Commissioner Allison Clements Statement
March 31, 2021
Docket No. ER21-943-000
I concur in today’s order but write separately to note that as energy efficiency programs continue to evolve and innovate, we may have reason to revisit their eligibility for pay-for-performance penalties and bonuses in the future.
When the Commission directed ISO New England to adopt the pay-for-performance market reforms in 2014, it rejected ISO New England’s proposal to require energy efficiency resources (EERs) to either install metering on constituent assets, which requires material investment, or face guaranteed pay-for-performance penalties if a reserve deficiency occurs outside of the EER’s measured hours (i.e., the hours in which demand reduction values are calculated under the tariff for that type of EER).[1] Instead, the Commission directed that ISO New England assess EERs’ performance only in reserve deficiencies that occur during an EER’s measured hours.[2]
I agree that in the instant filing ISO New England has made an adequate demonstration that it is just and reasonable to fully exclude EERs from pay-for-performance because EERs are not required to demonstrate their real-time performance in reducing load off of a baseline, including during measured hours. I note, however, that the revisions we accept today leave EERs without an avenue to participate in pay-for-performance even if they do install the necessary metering to assess their performance, as ISO New England originally proposed in 2014.
Energy efficiency programs continue to innovate, and it is possible we see deployment of energy efficiency measures that can and do measure real-time performance. Imagine a scenario where an installation of metered energy efficiency measures is permitted to offer 10 MW of load reduction into the Forward Capacity Market based on their studied load reduction versus a control group without those measures. Then, during a reserve deficiency, the metered load shows an actual load reduction of 12 MW versus the control group. Such demonstrated performance may well merit pay-for-performance bonuses for the 2 MW of over-performance.[3]
Should programs that explicitly measure meter-based energy savings develop in New England, EER participation rules may warrant a fresh look. Pay-for-performance is focused on avoiding and shortening reserve deficiencies through short-term incentives to perform in real-time and long-term incentives to invest in steps to improve the probability of performance in real-time.[4] To the extent that in the future an EER makes investments to deliver value and can demonstrate through metering data that it has over-performed the load reduction it sold into the capacity market during a reserve deficiency event, I see no reason why it should not be eligible for pay-for-performance bonuses (or, on the flip side, bear the risk of penalties if it under-performs). If such changes come to pass, we may wish to revisit the changes today’s order accepts.
For these reasons, I respectfully concur.
[1] ISO New England Inc., 147 FERC ¶ 61,172, at P 89 (2014).
[2] Id. On compliance, the Commission accepted ISO New England’s proposal to set an EER’s Capacity Performance Score to zero during any reserve deficiency that occurs outside of the resource’s measured hours. ISO New England Inc., 149 FERC ¶ 61,009, at P 33 (2014).
[3] I recognize that, in any metered design, creating an appropriate baseline from which to measure performance is complicated. I do not seek to downplay that challenge, but instead highlight that thoughtful design may be able to overcome it.
[4] ISO New England, Filing, Docket No. ER14-1050-000, at 6 (filed Jan. 17, 2014) (“If the Pay for Performance mechanism is implemented, it will provide numerous important benefits . . .includ[ing] [o]perational-related investment. Strong performance incentives provide suppliers with the economic motivation, and the financial capability, for operational-related investments that ensure resources are available when needed to maintain reliability. This might include dual-fuel capability, short-notice or more reliable fuel supply arrangements, continuous staffing at resources, improved operating practices, more robust maintenance arrangements, shorter planned outages, incremental capital investments that shorten start times or increase ramp rates, rapid price-responsive demand behavior, and other improvements to similar effect.”).