnecting firm load due to resource deficiencies shall be, on average, no more than 0.1 day per year” or 1
day in 10 years.

◦ The 0.1 day/year criterion is an industry standard and is used by other RTOs (e.g., PJM, ISO-NE, MISO).
◦ The design criterion makes “due allowance for demand uncertainty, scheduled outages and deratings, forced
outages and deratings, assistance over interconnections with neighboring control areas, NYS Transmission
System transfer capability, and capacity and/or load relief from available operating procedures.” (Emphasis in
original.)
◦ The criterion incorporate guidelines and procedures of the Northeast Power Coordinating Council (NPCC) and
the standards of the North American Electric Reliability Corporation (NERC).
 Reliability Rule A-R2
1
requires LSEs to procure sufficient resource capacity to meet the statewide IRM,
and this capacity obligation is distributed so as to meet locational ICAP requirements.
 NYSRC evaluates compliance for NYCA and individual zones with the the design LOLE probabilistically via
GE’s MARS (Multi-Area Reliability Simulation) Model under security constrained conditions, i.e., allocation
of generation and transmission resources to serve the system load with high reliability.
 Importantly, both NYSRC rules and IRM studies are subject to a vigorous internal vetting process by all
NYISO members/participants and results are adopted by both FERC and the NYS PSC.
However, NYS reliability planning has evolved significantly and now represents a highly
sophisticated, comprehensive approach based on an industry standard design criterion.
7
The NYSRC and NYISO use what is termed the “Unified Method” to relate IRM and LCR values.
• Any point on the curve meets the LOLE design criterion of 0.1 day/year (i.e., 1 day in 10 years).
• Depending on which direction movement on the curve occurs, resource dependency shifts between
LIPA/Con Edison and the rest-of-state.
• The TAN 45 methodology is used to select a point on the curve that represents the location where there
is an approximately equal change in IRM and LCR independent of direction of movement (i.e., where the
dotted red line touches the blue curved line).
2: Source: NYSRC Policy 5-7, Appendix B, PSEG Long Island
Installed Reserve Margin (IRM) %
@ TAN 45
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%
Minimum Flow Equivalent
Maximum Possible LCR at Lowest
possible IRM
IRM-LCR Curve
Dynamics
2
Unified Method with
Tan 45 Anchor Point
Maximum Flow Equivalent
Maximum Possible IRM at lowest possible LCR
8
LIPA must plan to meet two NYSRC/NYISO planning criteria – an Installed Reserve Margin
(IRM), and a zonal, or locational, capacity requirement.
* The LCR is expected to decline by approximately 3.0% in 2015 with the Danskammer generating unit’s anticipated return to service.
3. Source: LIPA Board of Trustees Briefing, February 25, 2010, pg.8; PSEG Long Island.
 Proportional Share of a Statewide Installed
Reserve Margin (IRM) Requirement
3

 Determines how much total capacity – on and
off island - LIPA must have.
 Set annually for the upcoming planning year
by the NYSRC.
 Calculated using GE MARS, a probabilistic,
security (i.e., transmission) constrained model.
 Statewide, there must be at least enough
capacity to meet the combined projected load
of all utilities, plus the IRM.
 Currently, the IRM is 17% for the period from
May 1, 2014 to April 30, 2015.
 The IRM requirement is allocated to each load
serving entity in proportion of its peak load to
NYCA total peak load.
 Zone K Locational Capacity Reserve (LCR)
Requirement
3

 Due to transmission constraints, Zone K
(Suffolk, Nassau and Far Rockaway) must be
able to serve the specified percentage of its
load from resources qualified as on-island
resources.
 The LCR is set annually for the upcoming
planning year by the NYISO. It is calculated by
dividing required on-island designated
resources (MWs) by forecasted peak load (MWs).
 The LCR is calculated using the same model
and methodologies used to determine the IRM.
 LIPA’s LCR for the planning year May 2014 to
April 2015 is 107%*. That is, LIPA must have
on-island resources equivalent to 107% of the
NYISO approved peak load for Long Island.
 Probabilistic (LIPA) - 80th percentile confidence level
:
Needs assessment projections reflect
the 80th percentile results (i.e., conservative results) from LIPA’s internally developed
probabilistic model based on customized probability distributions of key variables (e.g., load
forecast, energy efficiency program targets, unit rating variability).
 Probabilistic (NYISO)*: Results reflect the use of the NYISO-approved inputs** and target LCR,
coupled with existing resource supply to determine resource need.
 OPCAP-C: An alternative planning criteria that takes into account specific operational
conditions and contingencies. It does not account or allow for LCR, LOLE or IRM requirements.
9
LIPA’s preferred methodology for making reliability and resource decisions is to use the Probabilistic
(LIPA) model.
• OPCAP-C was used for a few years but was superseded by the development of the Probabilistic
(LIPA) model around 2005.
• The Probabilistic (NYISO) methodology provides the basis for Probabilistic (LIPA) resource
planning with LIPA choosing to plan to the 80% percentile confidence level.
LIPA can use, or has used, different methodologies to determine anticipated resource needs.
* IRM and LCR targets are developed through application of the Probabilistic (NYISO) methodology.
** In 2014 the NYISO decided to use its own peak load forecast for Zone K, which is very similar to LIPA’s forecast for Zone K for the first five years, but then
grows more slowly.
10
LIPA’s probabilistic model uses the NYISO probabilistic model as its base case
4. 2012 NYISO Reliability Needs Assessment, pg. 35, 39.
 LIPA uses an internally developed probabilistically-based model for resource planning.
◦ The model, similar to NYISO’s, contains sufficient functionality to produce results adequate for the
purposes of long-term planning; results, however, are driven by the value of assumptions used.
◦ The model contains over several hundred individual variables, each with probabilistic distributions.
◦ The model assumptions are not the same, in all cases, as the information/assumptions that LIPA
provides to the NYISO for IRM and LCR purposes (e.g., load forecast, SCRs, planned effects of the
Efficiency Long Island (ELI), EFORds).
 Under NYSRC Reliability Rules AR-1 and AR-2 LIPA must plan to meet the LCR requirement as
determined by the NYISO for the upcoming planning year.
 Meeting or exceeding the LCR target achieves, by definition, a lower LOLE than the NYCA design
standard because the NYCA LOLE is, essentially, a sum of zonal events (i.e., each zone has a
calculated LOLE that is less than the NYCA LOLE.) LIPA’s current, or “as-is,” LOLE is 0.001 day/per
year, or 1 day/1000 years.)
 The NYISO/NYSRC estimates of resource needs for each zone are based on projected reliability and
security needs and targets. LIPA is not projected to exceed an LOLE of 0.1 day/year until 2022 but
may need to add capacity in 2020 to ensure that NYCA satisfies the design criterion.
4
11
The relationships of the various planning methodologies to each other and to the
NYISO/NYSRC is reasonably direct, as shown in the simplified illustration.
LIPA Load F’cast
NYISO Load
Forecast
NYISO Approved
Load Forecast
LIPA Resource
Portfolio
NYISO
Probabilities
Transmission
Topology
NYCA LOLE
Design Criterion
GE MARS Model
Other inputs e.g.,
Tie-line support,
other TO data
Installed
Reserve Margin
(IRM)
LIPA LCR
Prob. (NYISO) Prob. (LIPA) OPCAP-C
Planning Models/Approaches
• LI centric
• Not influenced by
LOLE, IRM or LCR.
• Focus is on major LI
contingencies.
• Results in needs
assessment close to
Probabilistic (NYISO).
• Uses modified LIPA peak
load forecast submitted to
NYISO.
• Modifies other variables,
e.g., EFORds
• Needs assessment more
conservative than design
criterion requirement.
• Uses LIPA peak load
forecast submitted to
NYISO.
• Needs assessment
consistent with design
criterion.
Unified Method/
Tan 45
12
The Probabilistic (NYISO) and Probabilistic (LIPA) approaches to determining base case LIPA
resource needs are similar in some respects but also have fundamental differences.
Probabilistic (NYISO) Probabilistic (LIPA)
Inputs
 Probability distributions of key variables (more expansive
than LIPA’s)
• E.g., load forecast and growth, resource level and
performance (e.g., EFORds), load shapes, external
(other RTOs) support, load relief from operating
procedures, etc.
• Developed by NYISO/NYSRC in conjunction with
market participants
 Known additions/retirements
 Sensitivity analyses performed on key uncertainties
 Considers Special Case Resources (SCR)
 Starts with LCR/IRM (from NYISO) as input
 Additional probability distributions of certain key
variables are added on top of ISO Probabilistic
assumptions
• E.g., load forecast and growth, resource level and
performance (e.g., EFORds), etc.
• Developed by LIPA
 Known additions/retirements
 Excludes Special Case Resources (SCR)
Engine/Approach
GE MARS
 Developed by GE
 Industry standard
 Security (i.e., transmission) constrained capability
TAN 45 Unified Method
 Develops LCR/IRM relationship
Market Manager
 Internally developed
 Excel based, “At-Risk” add-on
 Not security constrained

Design Criterion  LOLE of 0.1 day/year  Meet LCR target at a high targeted (80%) confidence level
Outputs
 Annual LCR and IRM
 Long Term Resource Needs Assessment
 Long-term probability based distribution of needs
assessments
• Confidence level tables of needs assessments
• High confidence level indicates a process that
satisfies a high level of worst case contingencies
Needs Assessment
 Surplus/deficit = [Resources - (LCR x base case load
forecast)]
 Equivalent to ~30th to 40th percentile results from LIPA’s
Probabilistic model output.
 LIPA uses 80th percentile confidence level results: i.e.,
High confidence
• Accounts for 80% of all possible resource needs
outcomes produced by the model, equates to ~1/250
yr. LOLE.
13
Irrespective of methodology, resource needs are determined by a simple equation:
Resource Need (+/-) = Resource Supply – (LCR x Peak Load Forecast)
 The major driver of the difference in resource needs results obtained using the probabilistic
models of NYISO and LIPA is that LIPA allows for inclusion of additional uncertainty over and above
the uncertainty already embedded in NYISO calculations.
 This uncertainty primarily manifests itself in the fact that the peak load forecast used in LIPA’s
probabilistic model is not the same as the peak load forecast submitted to the NYISO for review
and approval.
• LIPA adjusts the peak load forecast that it submits to the NYISO by discounting the effectiveness of
its energy efficiency programs, including ELI, thereby increasing forecasted peak load. (LIPA had
previously discounted the effectiveness of ELI prior to submittal to the NYISO but discontinued the
practice of discounting in 2014 due to the program’s experience. However, the Probabilistic (LIPA)
model continues that discounting practice.)
 LIPA also does not include Special Case Resources (SCRs) as a resource in its models, while the
NYISO does.
 LIPA also adjusts the resource supply by applying model-specific distributions of unit parameters,
such as unit ratings; adjustments that, to some degree, have already been accounted for in the the
GE MARS model and reflected in the the NYISO’s Resource Needs Assessment (RNA) target.
 LIPA uses, as previously noted, the 80th percentile confidence level of model results.
14
 Variations in actual peak loads vs. projected peak loads have been substantive (above and below
projections) and largely have been weather driven...
 …but LCR calculations allow for variations in weather normalized peak load.
 LIPA’s peak load forecasts trend very closely with weather normalized peak loads indicating a high
degree of forecast accuracy. (Statistically, the median absolute percent error (Median APE) is very
low, 0.5%., or less than 30 MW)
5,000
5,100
5,200
5,300
5,400
5,500
5,600
5,700
5,800
5,900
6,000
2007 2008 2009 2010 2011 2012 2013
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Historic Peak Loads
Weather Adjusted
Projected
Actual Load
Source: PSEG Long Island Transmission and Distribution Planning, NYISO Load and Capacity Data (“Gold Book), 2006 – 2013
15
There are long-term differences in projected peak load forecasts developed by LIPA and
submitted to NYISO for approval and those used in the Probabilistic (LIPA) resource
planning model.*
5. Long Island Resource Needs Assessment, May 2014 – Update, June 19, 2014.
* In 2014 the NYISO decided to use its own peak load forecast for Zone K, which is very similar to LIPA’s forecast for Zone K for the first five
years, but then grows more slowly.
NYISO
LIPA Submitted
Probabalistic (LIPA)
OPCAP-C
5,000
5,200
5,400
5,600
5,800
6,000
6,200
6,400
6,600
6,800
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
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Load Forecasts
5
NYISO Approved
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• Actual supply margin above target LCRs can be expected, to some degree, since resource
additions/removals can be “lumpy” and the LCR target is represents a minimum resource threshold.
• Consistently high differences, however, reflect a trend that results from LIPA’s determination to embed
more conservatism in its needs assessments.
90
95
100
105
110
115
120
125
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
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%

Zone K Location Capacity Requirements (LCR)
Forecasted Historical
NYISO Target
Actual Supply Margin
Probabilistic (LIPA) - Danskammer In
Probabilistic (LIPA) - Danskammer Out
Probabilistic (NYISO) - Danskammer In
Probabilistic (NYISO) - Danskammer Out
Since 2006 LIPA’s actual supply margins* have been consistently above target LCRs,
sometimes significantly so, and are projected to remain above target in the future.**
* Available on-island resources divided by forecasted peak load.
** Forecasted Probabilistic (LIPA) LCRs = [Projected Probabilistic (LIPA) resource levels] divided by [LIPA load forecast]
Source: Long Island Resource Needs Assessment, May 2014 – Update, June 19, 2014.
17
LIPA LCRs have varied over time for a number of reasons, some of which are under LIPA’s
control, such as election of Unforced Delivery Rights (UDRs) over transmission tie lines.
Planning
Year
LCR (%)
Delta*
(%)
Drivers**
2008 - 2009 94 (5)
• Addition of Neptune HVDC line (-), increased availability of generating
units and cable interfaces (-).
2009 – 2010 97.5 3.5
• Increase in generating unit EFORs (+), less assistance from PJM (+), lower
MWs from EOP (+), higher peak load forecast (+)
2010 – 2011 104.5 7.0
• Increase in generating unit EFORs (+), poorer performance from SCRs (+),
less assistance available on HVDC lines (i.e., election of UDRs associated
with Marcus hook) (+)
2011 - 2012 101.5 (3)
• Decrease in EFORs (-), increased transfer capability from M29 project (-),
greater amount of assistance from New England (-)
2012 - 2013 99 (2.5)
• Anticipated better performance from SCRs (-), a 1.2% drop in LI load
forecast uncertainty (-)
2013 - 2014 105 6
• Addition of HTP (-), lower LI load forecast uncertainty (-), changed EFORd
calculation methodology (-); adopt fixed SCR values (+), increased LI unit
EFORds (+), increased EFORs on subterranean cable (+), lower assistance
from nearby control areas (+), Danskammer retirement (+)***
2014 - 2015 107 2
• Adoption of new load shape model (-), reduced SCR response (+),
increased EFORd LI generating fleet (+), less assistance from ISO-NE (+)
* Change from previous year.
** Sign convention: lowers LCR, (-); increases LCR, (+).
*** If Danskammer is reactivated in 2015, as expected, LIPA’s LCR will decrease about 3%.
18
 The IRM/LCR process has matured and, consequently, the risk of a large change in annual values due to changes
in methodology, database errors and other calculation anomalies has been greatly diminished.
 A decline in LCR does not present a problem.
 Due to the “lumpiness” of capacity additions LIPA will always be projected to be above the minimum
requirements; it is reasonable to anticipate that some degree of excess capacity will be available.
 Many large LCR swings are due to LIPA-controlled decisions (election of UDRs, LIPA policy decisions)
 System changes such as units retirements require ISO studies and will only be allowed to the extent reliability
criteria is satisfied. RMR contracts may be required to offset reliability impacts.
 LIPA Resource Planning does not consider SCRs, which equate to ~80 MW of added buffer beyond LIPA
Probabilistic model results. Also, the possibility of entering into additional UDRs over the Cross Sound Cable
represents an additional potential margin of ~92MW. A further additional ~55 MW of energy output beyond unit
Capacity Resource Interconnection Service (CRIS) Rights’ ratings is available in an emergency and potentially
could be converted to firm capacity with appropriate studies.
 While never planning to be deficient, there are options, and an unforeseen large Increase in LCR can be
managed.
◦ As a stop gap measure, LIPA can work with the NYISO to purchase additional IRM to make up for an LCR shortfall – this
has been done before. Due to market structure, LIPA is somewhat financially indifferent as it is both the LSE and
resource supplier. (LIPA will get back 95¢ of every dollar of the deficiency penalty because it has approximately 95% of
the load in Zone K.)
◦ Emergency Generators: This has been done before by LIPA - 96 MW in 2004-2007 of Cummins Diesel Emergency
Generation.
 PSEG PM verified that interconnecting infrastructure is virtually entirely intact at Shoreham and Holtsville.
 Roughly $10-20 M cost for 100 MW.
19
 Curtail Company use
 Public Appeals
 Voltage reduction
 Curtail Con Edison wheel
 Emergency support (NYISO)
 Emergency support (ISO-NE)
 NYISO Special Case Resources (SCRs) in LICA (day-ahead)
 Load shed
Along with an ability to manage LCR volatility, LIPA has a variety of measures to manage
operational volatility. These measures include the following:
While there is always the possibility, by design, of the loss of load due to a resource shortfall, the
probability of such a shortfall is low and is subject to mitigation through numerous potential actions.
20
LIPA’s probabilistic approach to resource planning has resulted in greater than needed
capacity reserves vis a vis the reliability design criterion of 0.1 days/year which can, to some
extent, provide support to the rest of NYCA.
• Both NYCA’s and LIPA’s “as-is” conditions reflect high levels of capacity reserves,
hence low LOLEs relative to the design criterion of 0.1 day/yr, or 1 day/10 years.
• The “NYISO Criterion” LOLE reflects what NYCA designs to and what LIPA would
achieve if it closely met the LCR projection.
• The “80th percentile” planning criteria indicates what LIPA’s LOLE would be if that
methodology were followed and, because of the relationship between LCR and IRM,
the projected impact it would have on the design criterion for the rest of NYCA (i.e.,
lowering it from 0.1 to 0.06)
Note: “As is” represents a “snap-shot” of current system conditions. Small percentage increases or decreases in
reserves relative to total supply may significantly impact reliability criterion results (i.e., day/years).
21
Source: NYISO 2012 Reliability Needs Assessment, Pg. 35.
• Resource additions in NYS, possibly in Zone K, would likely be required by 2020 to ensure that
NYCA as whole stayed below the LOLE design criterion of 0.10. (An updated RNA, due in fall
2014, could show an advanced resource need in Zone K).
Note: Refer to Map of NYCA Load Zones provided in Appendix. A “0” represents an LOLE of less than 0.001. An
LOLE value of 0.00 represents a rounded value such as 0.001 through 0.004.
The base case of the most recent NYISO Reliability Needs Assessment (2012 RNA) shows
that LIPA (i.e., Area K) is not projected to exceed the NYCA design LOLE of 0.10 days/year
until 2022 under base case conditions.
22
Probabilistic (NYISO) and OPCAP-C approaches result in similar short and long-term
needs assessments*; Probabilistic (LIPA) needs assessments are significantly greater than
either the NYISO or OPCAP-C approaches, in both the short and long term.
* The current probabilistic NYISO resource need date for Zone K of 2020 is advanced relative to the 2013 RNA.
Source: Long Island Resource Needs Assessment, May 2014 – Update, June 19, 2014.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Probabilistic (NYISO) 148 241 211 135 69 (9) (99) (231) (330) (436) (546)
Probabalistic (LIPA) 118 9 (160) (256) (341) (439) (551) (718) (832) (979) (1,100)
OPCAP-C 281 218 193 124 65 (5) (86) (171) (261) (357) (457)
(1,200)
(1,000)
(800)
(600)
(400)
(200)
0
200
400
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Long Island Resource Assessment - with Danskammer
23
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Excess MW 52 50 377 317 635 455 913 972 669 365
NYC $110.02 $112.24 $113.58 $110.42 $53.28 $58.32 $110.70 $73.05 $96.16 $135.05
Long Island $94.45 $104.09 $83.33 $67.73 $34.01 $29.11 $19.67 $3.49 $21.44 $58.18
0
100
200
300
400
500
600
700
800
900
1000
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
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Weighted Average Capacity Prices $/kw-yr
Excess supply on LI has had a significant dampening effect on LI capacity prices vis a vis
NYC, thereby affecting market signals and hindering merchant activity.
 Following deregulation the NYISO and FERC established a “demand curve” to incentivize new
generation to locate in NYS and LI/NYC localities.
 Prices based on level of surplus/deficit resources relative to LCR.
 As zone approaches capacity deficiency, capacity prices increase to support new unit
development.
 If an area is substantially overbuilt relative to requirements, capacity prices collapse.
 LIPA probabilistic criteria has led to excess supply margins* (up to ~1000 MW beyond NYISO
requirement).
 Low capacity prices on LI are a disincentive to new generation development.
 Requires LIPA to support new capacity suppliers with long term PPAs to incent capacity
development.
 LIPA ratepayers assume risks traditionally borne by merchant suppliers in deregulated power
supply market.
 Con Edison has not signed a PPA for new capacity since the early 2000s. Over 3000 MW of
new capacity has been developed in Zone J without Con Edison ratepayer commitments.
 The resulting high percentage of long-term bilateral capacity contracts impedes viability of
LIPA retail choice programs by removing liquidity from the LI capacity market and ESCOs
ability to make money.
24
* See Appendix for illustrative rate impact analysis.
25
 LIPA has not experienced resource shortfalls or reliability issues during the use of its probabilistic
model…
 …however, the model, by design, projects a need for higher levels of on-island resources than
would be required using only the NYISO-developed criterion or the OPCAP-C approach.
 The current LCR calculation methodology (i.e., Unified Method/TAN 45) represents a much more
sophisticated approach than was employed in the early 2000s and is approved by both FERC and
the NYS PSC.
 Actual achieved LI resource levels (2005 - 2013), on average, have been significantly higher (over
500 MWs) than NYISO-approved LCR levels.
◦ In addition, projected target resource levels using the Probabilistic (LIPA) methodology are expected to
continue to be significantly higher than target LCRs using LIPA’s base case load forecast.
◦ Low market capacity prices on Long Island are a disincentive to merchant generation development.
 LCRs, while subject to some volatility, are considered manageable and are not anticipated to
change substantially from current levels absent significant system changes.
 LIPA’s base peak load forecast, a key input into resource need calculations, closely tracks weather
normalized peak loads.
26
 The LOLE for all NYCA zones must be, by definition, below the NYCA target of 0.1 days/year, thereby
implying a greater level of resource adequacy in each zone than NYCA overall.
◦ Zone K (Long Island) is not projected to exceed the design LOLE until 2022, or have a resource need until
2020, under the NYISO’s 2012 Resource Needs Assessment base case.
 Planning should always be based on the need to meet NYSRC/NYISO requirements, but not meeting
the LCR target does not necessarily mean that reliability is compromised.
 LIPA is the only utility in New York state that explicitly uses a more conservative planning criteria than
that mandated by the NYISO/NYSRC.
 Using the NYISO design criterion will bring LIPA in alignment with other NY state utilities and will
reduce the implicit dependence that the rest of NYCA and interconnected regions enjoy by having
LIPA effectively design to a criterion well below 0.1 days/year.
 A planning approach based on the NYSRC-approved LOLE and NYISO-developed LCR delays the
projected need for new capacity resources approximately 3 years (from 2016 to 2019) in comparison
with the Probabilistic (LIPA) approach.
◦ Inclusion in the planning process of the effects of Special Case Resources (SCRs), Utility 2.0 projected
impacts, and the election of available Unforced Deliverability Rights (UDRs) would push out the need date
an additional 2 – 3 years, to 2022.
 There is essentially no LI merchant development activity in the generating sector and, effectively, no
competitive wholesale power market. (Largely driven by capacity oversupply and full reliance on
PPAs).
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 LIPA’s current planning approach (i.e., Probabilistic (LIPA)):
◦ allows for greater uncertainty than what is embedded in the NYSRC/NYISO methodology.
◦ indicates greater resource needs than are identified using the NYCA designated design criterion.
◦ reflects antecedent events in the early 2000’s (i.e., relative geographic isolation and substantial
uncertainty in supply adequacy, which supported a degree of conservatism) that is no longer
applicable, or at least not as relevant under current circumstances.
 The NYSRC/NYISO planning approach is based on industry standards, conservative assumptions,
and forms a sound basis for LIPA long-term planning.
 Adoption of the NYSRC/NYISO planning criterion is consistent will all other NYS utilities;
therefore, based on historical performance, adoption is unlikely to lead to reliability impacts.
 The use of the Probabilistic (LIPA) approach for resource planning compared with the
Probabilistic (NYISO) approach will require hundreds of additional MWs of generation and, by
definition, lead to near-term rate impacts.
 A delay of 12-18 months of LIPA’s current resource plan presents no demonstrable risk to Long
Island reliability.
◦ Increases in load or decreases in supply would be addressed by measures to preserve reliability and
meet NYISO requirements.
◦ Power Market opportunities at both the wholesale and retail level will be identified through the
Integrated Resource Planning Process.
 PSEG Long Island should adopt the NYISO planning criterion for resource needs assessment.
◦ The NYISO planning process has matured and become highly sophisticated over the last decade.
◦ NYISO’s probability analysis is sufficiently robust.
◦ NYISO adopts conservative values for many key variables, such as availability of external (to NYCA) assistance.
◦ The design criterion is consistent with that used by other NYS utilities, reflects the standards and guidelines of NERC and NPCC, and is approved by
both FERC and the NYS PSC.
 Re-task Phase 2 of this process to perform a full Integrated Resource Plan (IRP), expected to be concluded by
end of 2015.
◦ Public outreach and input to be solicited.
 Delay commitments on all current RFPs excepting those with existing, binding agreements and/or immediate
needs:
◦ 2010 Generation and Transmission RFP (Caithness selected), 2013 GS&DR RFP – in progress, 280 MW RFP (Renewable)-in progress
◦ Suspend payments on Iroquois pipeline but continue OSC/AG approval process.
◦ Suspend any significant expenditures for Article 7 process for Caithness, Barrett Peaking Units and Barrett Steam Repowering,
maintain optionality at minimal expense.
◦ All RFPs listed above, should continue to be reviewed and short listed as appropriate.
◦ Specifically address issues on the the eastern end of the island with Utility 2.0 or Block 1 of GS&DR RFP.
◦ PSEG Long Island condition assessments of National Grid generating units is pending. However, review of performance data and
discussions with NG staff do not indicate any significant near-term performance related or environmentally mandated changes to the
current generating unit portfolio. [See Appendix 6 for related data].
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Short-Term
 Develop IRP plan and schedule.
 Perform detailed condition assessment of capacity resources.
 Validate use of existing RFPs and/or initiate new RFPs, if appropriate.
◦ Further consideration of transmission solutions on par with on-island
generation options.
◦ Consideration of Utility 2.0 and UDRs.
Longer Term
 Review contracts for energy pricing improvements.
 Conduct study for opening a fully competitive capacity market for Zone K.

29

 Interviews, Data Review and Analysis
 Rate Impact
 Map of NYCA Load Zones
 Footnotes

30

 Multiple Interviews with LIPA Staff
 Multiple Interviews with PSEG Long Island Staff
 Interview with NYISO Vice President of Planning
 Interview with National Grid Staff
 Documents reviewed and analyzed included, among others:
◦ LIPA Electric Resource Plan 2010-2020
◦ LIPA Strategic Plan, supporting documentation and presentations
◦ NYISO Load and Capacity Data (”Gold Book”) – various
◦ NYSRC New York Control Area Capacity Requirement, May 2014 – April 2015 (December 2013)
◦ NYSRC Policy 5-7, Procedure for Establishing New York Control Area Installed Capacity
Requirements, April 2013
◦ PSEG Long Island IC Resource Needs Assessment May 2014 – Update Final
◦ NYISO Reliability Needs Assessment, 2012
◦ NYSRC Reliability Rules, April 2014
◦ NYISO Reliability Planning Process Manual, June 2014
◦ NYISO Installed Capacity Manual, May 2014
◦ NYISO Load Forecasting Manual, September 2014

31

 2005-2013 Average LIPA capacity excess over NYISO LCR was 528 MW
 Probabilistic (LIPA) methodology results in approximately 400 MW in excess of
NYISO LCR (2018)
◦ LI net capacity cost ~ $285/KW-Year (2018)*
◦ NYISO Rest of State capacity price forecast: $65/KW-Year (2018)
 Cost of 400 MW oversupply is approximately $88M/year, or an approximate 2%
rate impact.
◦ ($285/kw-yr. – $65/kw-yr.) x 400 MWs = $88million/year
◦ LIPA revenue requirements = ~$4 billion/yr. (2018 estimate)
◦ Rate Impact = (~$88 million/~$4 billion) = 2.2 percent
32
A high level estimate of the rate impact of LIPA’s projected excess supply, over and above
that required to meet the LCR requirement, results in a measureable impact on rates.
• Derived from RPCC Benchmark file and Caithness II study for energy offset.

33
A - WEST
B - GENESE
C - CENTRL
D - NORTH
E - MHK VL
F - CAPITL
G - HUD VL
H - MILLWD
I - DUNWOD
J - N.Y.C.
K - LONGIL

1. NYSRC Reliability Rules, Version 33, April 10, 2004, Pg. 13-14
2. NYSRC Policy 5-7, Section 3.1 and Appendix B
3. LIPA Board of Trustees Briefing, February 25, 2010; PSEG Long Island update,
pg. 8
4. NYISO 2012 Reliability Needs Assessment, pg. 35, 39
5. Long Island Resource Needs Assessment, May 2014 – Update
6. National Grid Generating Units, June 27, 2014. Pg. 11-12, 17-19, 27.
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