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UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION
ISO New England Inc. and New England Power Pool Participants Committee—-Docket No. ER22-1528-000
COMMENTS OF THE NEW ENGLAND STATES COMMITTEE ON ELECTRICITY
Pursuant to the March 31, 2022 Combined Notice of Filings #1 issued by the Federal Energy Regulatory Commission (“Commission” or “FERC”), the New England States Committee on Electricity (“NESCOE”) hereby submits these comments in the above-captioned proceeding. On March 31, 2022, ISO New England Inc. (“ISO-NE”) and the New England Power Pool (“NEPOOL”) Participants Committee jointly filed with the Commission pursuant to Federal Power Act (“FPA”) section 205 a proposal to reform ISO-NE’s Forward Capacity Market (“FCM”) by eliminating the current minimum offer price rule (“MOPR”) beginning in the nineteenth Forward Capacity Auction (“FCA”). For the next two capacity auctions, ISO-NE would implement a Renewable Technology Resource (“RTR”) exemption that would allow up to 700 megawatts (“MW”) of state-sponsored clean energy resource qualified capacity to clear the market without buyer-side market power mitigation review.
NESCOE strongly supports the elimination of the current MOPR and has for a decade advocated for fundamental changes to ISO-NE’s capacity market rules to remove barriers to the participation of clean energy resources developed in furtherance of state clean energy and environmental laws. NESCOE has repeatedly stated that a market without such rule changes is not sustainable over the long-term. During the lengthy stakeholder process leading up to the Filing, NESCOE expressed the view (with New Hampshire opposing) that MOPR reforms should be enacted as soon as possible in a manner that supports system reliability. As discussed below, NESCOE does not oppose the limited two-year transition to full MOPR reforms reflected in the Filing so long as that deadline remains firm. The Filing hardwires into the Tariff the elimination of the current MOPR in FCA 19 and, in so doing, provides a clear end to a historic impediment to clean energy resource participation in the capacity market. To the extent the Commission accepts the Filing, NESCOE respectfully asks the Commission to ensure that the full MOPR reforms take effect by FCA 19 and are not further extended.
NESCOE is the Regional State Committee for New England. It is governed by a board of managers appointed by the Governors of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont and is funded through a regional tariff that ISO-NE administers. NESCOE’s mission is to represent the interests of the citizens of the New England region by advancing policies that will provide electricity at the lowest possible price over the long term, consistent with maintaining reliable service and environmental quality. These comments represent the collective view of five of the New England states, with New Hampshire not joining this filing as noted above.
The New England states have proactively advanced and provided substantial financial support for the development of renewable resources over the past two decades. All six New England states have enacted laws that require renewable and alternative portfolio standards or comparable programs. The laws and regulations governing the New England states’ renewable portfolio standards require load-serving entities (both load-serving utilities and competitive suppliers) to purchase renewable energy certificates in proportion to a percentage of their load. These programs have given rise to a secondary market in which qualifying renewable resources may sell the renewable energy certificates created by their energy generation to load-serving entities and others, establishing a market-based approach to incentivizing renewable resource development.
More recently, some New England states have enacted statutes and regulations to promote the development of renewable energy by facilitating the financing of new clean energy resources through long-term power purchase agreements. Five of the New England states are committed to cost-effectively reducing economy-wide greenhouse gas emissions by at least 80 percent below 1990 levels by 2050.
Against this backdrop, the need for capacity market reforms has been at the center of NESCOE’s work. Over the last decade, NESCOE has been vocal in advocating for capacity market rules that recognize investments made in renewable resources to satisfy New England states’ energy and environmental requirements. NESCOE has strongly and repeatedly expressed that for ISO-NE’s wholesale markets to be sustainable, they must reasonably account for and harmonize with the requirements of state energy and environmental laws. NESCOE has called for the region’s efforts to prioritize these market reforms. NESCOE accompanied these calls with proposals as well as amendments to ISO-NE’s and others’ proposals. NESCOE’s advocacy has emphasized the need to be mindful of the impact on the consumers who fund the power system.
When ISO-NE filed proposed buyer-side mitigation rules in 2012 without an exemption for state-sponsored resources, NESCOE protested the filing and also filed a complaint with the Commission challenging ISO-NE’s MOPR as unjust and unreasonable. That litigation was, to NESCOE’s understanding, the first of its kind in the nation that challenged a MOPR as being unjust and unreasonable. NESCOE’s complaint explained that ISO-NE’s Tariff revisions were unlawful because they implemented buyer-side mitigation without an exemption for state-sponsored resources. Without such an exemption, NESCOE argued, renewable resources would be excluded from the capacity market, which would lead ISO-NE to over-procure capacity needed for resource adequacy, ignoring renewable resources that are operational and provide system capacity. In turn, this would lead to excessive consumer costs and unjust and unreasonable rates. Although the Commission rejected NESCOE’s complaint, concurrently, the Commission issued an order addressing a package of reforms to ISO-NE’s capacity market rules, acknowledging “the large number of stakeholders that supported some form of renewable resource exemption” from the MOPR.
Over the past decade, NESCOE has repeated its message about the need to prioritize clean energy requirements side-by-side with reliability and consumer cost considerations:
For New England-wide system planning and wholesale competitive markets to be sustainable, they must reasonably accommodate state energy and environmental policies and priorities codified in state laws.
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The practical reality is that state energy and environmental requirements intersect with regional competitive energy markets. State requirements must be harmonized with regional resource adequacy criteria and market mechanisms to ensure that consumers receive the full value of their investments in clean and/or local energy resources and that the resources consumers pay for through regional planning and markets account for those energy resources installed in accordance with state policies.[]
NESCOE continued to press for reforms including an accommodation for renewable resources—the RTR exemption—that provided access to the capacity market to state-sponsored off-shore wind and other renewable resources when no other mechanism existed. The tension in New England around wholesale markets and meeting state legal requirements was intensified, however, with the removal of the narrowly tailored RTR exemption in favor of what ended up being, unfortunately, a non-functional market rule change known as CASPR. At the outset of CASPR’s development, NESCOE again expressed support for an objective that recognized the inherent need for balance between competitive wholesale market pricing and the requirements of state laws—both of which are ultimately about and for consumers—and asked ISO-NE to ensure that consumer costs were central in its CASPR design.
NESCOE’s comments on the proposed CASPR program were generally, but conditionally, supportive given the objective of accommodating clean energy resources in the wholesale market. That support relied on ISO-NE’s commitment to monitor CASPR and file revisions if the program failed in practice. NESCOE emphasized:
ISO-NE must revise CASPR if it falls short of its intent to accommodate the participation of state-sponsored resources or if it proves inflexible to the execution of state laws, which are not static. Indeed, should CASPR not accommodate the entry of state-sponsored resources, NESCOE expects that ISO-NE would act expeditiously, in collaboration with states and stakeholders, to develop and file revised market rules with the Commission—including interim rules as necessary—to protect against excessive consumer costs. If and when that circumstance should occur, the need for expedited action may be particularly acute given the planned phase out of the Renewable Technology Resource exemption, New England’s current just and reasonable mechanism for accommodating state-sponsored policy resources and limiting the risk of excessive consumer costs arising from redundant capacity purchases.[]
As the Commission is aware, only 54 MWs have cleared through CASPR’s secondary auction feature since its inception. As a result, in practice, CASPR has proven to be a failure in aligning wholesale markets with the requirements of state laws and as a durable design.
New England state laws continue to drive renewable resource integration in the region, as ISO-NE has recognized, and these requirements are increasingly transitioning the region’s power mix away from a central station, carbon-intensive fleet and toward a clean distributed energy system. Various New England states have continued their steady march toward a clean energy future by enacting new climate policy legislation, releasing an integrated resource plan aimed at pathways to achieving a 100 percent zero-carbon electric sector, and forging ahead with additional procurements of large-scale clean energy projects.
Last year, NESCOE issued Advancing the Vision, a report to the New England Governors with recommendations for reforms in three intersecting areas—wholesale markets, transmission, and ISO-NE governance—to transition successfully to a clean, affordable, and reliable 21st century power grid. Advancing the Vision built upon prior NESCOE work in October 2020, the New England States’ Vision for a Clean, Affordable, and Reliable 21st Century Regional Electric Grid (“Vision Statement”). The Vision Statement repeated the call for the integration of clean energy to be prioritized in our regional system along with the uncompromised need for reliability and consumer cost protections. It emphasized the need for reforms to ensure that market rules account for and support the New England states’ clean energy policies and mandates rather than impede them by making consumers overpay for power.
During discussions in the regional stakeholder process on MOPR reform, NESCOE made clear what it has long expressed and brought litigation to address: it is fundamentally inappropriate to apply the MOPR to state investments to meet clean energy mandates. In short, a market with such a MOPR is not sustainable. Whether the current MOPR is in place or not, state-sponsored renewable resources will continue to come online and provide clean energy to the grid. As Dr. Chadalavada accurately observed, “the primary driver for the region’s desire to eliminate the MOPR” is the fact that state-sponsored resources are favorably positioned to become operational and provide system capacity irrespective of ISO-NE market revenues. Consumers should not be forced to pay for duplicate capacity, i.e., once for capacity in the wholesale market and a second time for capacity from state-sponsored renewable resources excluded from the market due to the MOPR.
After listening to deliberations in the many months-long stakeholder process, NESCOE expressed the view (with New Hampshire opposing) that MOPR reform should be enacted as soon as possible in a manner that supports system reliability. Over the course of those discussions, NESCOE was active in understanding the various proposals, and in the end recognized ISO-NE’s support for a transition proposal as ISO-NE’s preferred way to reform the MOPR to mitigate the potential for short-term reliability risks and cost impacts.
The transition approach is, in fact, what ISO-NE has proposed in the Filing that is before the Commission. That approach is supported by almost 70% of NEPOOL, with affirmative support across all sectors.
NESCOE reaffirms its position that it does not oppose the Filing’s approach to eliminating the MOPR—with a substantial caveat. During stakeholder discussions, NESCOE made clear that it would fiercely oppose any attempts to extend the deadline for full MOPR reform beyond FCA 19 and that any transition must hardwire into the Tariff elimination of the current MOPR as of that auction. The Filing does just that, providing a clear, defined, and expedient path for reforming market mitigation rules with a fixed and near-term end-date.
NESCOE also emphasizes the tight timeline for implementing changes in time for the next capacity auction, FCA 17. As the Commission considers requests to reject the Filing from opposite sides of the issue—those wanting to retain the existing MOPR framework and those seeking a faster track to full reform—NESCOE respectfully asks that the Commission weigh its procedural options against the risk that the status quo capacity market rules would remain intact for FCA 17. The calendar for resources seeking to participate in FCA 17 has already commenced. As noted above, ISO-NE phased out the RTR exemption in conjunction with its CASPR program. NESCOE urges caution against leaving New England in an untenable position that is the worst of both worlds for the next auction: the existing MOPR remains in place with no RTR exemption. That outcome would exacerbate the very problems NESCOE has long been advocating for ISO-NE and the Commission to remedy, and it would leave state-sponsored resources with uncertainty regarding whether the MOPR would impede their ability to access the market. That uncertainty will have clear negative consumer cost implications.
For the reasons stated herein, NESCOE respectfully requests that the Commission consider the above comments in this proceeding.
/s/ Jason Marshall
New England States Committee on Electricity
P.O. Box 322
Osterville, MA 02655
Tel: (617) 913-0342
Date: April 21, 2022
CERTIFICATE OF SERVICE
In accordance with Rule 2010 of the Commission’s Rules of Practice and Procedure,
I hereby certify that I have this day served by electronic mail a copy of the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding.
Dated at Cambridge, Massachusetts this 21st day of April, 2022.
/s/ Jason Marshall
New England States Committee on Electricity
P.O. Box 322
Osterville, MA 02655
Tel: (617) 913-0342