The price you pay for electricity in the NYISO region is made up of a variety of components.
In order to reduce electricity costs, each component requires its own intelligent strategy. These price components differ depending on your usage, service zone, and a variety of other influences. This is no different in New York or the NYISO region.
The Independent System Operator (ISO) is the organization in charge of the operations of a region’s electrical system. There are 5 of these ISOs throughout the United States. Best Practice Energy mainly services clients in the 3 of these regions:
- NYISO: Serves New York
- ISO-NE: Serves all deregulated states in New England (Massachusetts, Rhode Island, Connecticut, Maine, and New Hampshire)
- PJM Interconnection: Serves parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia
Each ISO has its own electricity supply price components specific to their controlled area. There is overlap of these from ISO to ISO, however, the proportion they occupy in your electricity supply price vary.
If you’re looking for information on natural gas pricing, please check out our post, The Components of Your Natural Gas Supply Price.
The actual commodity generated from power plants and the like, energy represents the electricity that powers a building. This price component occupies the largest piece of your electricity supply price. Its cost is dependent on your facility’s kWh usage.
The capacity price component represents the maximum amount of electricity that needs to be allocated for a facility to operate. This is also referred to as ‘demand’. To ensure there is enough power for all buildings on it, the electricity grid also has capacity needs. Without enough available electricity to handle the grid’s
peak load, brown outs, black outs, and other unexpected outages can occur.
In NYISO, capacity rates (capacity tags) are determined by your demand for electricity during one hour on peak day. Peak day is an event during the year that the most electricity is being drawn from the grid. This peak day usually occurs during heatwaves in the summer. If you curtail your demand at specific times during these days, you can reduce your capacity tag. This process is referred to as peak load management.
Our complimentary Peak Notification Service helps you design and implement a customized peak load management curtailment plan. When we forecast a peak day, we contact you so you can implement your strategy at the right time. In 2020, we had one client save $90k on their capacity costs by doing just this!
NYISO Capacity Zones
The New York capacity market consists of 4 zones. The costs differ drastically in each (Figure 1).
To determine the price, there are 3 types of auctions that the NYISO holds: Strip, Monthly, and Spot:
Strip Auction: This type of auction takes place twice per year. It occurs ~1 month before the summer and winter capability periods (summer: May – Oct; winter: Nov – April). For example, the auction for summer capability period occurs ~ March 30th. Generators commit to providing a given MW of capacity for the upcoming summer or winter capability period.
Monthly Auction: This auction occurs in the middle of the month for the following month and the remainder of the capability period. For example, the auction for May – Oct occurred on April 15th. Next month, the auction would be for June – Oct and would take place around May 15th. Here, generators commit to providing a given MW of capacity for the rest of the summer or winter capability period.
Spot Auction: This is where the majority of the capacity in New York is purchased. The auction occurs at the end of the month for the upcoming month i.e May’s auction takes place ~April 25th. Generators will commit to providing a given MW of capacity for the upcoming month. A certain percentage of excess capacity clears in this auction, which all LSEs are required to purchase.
NYISO Regulatory Charges
Regulatory Charges are part of New York’s Clean Energy Standard (CES). The CES requires a percentage of electricity from the NYISO to come from renewable resources. The CES has extremely ambitious goals to make 70% of electricity in New York come from renewable resources by 2030. New York’s CES consists of 2 aspects: Renewable Energy Standard and Zero Emission Credits.
Renewable Energy Standard (RES): All energy load-serving entities (LSE) in the NYISO area are required to obtain renewable energy credits (RECs). These must be associated with new renewable energy resources for their retail customers. If LSEs are not meeting this REC commitment, they must make alternative compliance payments (ACPs).
Zero Emission Credits (ZECs): Energy load-serving entities (LSE) are required to procure ZECs from the New York State Energy Research and Development Authority (NYSERDA). The amount of ZECs is determined by the amount of load the LSE’s handle in New York within a year.
Line Losses are the cost of the amount of electricity that is lost in the transportation and transmission process. This loss is typically due to heat dissipation from electricity’s journey through transformers and high-voltage lines.
NYISO Transmission Owner Transmission Solutions (TOTS)
These costs are associated with the Transmission Owner Transmission Solution projects. These projects were built on the NYISO transmission system to improve the transfer capabilities and efficiency between Upstate New York and Downstate New York.
The purpose of Ancillary Services is to maintain reliable operation of the NYISO grid system. They also support capacity and energy transmission from the point of generation to a building. These services include Regulation Service, Voltage Support, and Black Start Capability.
Whether it’s the NYISO, NE-ISO, PJM Interconnection or any other ISO region, our goal is to empower businesses. By understanding what is inside an electricity price, clients gain the confidence to make intelligent decisions on their energy. This is the best path towards cost avoidance and lower electricity bills.
The best part? Our clients are never alone!
We’re with you every step of your energy procurement, monitoring each price component. We help you react to market changes and develop the right cost avoidance strategy for your business.
Contact us today to discover how you can achieve maximum cost avoidance on your electricity bills through tailored strategies.