Docket No. ER22-1528-000
I believe that the best outcome here would have been for ISO New England Inc. (ISO-NE) to immediately implement its new Minimum Offer Price Rule (MOPR)—i.e., without the Transition Mechanism. Simply put, ISO-NE could have, and should have, done better. Nevertheless, ISO-NE submitted a different proposal—one that delays reform of the MOPR by two years—and we must evaluate the filing before. When considered in that context,[1] I believe that the proposed Transition Mechanism is part of a just and reasonable package of reforms.[2] In addition, and critically, the New England States have explained that they do not oppose the Transition Mechanism.[3]
Nevertheless, it is important to take a step back and not lose sight of how far we have come in this debate. It was a little over four years ago, in response to another ISO-NE filing establishing the Competitive Auctions with Sponsored Policy Resources (CASPR) construct, that the Commission laid the foundation for its recent MOPR misadventures.[4] In that order, the Commission announced its intention to coopt MOPRs, turning them into a means to block the effects of states’ exercise of their reserved authority under section 201(b) of the FPA.[5] Time has proven what I said at the time: the Commission’s antagonistic approach to the states would “come to rank as a historically serious misstep” that represented a “threat to consumers, the environment and, in fact, the long-term viability” of capacity markets more generally.[6] And how. Over the ensuing two years, the Commission engaged in a quixotic campaign to use its authority under the FPA to effectively “nullify” certain disfavored state public policies.[7] Far from protecting consumers and creating confidence in capacity markets, the Commission’s orders risked causing serious harm to those very markets and led numerous states to consider abandoning them altogether.
In his dissent, Commissioner Danly continues to beat the drum via an ahistorical attempt to recast the MOPR as a reliability tool. Not only is that characterization unsupported by Commission precedent, the evident antipathy to state resource decisionmaking—equating states’ exercise of their authority under section 201(b) to a “manipulative scheme”[8]—only underscores the extent to which nullification was the goal all along. There can be no winners in a regulatory civil war between FERC and the states. Although the professed rationale for using the MOPR against state resource decisionmaking has whipsawed back-and-forth in recent years[9]—from buyer-side market power, to “price suppression,” to “market integrity,” to, now, reliability—none of those rationales can avoid the fact that any approach that puts the Commission, and by extension, the RTOs, at loggerheads with the states is bound to fail, with customers, as usual, being stuck with the tab. Ending the federal-state antagonism over the MOPR represents a significant step forward toward ensuring resource adequacy at just and reasonable rates, which is, after all, the entire purpose of a capacity market.[10]
I recognize that the changing resource mix is forcing the Commission, RTOs, and the states to take a new tack to ensuring reliability. No one can dispute that. But the right way—and, in my view, the only just and reasonable way—to do so is by designing wholesale electricity markets to ensure reliability in light of that changing resource mix rather than trying to roll back the resource mix clock. It is not the Commission’s role to choose one resource type over another, or to second guess the wisdom of state resource decisionmaking. Instead, we must ensure, in a resource-neutral manner, that wholesale electricity markets are procuring the services need to keep the lights on and the grid in balance.
As a result of today’s order, ISO-NE is free to do just that rather than engaging in a Sisyphean attempt to stymie state efforts through the capacity market. In this respect, I strongly encourage ISO-NE to move forward expeditiously in developing and filing a capacity accreditation proposal to ensure that the FCM is accurately valuing the capacity contribution of all resources. Done right, capacity accreditation can serve as a prime example of how Commission-jurisdictional markets can ensure reliability in a manner that compliments, rather than contradicts, states’ exercise of their sovereign authority—exactly the type of “cooperative federalism”[11] that I believe should typify the Commission’s interaction with the states and its regulation of wholesale markets more generally. Similarly, I urge ISO-NE to consider how the unique winter reliability issues facing New England are reflected in its markets, and whether those markets require modifications—such as a seasonal reserve product[12]—or additional products in order to maintain reliability at just and reasonable rates, both in the near-term and as the resource mix continues to evolve in the years ahead.
For these reasons, I respectfully concur.
[1] As today’s order notes, “best” is not the standard we apply in reviewing this Federal Power Act (FPA) section 205 filing. ISO New England Inc., XX FERC ¶ 61,XXX, at P 103 (2022) (Order); see Petal Gas Storage, L.L.C. v. FERC, 496 F.3d 695, 703 (D.C. Cir. 2007) (“FERC is not required to choose the best solution, only a reasonable one”); PJM Interconnection, L.L.C., 170 FERC ¶ 61,243, at P 57 (2020) (“A party filing a proposal pursuant to FPA section 205 need not demonstrate that its proposal is the best option, but only that it is just and reasonable.”); see also NRG Power Mktg., LLC v. FERC, 862 F.3d 108, 114 (D.C. Cir. 2017) (Section 205 puts FERC in a “passive and reactive role.”). Instead, under section 205, when a public utility—in this case, ISO-NE—submits a proposal that is itself just and reasonable, we must accept that proposal even when there is a superior option, as there was here. See Cities of Bethany v. FERC, 727 F.2d 1131, 1136 (D.C. Cir. 1984) (utility needs to establish that its proposed rate design is reasonable, not that it is superior to all alternatives).
[2] Order, XX FERC ¶ 61,XXX at P 104.
[3] New England States Committee on Electricity Comments at 2.
[4] ISO New England Inc., 162 FERC ¶ 61,205 (2018) (CASPR Order).
[5] CASPR Order, 162 FERC ¶ 61,205 at P 22; see generally Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1292 (2016) (describing the jurisdictional divide set forth in the FPA); FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 767 (2016) (EPSA) (explaining that “the [FPA] also limits FERC’s regulatory reach, and thereby maintains a zone of exclusive state jurisdiction”); Panhandle E. Pipe Line Co. v. Pub. Serv. Comm’n of Ind., 332 U.S. 507, 517-18 (1947) (recognizing that the analogous provisions of the NGA were “drawn with meticulous regard for the continued exercise of state power”).
[6] CASPR Order, 162 FERC ¶ 61,205 (Glick, Comm’r, dissenting in part and concurring in part at 1).
[7] In a moment of candor the Commission’s December 2019 order on PJM MOPR forthrightly acknowledged that the application of the MOPR would have the effect of “nullify[ing]” the policies that trigger it. See Calpine Corp. v. PJM Interconnection, L.L.C., 169 FERC ¶ 61,239, at PP 10, 89 (2019); id. (Glick, Comm’r, dissenting at n.26) (“The Commission justifies its refusal to extend the MOPR to federal subsidies because to do so would ‘disregard or nullify the effect of federal legislation.’ But that can only mean that the Commission is fully aware that this is what it is doing to state policies, notwithstanding its repeated assurances that it respects state jurisdiction over generation facilities.”) (citations omitted).
[8] Order, XX FERC ¶ 61,XXX (Danly, Comm’r, dissenting at P 8).
[9] Cf. Calpine Corp. v. PJM Interconnection, L.L.C., 171 FERC ¶ 61,034 (2020) (Glick, Comm’r, dissenting at P 33) (“Throughout this proceeding, the Commission has relied on various inscrutable principles, such as ‘investor confidence’ or ‘market integrity,’ to justify its new MOPR.”).
[10] See, e.g., CASPR Order, 162 FERC ¶ 61,205 at P 23 (“The objective of the [Forward Capacity Market (FCM)], a market mechanism adopted by the New England region, is to ensure resource adequacy at just and reasonable rates.”).
[11] Cf. EPSA, 136 S. Ct. 760.
[12] The Commission has already once rejected ISO-NE’s attempt to address reliability issues through relatively short-term methods, such as the day-ahead-market, see ISO New England Inc., 173 FERC ¶ 61,106 (2020). Although I will review any filing made by the ISO with an open mind, and consistent with the standard of review, I believe the better course of action for a durable solution to ISO-NE’s winter reliability issues may lie in a seasonal approach to procuring the services that will ensure the reliable operation of the grid.