New York City Faces a Potential Capacity Shortfall This Summer. Here's What You Need to Know.

For the first time in recent memory, the NYISO has flagged a potential capacity deficiency in New York City heading into the Summer 2026 capability period. If you participate in the ICAP market, this is worth paying close attention to and acting on quickly. 

The NYISO identified CHPE (the Champlain Hudson Power Express, a 1,250 MW HVDC transmission project) as a "Triggering Resource" for the 2026-2027 Capability Year. Under the triggering resource rules, CHPE's participation in the ICAP market requires two months' advance notice before it can commence capacity market participation. Because the NYISO did not receive the required notice by the March 2 deadline, CHPE-Out parameters will apply starting in May 2026. 

Under CHPE-Out, the market operates as though CHPE's UDRs are not supplying capacity. This affects several key ICAP parameters: the Locational Minimum Installed Capacity Requirements (LCRs) for New York City are set at the transmission security limit floor, Capacity Accreditation Factors (CAFs) reflect CHPE's absence, and the UCAP demand curves are calibrated accordingly. The CHPE-Out LCR for New York City is what drives the potential deficiency. With CHPE out of the picture, available supply may fall short of the minimum requirement the market must clear. 

It is important to note that this is a transmission security issue, not a resource adequacy concern. Preliminary analysis confirms the NYCA continues to meet the resource adequacy criterion of 0.1 Loss of Load Expectation for the 2026-2027 Capability Year, with the final LCR study showing a 0.072 LOLE. Emergency operating procedures, including emergency assistance from neighboring control areas, remain available to address real-time needs if necessary. 

The NYISO flagged the potential for a deficiency in meeting the Zone J LCR for Summer 2026 spot auctions but did not quantify the deficiency in MW. Some additional clarity will be available after April 22, when the certification window closes and the NYISO publishes the default reference price. The official deficiency amount will only be confirmed after the May 2026 spot auction runs on April 27 and results are posted on April 29.

If a deficiency is confirmed following the May 2026 spot auction, the NYISO is required under its tariff to conduct a supplemental capacity procurement process. LSEs that are deficient in meeting their minimum capacity requirements are assessed supplemental supply fees equal to the spot market clearing price multiplied by their deficiency. The NYISO then uses those collections to procure supplemental capacity from two categories of resources. Category 1 resources are those capable of supplying UCAP that were not qualified to offer in the spot auction. Category 2 resources are those that offered but did not clear (unsold MW) or were qualified but did not offer (unoffered MW). Supplemental offers are pay-as-bid, capped at the spot market clearing price, and Category 1 resources are prioritized if multiple offers come in at the same price. 

The timeline is tight. Certification closes April 22, the spot auction offer period runs April 24 through 27, and results are posted April 29. If a deficiency is identified after the auction is conducted on April 27, the supplemental offer period opens at 6 PM that evening and closes at 5 PM on April 28, leaving approximately one day between the deficiency notice and the offer deadline. Resources that believe they may qualify should not wait to begin preparing. 

Supplemental capacity procurement is a separate, expedited post-auction process. Here is how it works:

• If the spot auction clears with a deficiency for NYC, the NYISO immediately issues a marketplace notice identifying the shortfall and the market clearing price.

• A supplemental offer window opens the same day (e.g., 6 p.m. April 27) and closes the following afternoon (5 p.m. April 28).

• Eligible suppliers can submit offers via email, capped at the spot auction clearing price.

• The NYISO processes those offers and issues awards up to the size of the deficiency. Results are folded into the original spot auction posting by April 29.

• If collected supplemental supply fees exceed what is awarded, the excess is rebated to LSEs in the deficient region.

The NYISO flagged that historically, unsold and unoffered MW in NYC spot auctions have been very limited, so Category 2 supply is unlikely to close much of a gap. Category 1 resources (newly eligible or previously unregistered) are the more likely source of supplemental supply, if any is available.

The NYISO is actively encouraging potential Category 1 resources to reach out now to discuss eligibility before the supplemental process begins. This includes resources that are operational but have not yet completed ICAP market registration, resources with incremental UCAP available through a one-time CRIS increase request for up to 2 MW, and resources waiting out the two-month triggering rule. Non-SCR resources should contact the NYISO at ICAP_info@nyiso.com, and SCRs should contact scr_registration@nyiso.com. 

Looking ahead, the next CHPE notice deadline is April 10 for June 2026 participation. On April 15, the NYISO will publish its Short-Term Reliability Process Report, which will include the outcome of the Generator Deactivation solicitation that closed in January. That report will provide additional clarity on near-term reliability needs in New York City. If no CHPE notice is received by August 10, CHPE-Out parameters will remain in effect for the balance of the 2026-2027 Capability Year. The NYISO has committed to issuing a market notice each time a monthly deadline passes without a valid notice being received. 

We will continue monitoring this situation closely and will share updates as they develop. 

To learn more about Luminary Energy’s services or to connect with a member of our team, contact us at contact@luminary.energy.