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States want more time to craft responses to complaint over ISO-NE fuel security proposal

Increase font size  Decrease font size Date:2018-05-31   Views:425
New England states have asked the Federal Energy Regulatory Commission for more time to respond to generators' complaint challenging the regional grid operator's plan to keep certain natural gas-fired units online for fuel security.

ISO New England in a May 2 filing (ER18-1509) told FERC that Exelon's planned retirement of its Mystic Generating Station in Massachusetts at the end of May 2022 posed "unacceptable fuel security risks" that could lead to rolling blackouts during the 2022-23 and 2023-24 winters.

The grid operator thus sought tariff waivers for an out-of-market remedy, in the form of a cost-of-service agreement with Exelon, to keep Mystic Units 8 and 9 operating for at least an additional two years beyond Exelon's proposed retirement date. The units at issue do not rely on pipeline gas but are fueled by "onsite" LNG from the Distrigas import terminal. Current tariff language allows ISO-NE "to retain retiring resources to resolve local transmission security issues, [but] it does not contemplate retention to address reliability risks related to fuel security," the grid operator said.

$642 MILLION IN PRICE SUPPRESSION POSSIBLE IN FCA 13

The New England Power Generators Association filed a complaint (EL18-154) May 23 that steered clear of the underlying issue of retaining resources for their fuel security benefits as it blasted ISO-NE's proposed arrangement for the Mystic units to be entered into forward capacity auctions slated to commence in February 2019 and February 2020 as price takers. This means the units' 1,400 MW of capacity would be offered into FCA 13 and FCA 14 for the 2022-23 and 2023-24 commitment periods, respectively, at a price of zero, ensuring they clear the market.

"This proposed treatment would render the ISONE tariff unjust and unreasonable and unduly discriminatory against every resource relying upon the capacity auctions for a just and reasonable rate," NEPGA argued.

Retention of the Mystic units in this manner could suppress prices during FCA 13 by as much as $642 million and displace up to 1,285 MW of economic generation, "with the potential for even greater displacement and price suppression in FCA 14" and subsequent auctions, the group added.

NEPGA said commission action is needed to ensure ISO-NE accounts for resources' fuel security benefits in a way that avoids price suppression and reflects the actual operating costs of units bid into capacity auctions -- in this case the Mystic units' retirement de-list price, as mitigated.

FERC set a June 6 deadline for interested parties to intervene or protest the complaint.

But the New England States Committee on Electricity -- an ongoing, cooperative effort by the offices of the six New England governors to address the region's energy needs in a comprehensive fashion -- said that would not be enough time to adequately respond to the complaint.

It pointed to the complexity of ISO-NE's proposal and the "substantial implications for [forward capacity market] pricing and the capacity costs that consumers ultimately pay" in its request for a 14-day extension to June 20.

NESCOE also noted in its motion Friday the interrelated market rules and pending FERC proceedings tied to the complaint, namely ISO-NE's tariff waiver and Exelon's cost-of-service filing (ER18-1639), which also have June 6 filing deadlines.

14-DAY EXTENSION SOUGHT TO BETTER REVIEW NEPGA'S CLAIMS

"Meeting both deadlines in a brief period of time poses a significant burden on NESCOE and likely others who seek to participate in both proceedings. The requested, brief extension would better allow parties an opportunity to examine the relevant factual and legal claims in the complaint and prepare more complete responses to the issues raised," the committee said.

The Connecticut Public Utilities Regulatory Authority said in a filing Friday in support of the motion that "the claimed magnitude of the dollar impacts associated with the matters at issue merits ensuring that all parties are given a full and fair opportunity to review the complaint and respond to the allegations made by" NEPGA.

NESCOE has asked FERC to act on its motion by Wednesday so entities have certainty and can plan their filings accordingly.

Turning back to the complaint, NEPGA stressed that New England "cannot withstand any further price suppression." ISO-NE's FCM, it said, already finds it difficult to attract investment necessary to maintain reliability in the face of existing price-suppressive initiatives, including the seven-year lock-in of the clearing price for new generation, exemptions to the minimum offer price rule and changes to the region's demand curves.

ISO-NE CAPACITY MARKET PRICES HAVE BEEN ON THE DECLINE

As a result, "capacity market prices have plummeted" over the past four FCAs, and come in consistently and considerably below the net cost of new entry, which is the estimated compensation a new resource would need to recover its costs when expected energy and other revenue is included in the calculation, NEPGA said. It noted that the average annual difference in FCA price and net CONE between FCA 9 and FCA 12 was 36.4%. The group's complaint also contended that treating generators held for fuel security as price takers in capacity auctions would only exacerbate the region's fuel security concerns.

The artificial price suppression and distorted market signals that NEPGA asserts would result from ISO-NE's proposal would likely push struggling oil, coal, nuclear and other fuel-secure plants in the region "over the economic cliff," requiring their retirement or pursuit of their own cost-of-service contracts for fuel security purposes.

Contending that "the unjust and unreasonable harm inflicted upon the capacity market is the same regardless whether the outofmarket revenues come from a state program or a costofservice contract," NEPGA urged FERC to rule on its complaint by July 2.
 
 
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