E-8: Statement of Commissioner James P. Danly Regarding ISO New England Inc. Docket No. ER19-1428-005

I concur in today’s order[1] on remand from the decision of the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) to eliminate Inventoried Energy Program payments to nuclear, coal, biomass, and hydroelectric generators.[2]  The D.C. Circuit’s decision reaches conclusions based on an obvious misreading of the record and, as a result, reliability in New England has been further jeopardized.  However, the court has spoken, the Commission declined to seek rehearing, and the order on remand does what we were told to do.  I must therefore concur.

The Commission should have sought rehearing of the D.C. Circuit’s decision, which plainly contradicts itself.  The court first recounts record evidence that “[i]n the [Federal Energy Regulatory Commission (FERC or Commission)] proceedings, [ISO New England Inc. (ISO-NE)] represented to FERC that [the Inventoried Energy Program’s] compensation scheme may . . . reduce generator retirement risks because compensation received through the program reduces the amount of revenue generators must recover through the capacity markets to meet their going-forward costs.”[3]  The court next liberally quotes from the Commission’s underlying order[4] that “[u]nlike the [prior] winter reliability programs, the Inventoried Energy Program includes a forward component that will allow resources to account for the program’s revenue in making retirement and other de-list bid decisions.”[5]  The court correctly restates that “[t]he Commission thus concluded that the program reasonably . . . is designed to motivate generators contemplating retirement to stay in the market.”[6]

The court then forgets about all of this and opines that the Commission in its order “did not make any attempt to explain why it now believes it is appropriate for ISO-NE to compensate generators that are unlikely to respond to payment incentives or otherwise increase winter energy security.”[7]  This is plain error.  In addition to the record evidence the court itself summarized, the Commission also specifically addressed arguments about whether the Inventoried Energy Program would “deter energy-secure resources from pursuing retirement”[8] and concluded that “a resource that participates in the Inventoried Energy Program can lower its capacity offer to reflect program revenues and potentially clear the [Forward Capacity Market], potentially helping to retain an additional fuel secure resource that would have otherwise retired.”[9]

The Commission did not seek rehearing and now its sole option is to implement the D.C. Circuit’s order, notwithstanding substantial record evidence that the court itself recounted showing that payments to the eliminated classes of resources were designed to retain these units and stave off their retirements in order to help ensure reliability in New England in the winter.

The timing is as poor as the reasoning.  Two weeks ago, the Commission convened a long-overdue conference in New England to discuss the region’s worsening reliability crisis which has been caused in large part by the failure of the markets to retain essential dispatchable resources.[10]  We heard a good deal of aspiration, a lot of wishful thinking, and witnessed plenty of finger-pointing at that meeting, but it did not yield a solution.  The effect of this order on remand is to scrap one just and reasonable solution that could have helped retain the dispatchable generation resources that are essential for reliability in New England.  The situation in New England is already dire.  The loss of this program has made things worse.

For these reasons, I respectfully concur.