In a protest to the Federal Energy Regulatory Commission, RENEW Northeast explained how ISO New England’s proposal to give a no-bid contract to the Mystic 8 and 9 fossil fuel generation units will provide “undue” preference, advantage and prejudice prohibited by the Federal Power Act to those units at the expense of state policy resources like wind and solar. This discrimination will hinder attainment of state policy requirements and increase consumer costs.
The current Forward Capacity Market (“FCM”) rules subject new state-sponsored capacity resources to a Minimum Offer Price Rule (“MOPR”), which requires these sponsored assets to bid into FCM at an administratively determined price. The ISO believes that state-sponsored resources must be mitigated in the FCM to avoid a significant overbuild of the New England power system. In its fuel security proposal, however, the ISO seeks to treat resources that have been retained for fuel security- not state sponsored resources- as price-takers in the FCA. The ISO asserts that treating fuel security risk units as price-takers “considers the contribution to resource adequacy of these resources when determining Capacity Supply Obligation (“CSO”) awards and setting the FCA clearing price,” and “will prevent the region from procuring more resources than are needed to meet its resource adequacy objectives.” Of course, the same argument is true for state-sponsored resources. In requiring units having fuel security out-of-market agreements but not units having state-sponsored agreements to be price-takers in the FCA, the ISO is taking a position contradictory to its position on state sponsored resources and one biased against the contributions of state-sponsored resources. It is also one that gives “undue” preference and advantage to those retained fossil fuel units.
Should this provision enter the Tariff, it will join another aspect of the FCM design that disadvantages renewables which is the calculation of the CSO of variable renewable resources like wind and solar compared to generation with interruptible fuel like natural gas generation. While wind and solar are variable, the ISO operates an accurate forecasting system that renders a fleet of solar and wind resources dependable. Nevertheless, the CSO of variable resources is reduced to reflect actual wind and solar. By comparison, all the factors that are driving the next round of fuel-security market improvements that the ISO must submit to the Commission by July 1, 2019, which are pipeline capacity limits and outages, disruptions that can accompany oil and LNG deliveries and limitations due to air emission permits, are limited to fossil fuel resources whose CSOs are not adjusted downward despite the limitations of their fuel sources. The ISO’s lead-off memorandum to begin stakeholder discussions to meet the July 1, 2019, deadline states that the ISO will not be making any changes to the FCM, as it finds it is meeting its requirements for capacity, but will focus on energy market changes to address fuel security. Although a CSO is designed to give the ISO a call-option on the energy from a capacity resource, the ISO apparently has no plans to reduce the CSO for resources they believe are causing the fuel security risk.