Department of Public Service

Environmental Disclosure Program - Rules and Procedures for Conversion Transactions



Rules and Procedures for Conversion Transactions

This document describes the Rules and Procedures that will govern the administration of Conversion Transactions as part of the Environmental Disclosure Program instituted by the New York State Public Service Commission.

Section 1
Background.

On December 15, 1998, the Public Service Commission directed all entities subject to its jurisdiction that supply retail electric service to provide their customers with periodic environmental disclosure statements. The Commission's directive applies to all electric utilities, energy services companies (ESCOs), and jurisdictional municipal and electric cooperatives. The New York Power Authority and the Long Island Power Authority will participate on a cooperative basis.

The Commission has designated Staff of the Department of Public Service (DPS Staff) to be the Administrator of the Environmental Disclosure Program. DPS Staff will provide all retail electric service providers with the individualized fuel mix and emissions characteristics information that will be included in their respective environmental disclosure statements.

Energy purchases from the New York Independent System Operator (ISO)-sponsored Locational Based Marginal Pricing (LBMP) markets (Spot Market) will be aggregated quarterly separate from bilateral transactions. After final settlement for a quarter, in addition to providing a report of bilateral transactions, the ISO will prepare a report to the Administrator stating the amount of power each participating entity sold into the Spot Market for that quarter, by source power plant, and the amount of power each participating entity purchased out of the Spot Market for that quarter. The Spot Market participants will then be informed individually by the Administrator of their own Spot Market totals.

A “Conversion Transaction” occurs when an entity that sold energy into the Spot Market, and an entity that purchased a like amount of energy out of the Spot Market during the same quarterly settlement period, jointly identify for the Administrator such packet of energy such that it can be disaggregated, for environmental disclosure purposes, from the residual pool of Spot Market energy.

For disclosure purposes, the energy for which a Conversion Transaction is accomplished will receive the environmental attributes of the generation source of the entity that sold the energy into the Spot Market. Conversion Transactions are limited to the energy sold into the Spot Market. The generation associated with Conversion Transactions will be deducted from the spot market total, and the fuel mix and emissions characteristics of the remainder will be calculated and assigned to the Spot Market participant purchasers who did not arrange Conversion Transactions.

Spot Market participants are free to devise their own private methods for locating partners for Conversion Transactions, including but not limited to the use of third-party intermediaries, brokers, and independent trading markets. Spot Market participants are also are free to make and trade private agreements to enter into Conversion Transactions and to set the terms of such agreements, including but not limited to those regarding timing, duration, price, and payment arrangements, so long as the resultant Conversion Transactions are jointly identified for the Administrator according to the schedule and rules for quarterly settlement periods.

Section 2
Conversion Transactions Rules and Procedures

1) Conversion Transactions apply only to the energy sold into the New York Independent System Operator (ISO)'s Locational Based Marginal Pricing Day Ahead and Real Time Markets (“Spot Market”). Conversion Transactions are not applicable to bilateral transactions.

2) Conversion Transactions are settled on a quarterly basis. Conversion Transactions, when identified for and qualified by the Administrator, allow packets of energy sold through the Spot Market to be disaggregated from the residual pool of Spot Market energy for environmental disclosure purposes. The energy for which a Conversion Transaction is accomplished will receive the environmental attributes of the generation source of the entity that sold the energy into the Spot Market. While any entity (including third parties and brokers) may make and trade agreements to enter into Conversion Transactions, the original entity that sold the energy into the Spot Market and the ultimate retail electric1 service provider who bought the corresponding energy out of the Spot Market, must report the Conversion Transaction to the Administrator for the Conversion Transaction to become effective.1As a result, the identity of the original generation source must be preserved throughout any agreements or trades. Ultimately, if either party fails to report the Conversion Transaction, or if the information reported is incomplete, the Administrator will not recognize the Conversion Transaction.

3) As directed by the Commission, the environmental disclosure information will be updated on a quarterly basis using an annual rolling average of quarterly data. Thus, the Conversion Transactions designated for a given quarter will be included as long as that specific quarter remains in the rolling average.

4) Any load serving entity (LSE) that wishes to be credited with a Conversion Transaction in the calculation of its fuel mix and emissions characteristics, and the corresponding entity that sold the energy into the Spot Market that is the subject of the Conversion Transaction, shall each electronically transmit the required Conversion Transaction information to the Administrator, as discussed below.

(After the initial learning experience and ISO’s billing times are more regular we expect to follow the schedule as follows.) Upon receipt from ISO, the administrator will inform the Spot Market participants, individually their own spot market totals for the quarter. This transmittal of information by those who obtain conversion transactions should take place within four weeks after receiving the quarterly spot market totals from the administrator. The administrator will distribute, within six weeks, to each LSE its environmental disclosure information, incorporating all Conversion Transactions properly and timely submitted.

5) The Conversion Transaction information, as outlined below, must be submitted electronically by both parties to the Conversion Transaction in a prescribed format. The Administrator will electronically acknowledge the receipt of the Conversion Transaction information to both parties.

6) Using the information obtained from the ISO, the Administrator will review the details of the Conversion Transactions submitted, and notify the parties to the Conversion Transaction of any inconsistencies to be resolved in advance of a final update of environmental disclosure information for the quarter.

1 Exception to this rule is when an entity who exports power out of New York obtains conversion transaction—in this situation we will accept registration from this exporting entity and the generator who sold it.

Section 3
List of information that the sellers and buyers are expected to provide for each Conversion Transaction:

1) Name of the Reporting Entity

2) Name of Seller

3) Name of Buyer

4) Generating Station (and Unit) Name

5) Fuel Type - If dual-fuel, list fuels used

6) Amount of Energy Converted by Transaction (kwh)

7) Calendar Quarter

8) Contact Person

Telephone Number

E-Mail Address

NOTE: Please e-mail the above information to Environmental.Disclosure@dps.ny.gov

Section 4
Attachment 2

Discussion of Conversion Transactions from the Commission Order on Environmental Disclosure

Energy purchases from the ISO-sponsored Locational Based Marginal Pricing (LBMP) markets (hereinafter “spot market”) will be aggregated quarterly separate from other transactions. After final settlement for a quarter, the ISO will prepare a report to the Administrator stating the amount of power each participating entity sold into the spot market for that quarter, by source power plant, and the amount of power each participating entity purchased out of the spot market for that quarter. The spot market participants will then be informed individually by the Administrator of their own totals. The participant sellers and purchasers will be given a set period of time to jointly identify for the Administrator packets of energy previously sold and purchased by them for that quarter on the spot market for which they have arranged conversion transactions. No spot market participant has an obligation to negotiate conversion transactions or premiums. Spot market participants are free to devise their own private methods for locating partners for conversion transactions and are free to set the terms of such transactions including those regarding timing, duration, price, payment arrangements, and other provisions. For disclosure purposes, the generation for which a conversion transaction was negotiated will receive the environmental attributes of the source that generated the power. The generation associated with conversion transactions will be deducted from the spot market total, and the fuel mix and emissions characteristics of the remainder will be calculated and assigned to the spot market participant purchasers who did not arrange conversion transactions.

Case 94-E-0952, Opinion No. 98-19, Opinion and Order Adopting Environmental Disclosure Requirements and Establishing a Tracking Mechanism, (issued December 15, 1998) Appendix pp. 2-3.




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