Docket No. ER22-1528-000
Last December, ISO New England Inc. (ISO-NE) warned about possible threats to the reliability of power service in the coming months.[1] The warning cited, among other reasons, constraints on natural gas pipeline capacity and the potential lack of sufficient fuel supply as negatively impacting the performance of necessary baseload dispatchable generation.[2] Warnings with a similar theme – that while various factors threaten reliability, shortfalls of baseload, dispatchable generation is a significant factor – subsequently were made regarding the Midwest[3] and other parts of the country.[4]
Reforming the MOPR in ISO-NE’s capacity market as proposed in this filing not only will, but is intended to, bring about the replacement of dispatchable natural gas generating resources with intermittent resources. That result is in furtherance of the public policies of the states in ISO-NE, as the New England States Committee on Electricity (NESCOE) makes clear in its filing supporting elimination of the MOPR.[5]
I will concur in approving this filing due largely to my belief that RTO capacity markets – which are administrative constructs, not true markets[6] – should attempt to accommodate the public policies of the states as long as the impacts, both in costs and reliability, of one or more states’ public policies are not being forced onto other states not sharing those public policies.[7] The threat of such impact-shifting to other states in a multi-state RTO was present in PJM’s proposal last year to eliminate its MOPR, as pointed out by Pennsylvania and Ohio, two states that opposed PJM’s MOPR proposal.[8] Given the strong opposition of Pennsylvania and Ohio, as well as for other reasons expressed in my Fair RATES Act statement in that docket, I opposed PJM’s MOPR proposal.[9]
Here, however, and in distinct contrast to the PJM MOPR proceeding in which Pennsylvania and Ohio expressed strong opposition in a filing in the proceeding, no state in ISO-NE has filed in this record opposing the MOPR’s reform in ISO-NE.[10] Five of the six states joined the NESCOE Comments strongly supporting the elimination of ISO NE’s MOPR and not opposing the transition mechanism.[11] Accordingly, the obvious conclusion is that the ISO-NE MOPR reform proposal is in furtherance of the public policies chosen by the elected policy makers of New England. I believe we should respect those policy decisions.
While the policy makers of New England have made their choices and I respect them, I believe that this proposal, even given the transition mechanism, holds the potential for negative effects on the reliability of electric power service in New England and may even cause higher prices for consumers when state officials find it necessary to procure back-up sources of dispatchable power to keep the lights on, as California is now evidently finding it necessary to do.[12] However, in my concurrence to approve New York ISO’s recent proposal to “exclude [intermittent] resources that further the goals of New York State’s Climate Leadership and Community Protection Act (CLCPA) from application of NYISO’s buyer-side market power mitigation rules,”[13] I emphasized: “If the people and businesses of New York do not like the impacts of their new state laws, their recourse is to the ballot box.”[14] The same principle applies in New England.
While I concur with today’s order due primarily to NESCOE’s support of ISO-NE’s filing, I would caution that the absence of a new and credible marginal accreditation mechanism represents a potential flaw that could render the elimination of the MOPR unjust and unreasonable if that accreditation mechanism is not in place by the end of the transition period. In supporting NYISO’s recent revisions to its buyer-side mitigation rules, mentioned above, I emphasized that NYISO simultaneously adopted a new accreditation mechanism based on marginal values. In this proceeding the EMM, Dr. Patton, has emphasized the importance of adopting a marginal accreditation mechanism.[15] In my view a marginal capacity accreditation mechanism is essential to protect consumers from paying for capacity that does not deliver when needed.
For these reasons, I respectfully concur.
[1] See, e.g., Gordon van Welie, Pres. and CEO of ISO-NE, Opening Remarks, Winter 2021/2022 Outlook Media Briefing (Dec. 6, 2021), https://www.iso-ne.com/static-assets/documents/2021/12/20211206_winteroutlook2122_pressconference.pdf; Press Release, ISO-NE, Harsh Weather Conditions Could Pose Challenges to New England’s Power System This Winter, Fuel supply issues may threaten ability to meet consumer demand if the region sees extended periods of extreme cold weather (Dec. 6, 2021), https://www.iso-ne.com/static-assets/documents/2021/12/20211206_pr_winteroutlook2122.pdf; Press Release, ISO New England’s 2021/2022 Winter Outlook (Dec. 10, 2021), https://www.iso-ne.com/static-assets/documents/2021/12/2021-22-winter-outlook.pdf; Letter from Gordon van Welie, Pres. and CEO of ISO-NE to Comm’r Katie S. Dykes, Conn. Dept. of Energy and Envtl Protection (Dec. 23, 2021), https://www.iso-ne.com/static-assets/documents/2022/01/isone_ct_deep_combined_ltrs.pdf.
[2] See materials cited supra n.1.
[3] Improper price signals in capacity markets were cited as a major reason for losses of needed dispatchable generation in the Midwest Independent System Operator (MISO). See, e.g., Jeffrey Tomich, Soaring prices signal challenges ahead for Midwest grid, Energywire (Apr. 18, 2022), https://www.eenews.net/articles/soaring-prices-signal-challenges-ahead-for-midwest-grid/ (“David Patton, MISO’s independent market monitor, said during a MISO call on Friday that the auction results are ‘the outcome we’ve been worried about for a decade.’ MISO market rules that suppressed capacity prices in previous years, he said, have led to the retirement of otherwise economic power plants . . . .”) (emphasis added); Ethan Howland, Capacity prices jump across MISO’s central and northern regions, driven by supply shortfall, Utility Dive (Apr. 18, 2022), https://www.utilitydive.com/news/capacity-prices-auction-miso-midcontinent/622186/ (“MISO’s market is flawed, according to [David] Patton. ‘If we’re going to say that reliability is an imperative, we need to fix this market because we can’t expect the market to support reliability if we know that it’s not designed to produce efficient economic signals,’ Patton said during the conference call. . . . In the last four years, power plants totaling 4 GW to 5 GW retired, even though they appear ‘clearly economic,’ Patton said. ‘Our capacity market doesn’t price capacity efficiently, so it sends out a clear economic signal to retire.’”) (emphases added). See also, e.g., Robert Walton, MISO prepares for “worst-case scenarios,” heads into summer with insufficient firm generation, Utility Dive (Apr. 29, 2022), https://www.utilitydive.com/news/miso-prepares-for-worst-case-scenarios-heads-into-summer-with-insufficie/622932/ (“[MISO] is projecting a 5 GW shortfall in firm generation to meet projected load this summer . . . .The grid operator is forecasting a summer peak of 124 GW, with about 119 GW of ‘projected regularly available generation.’”).
[4] See Jeff Beattie, MISO at high risk of summer outages, threat “spreading,” The Energy Daily (May 19, 2022) (“In a media event releasing the [NERC Summer 2022 Reliability Assessment], John Moura, NERC’s director of reliability assessment and performance analysis, suggested the nation’s grid reliability is deteriorating because utilities are switching too rapidly from baseload power plants to intermittent renewables and demand-side resources to achieve decarbonization goals. ‘The conclusions are concerning; it’s a very sobering report,’ Moura said. ‘It is clear that the risk is spreading, and while we have initiated action on a number of fronts and sounded the alarm for many years, there is clear, objective, conclusive data indicating that the pace of our grid transformation is a bit out of sync with the underlying realities and physics of the system,’ he said.”) (emphases added). See also Naureen Malik and David R Baker, Vast Swath of US at Risk of Summer Blackouts, Regulator Warns, Bloomberg (May 18, 2022), https://www.bloomberg.com/news/articles/2022-05-18/vast-swath-of-us-is-at-risk-of-summer-blackouts-regulator-warns (“A vast swath of North America from the Great Lakes to the West Coast is at risk of blackouts this summer as heat, drought, shuttered power plants and supply-chain woes strain the electric grid. Power supplies in much of the US and part of Canada will be stretched, with demand growing again after two years of pandemic disruptions, according to an annual report. It’s among the most dire assessments yet from the North American Electric Reliability Corporation [NERC], a regulatory body that oversees grid stability. ‘It’s a pretty sobering report, and it’s clear the risks are spreading,’ John Moura, director of reliability assessment and performance analysis, said in a press briefing. . . . ‘The pace of our grid transformation is out of sync’ with the physical realities of the existing power network, Moura said.”) (emphasis added).
[5] NESCOE April 21, 2022 Comments at 2 (“NESCOE strongly supports the elimination of the current MOPR and has for a decade advocated for fundamental changes to ISO-NE’s capacity market rules to remove barriers to the participation of clean energy resources developed in furtherance of state clean energy and environmental laws.”) (footnote omitted). In its comments NESCOE also makes clear that it does not oppose ISO-NE’s transition period. Id. New Hampshire did not join the NESCOE filing. Id. at 2 n.6.
[6] In his dissent, Commissioner Danly says: “This begs the question, if all new entry is state-sponsored, and all necessary existing generation can obtain RMRs, why not simply return to cost-of-service ratemaking, thereby protecting ratepayers, ensuring reliability, and saving us all the trouble?” ISO New England Inc., 179 FERC ¶ 61,139 (2022) (Danly, Comm’r, dissenting at P 7). I agree.
[7] N.Y. Indep. Sys. Operator, Inc., 179 FERC ¶ 61,102 (2022) (Christie, Comm’r, concurring at P 3) (available at https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-nyiso-tariff-revisions-re-marginal-capacity) (quoting N.Y. Indep. Sys. Operator, Inc., 178 FERC ¶ 61,101 (2022) (Christie, Comm’r, concurring at PP 4-6), (available at https://www.ferc.gov/news-events/news/item-e-2-commissioner-mark-c-christie-concurrence-regarding-new-york-independent)).
[8] Pennsylvania and Ohio alleged that the PJM MOPR Proposal “unjustly transfers the consequences of a particular state’s policy preference(s) to all states and consumers within the PJM region.” Pennsylvania Public Utility Commission and Public Utilities Commission of Ohio, Joint Protest, Docket No. ER21-2582-000, at 4 (filed Aug. 20, 2021) (PAPUC and PUCO Joint Protest) (emphasis added); see also Commissioner Mark C. Christie, Fair RATES Act Statement on PJM Minimum Offer Price Rule (MOPR) Revisions, Docket No. ER21-2582-000 (filed Oct. 19, 2021) (Christie PJM MOPR Fair RATES Act Statement) at P 10 & n.17 (quoting PAPUC and PUCO Joint Protest at 4) (available at https://www.ferc.gov/news-events/news/commissioner-christies-fair-rates-act-statement-pjm-mopr).
[9] Christie PJM MOPR Fair RATES Act Statement (available at https://www.ferc.gov/news-events/news/commissioner-christies-fair-rates-act-statement-pjm-mopr). The PJM proposal was also adamantly opposed by PJM’s Independent Market Monitor (IMM). See, e.g., id. P 9 (citing IMM, Protest, Docket No. ER21-2582-000, at 1 (filed Aug. 20, 2021)). In contrast, Dr. Patton, President of Potomac Economics, ISO-NE’s External Market Monitor (EMM), while noting that ISO-NE’s proposal could be improved by eliminating the incentive rebuttal provision and while expressly recommending that the ISO pursue marginal capacity accreditation rules and changes to its capacity demand curves “recommend[ed] that the Commission approve the proposed changes to the MOPR provisions filed by [ISO-NE and NEPOOL].” EMM April 21, 2022 Comments at 9.
[10] Disagreement does appear to revolve around the existence or duration of the transition mechanism. For example, representatives of the Commonwealth of Massachusetts and State of Maine made a filing in this docket requesting that the Commission reject ISO-NE’s MOPR reform and transition proposal based on their belief that the transition mechanism is improper and unsupported under FPA section 205. Massachusetts Attorney General and Maine Office of the Public Advocate April 21, 2022 Joint Comments and Protest. See also Sec’y Kathleen Theoharides, Commonwealth of Mass., Exec. Office of Energy and Envtl Affairs April 21, 2022 Letter at 1 (“The Commonwealth supports elimination of the MOPR, but opposes an approach to elimination that prolongs the effects of the MOPR any longer than necessary.”).
[11] NESCOE April 21, 2022 Comments at 3 (“These comments represent the collective view of five of the New England states, with New Hampshire not joining this filing as noted above.”). See also id. at 2. NESCOE states that “After listening to deliberations in the many months-long stakeholder process, NESCOE expressed the view (with New Hampshire opposing) that MOPR reform should be enacted as soon as possible in a manner that supports system reliability.” Id. at 10. The NESCOE April 21, 2022 Comments include a footnote stating, “New Hampshire does not join this filing, and instead may present its view on the various issues in this proceeding in a separate pleading.” Id. at 2 n.6. The record in this docket, however, does not include any filing opposing MOPR reform from any state officials purporting to represent the interests of New Hampshire or, specifically, New Hampshire consumers.
[12] See, e.g., Kavya Balaraman, California governor floats 5-GW, $5.2B ‘reliability reserve’ amid possible electricity shortfalls, Utility Dive (May 17, 2022), https://www.utilitydive.com/news/california-5-gw-reliability-reserve-shortfall-caiso-puc/623864/ (“The reserve could include ‘existing generation capacity that was scheduled to retire,’ as well as new storage projects and diesel and natural gas back-up generation . . . .”) (emphases added). See also Colby Bermel, California could get $5.2B strategic electricity reserve, Political Pro (May 13, 2022) (“[Governor] Newsom . . . announced a $5.2 billion Strategic Electricity Reliability Reserve . . . [including] diesel and natural gas backup generation. . . .”) (emphasis added).
[13] N.Y. Indep. Sys. Operator, Inc., 179 FERC ¶ 61,102 at P 1.
[14] Id. (Christie, Comm’r, concurring at P 3) (available at https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-nyiso-tariff-revisions-re-marginal-capacity ) (quoting N.Y. Indep. Sys. Operator, Inc., 178 FERC ¶ 61,101 (2022) (Christie, Comm’r, concurring at PP 4-6) (emphases in the original and added) (available at https://www.ferc.gov/news-events/news/item-e-2-commissioner-mark-c-christie-concurrence-regarding-new-york-independent)).
[15] See EMM April 21, 2022 Comments at 6 (“[W]e have recommended that the ISO develop capacity accreditation rules based on each resource’s marginal reliability value. This is particularly important because some of the resources that will be the most over-accredited under ISO-NE’s current rules are the Sponsored Policy Resources. Because they are over-accredited, they will have a larger adverse effect on capacity clearing prices and the incentives for existing resources needed for reliability to remain in operation when the MOPR is eliminated.”).