Item E-24: Commissioner Allison Clements Concurrence Regarding ISO New England Inc.

Commissioner Allison Clements Statements
February 18, 2021
Docket Nos. ER18-619-002
Order: E-24

I agree with today’s order rejecting Clean Energy Advocates’ second request for rehearing as impermissible.  I write separately, however, to highlight what I see as a fundamental flaw in ISO-NE’s minimum offer price rule (MOPR) and in the CASPR design the Commission accepted in this proceeding.  I have previously expressed my disagreement with similarly intentioned rules in PJM’s capacity market.[1]  These rules serve as impediments to lawful state public policies in the name of “protecting” ISO New England’s markets—an outcome that leads to unjust and unreasonable wholesale rates for New England consumers.

ISO New England’s MOPR imposes an offer floor on all new resources entering the capacity market.  Where a state’s load-serving utility has contracted for the development of a new resource in accordance with the laws and regulations of that state, the contractual payments to the resource are deemed to be illicit “out-of-market” revenues and are excluded from the offer floor calculation.[2]  This requires the resource to offer into the market at a higher price, which reduces the likelihood it will be selected to provide capacity.  If the resource is developed but is not selected within the capacity market, ISO New England purchases capacity on behalf of the region’s customers as if capacity contributions from the state-sponsored resource do not exist.

In 2018, as several New England states implemented increasingly ambitious policies to move toward a cleaner resource mix, ISO New England proposed CASPR as a purported balance between what it saw as competing objectives—facilitating the entry of new resources developed pursuant to state public policies, and maintaining competitive capacity market pricing.  ISO New England presented CASPR as a means to offer state-sponsored resources the possibility of being recognized within the capacity market, but ISO New England was plain about its design choice: where these competing objectives were in conflict, the preservation of capacity market pricing would be prioritized.[3] 

I do not believe CASPR is a sound approach to reflecting states’ public policy choices within ISO New England’s markets because it does not address the underlying problem created by the MOPR.  States’ exercise of their authority under the Federal Power Act to shape the resource mix for their citizens is not an exercise of market power, and applying mitigation to such state actions is harmful to customers.  FERC-jurisdictional markets operate as a means to harness competition toward the end of greater efficiency in the provision of electric service—a benefit that can lower costs for customers.  ISO New England’s markets cannot succeed in achieving this end by operating in a vacuum that fails to embrace the reality of state policy choices.  Any resource developed in accordance with a New England state’s public policy that is ignored by ISO New England’s capacity market contributes to over-procurement of capacity and ultimately additional costs borne by customers.  The capacity market must instead acknowledge New England states’ exercise of legitimate authority and should respect their resource mix choices within the wholesale market framework.   

My concerns about the CASPR design are now validated by the three years of experience since its implementation.  In three capacity auctions, only 54 megawatts of state-sponsored resources have cleared CASPR’s substitution auction, all of them in the first year.[4]  For the last two years CASPR has not facilitated the entry of any state-sponsored resources into the capacity market.[5]  I do not believe this is a just and reasonable—or sustainable—market design.  

I look forward to engaging with my colleagues to work with the New England states, ISO New England, and the stakeholder community to re-examine the current capacity market construct to find a durable solution that yields just and reasonable rates for ISO New England customers.

For these reasons, I respectfully concur.