Nescoe

Presentation – CT Power & Energy Society & CBIA: What’s the Deal? 2016

CPES/CBIA 21st Century Energy: What’s the Deal?

October 5, 2016

Overview

  • New England’s Transmisison Investment; Potential Value of Competitive Dynamics
  • FERC Order 1000 ~ Public Policy
  • Policies and Markets – ~ NEPOOL Solutions’ Exploration
  • NESCOE Clean Enregy Mechanisms 2.0 Study

New England has invested in reliability-based transmission, more than other regions from 2010 forward

[see pdf for graphic]

Competition in (reliability) Transmission Development Good Results for Consumers Elsewhere
Illustration: Cost Variation in Bids

[see pdf for graphic]

FERC’s Order 1000

On FERC opening transmission development to competition: NESCOE supported concept and all qualified project proponents having comparable project development & cost recovery opportunity

  • It’s not working out this way.

On FERC requiring ISO-NE’s transmission planning to account for state public policies: NESCOE advocated for a process states would actually use, with a central decision-making role for states in connection with the execution of state laws.

  • It didn’t work out this way.

FERC’s Order 1000 on Public Policy-Related Transmission :

  • NESCOE*/5 New England States challenging FERC’s compliance orders at D.C. Circuit
  • FERC unlawfully expanded the rule to require ISO-NE to select state public policy-related project rather than to consider public policies

The problem with FERC’s Order 1000 is not academic.

By requiring ISO-NE to select transmission projects and at the same time denying states a central role in that process, FERC substituted ISO-NE’s judgment for state officials’ judgment about the means to implement state laws.

What’s the Vision?

The half of ISO-NE that determines how to transmit electricity must consider state public policies under FERC’s “Order 1000”

The half of ISO-NE that determines what resources will generate electricity generally does not consider state laws and policies

Forward Movement on State Laws and Policies + Wholesale Markets

  1. States must execute state laws.
  2. Competitive markets must accommodate state laws in order for markets to be sustainable over the long-term.
  3. Generators litigate mechanisms.  Even if litigating generators “succeed”, it won’t eliminate state energy and environmental laws.
  4. NEPOOL Conversations on Potential Solutions.  NESCOE Mechanisms 2.0 Study. State Activities. Other Analysis.

Policies & Markets: The Problem

The current wholesale market meets resource adequacy at the lowest price – nothing more, nothing less – and does so in a way that is resource neutral or blind to state laws.

Other than through a narrow renewable resource exemption, the current markets do not – by design – generally include resources that can satisfy some states’ mandates that currently require, for whatever reason, additional non-wholesale market revenues to operate.

Despite the requirements of law, some generators have opposed mechanisms that enable the execution of state energy and environmental policies.

[see pdf for graphic]

NEPOOL Leadership on Exploring Potential Solutions

“It feels as if the region may be coming to a cross roads where competitive markets and state mandates could collide.  That needs to change.”

“We, as an industry, need to get back on track and begin a more productive conversation toward finding solutions that better harmonize state public policy objectives with open, transparent and efficient wholesale market design.”

http://www.nepool.com/uploads/Other_20160606_Chairman_Comments_NECPUC_Symposium.pdf

Integrating Markets and Public Policies” (IMAPP) Timeframe

Now: exploring concepts
December: Vote on conceptual framework
2017/2018: Analysis and due diligence, then development of market rules, tariff changes
Implementation: 5 years away?

Assessing Potential IMAPP Solutions – Threshold Criteria

Cost-effectiveness relative to other mechanisms

State self-determination – uncompromised individual state determinations about those mandates for which it will incur costs

  • neither FERC nor ISO-NE may define, interpret, impose or attempt to create or confer authority about the requirements or implementation of state laws

Cost allocation – no state may be compelled to fund other states’ mandates

  • whether through the operation of the mechanism or by the result of a federal regulatory order

Further, Policy & Market Solutions Should…

  • Enable reaction to different market conditions and state laws over time
  • Focus on achieving longer-term goals (10-30 years) cost-effectively
    • with the ability to incorporate needed shorter-term mechanisms to achieve near-term mandates
  • At a minimum, enable the achievement of the current RPS requirements
  • In the near-term, consider some states’ need to accomplish current objectives
    • for example, state laws directing procurements for certain resources
  • Attempt to minimize short-term financial effects to current existing resources

2015: Mechanisms 1.0  

2016: Mechanisms 2.0

Continued analysis of a range of mechanisms that could support public policy resources, such as, for example:

  • renewable portfolio & clean energy standards
  • power purchase agreements
  • strategic transmission investments
  • centralized auction-based procurement

Mechanisms 2.0 Analysis

[see pdf for graphic]

The production of information about hypothetical scenarios or mechanisms does not indicate and should not be interpreted as indicating any state or states’ preference for any particular scenario or mechanism.
Further, hypothetical information is not a plan.  It is simply information.

Mechanisms 2.0 Analysis Approach

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Analysis, Studies and Discussion In Looking for Solutions

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