On August 4, 2014, RENEW submitted a protest to the Federal Energy Regulatory Commission (FERC) concerning ISO New England’s compliance filing involving changes to the design of its Forward Capacity Market known as pay for performance. The ISO’s proposed tariff will create a perverse disincentive for renewable and other resources to curtail operations at exactly the moment when their energy is most needed while under-compensating resources that perform during periods when the power system is experiencing a shortage.
In its protest RENEW explains how state policy has created a fleet of efficient and low production cost wind resources in New England. Not fully compensating these resources for their production undermines the efficiency of the market and frustrates the policies and clean energy goals of the states.
ISO New England’s compliance filing was submitted in response to FERC’s May 30, 2014 Order that directed the ISO to address improper price signal caused by intra-zonal transmission constraints “because it incents a generating resource on the export side of the constraint to submit energy market offer prices that are below its actual marginal operating costs in order to be dispatched at the greatest quantity possible and thereby maximize its Capacity Performance Payment.”
Update: On October 2, 2014, FERC issued an Order agreeing with the arguments by presented by RENEW and other parties. The FERC found the evidence provided by these parties indicates that this incentive is less of a concern than the Commission understood based on the record in the underlying proceeding. The FERC directed the ISO to remove the proposed design changes that were harmful to renewable and other resources.