United States of America Before the Federal Energy Regulatory Commission
ISO New England Inc. | Docket No. ER21-787-000
Comments of the New England States Committee on Electricity
Pursuant to the Federal Energy Regulatory Commission’s (“Commission” or “FERC”) December 31, 2020 Combined Notice of Filings #1, the New England States Committee on Electricity (“NESCOE”) hereby submits these comments in the above-captioned proceeding. On December 31, 2020, ISO-NE filed with the Commission proposed updates to the values reflected in the Forward Capacity Market (“FCM”) for (i) Cost of New Entry (“CONE”), (ii) Net CONE, and (iii) the Capacity Performance Payment Rate (“2020 CONE Filing”). The 2020 CONE Filing includes the detailed independent analysis that ISO-NE commissioned from Concentric Energy Advisors, Inc. and its subcontractor, the engineering firm Mott MacDonald, to inform the updated CONE/Net CONE values and other parameters to be used beginning with the sixteenth Forward Capacity Auction (“FCA 16”).
NESCOE supports the 2020 CONE Filing. As ISO-NE states, the updated CONE/Net CONE values and Capacity Performance Payment Rate are identical in both the ISO-NE proposal and the NEPOOL-supported alternative, representing a consensus regional position on these parameters among ISO-NE, the six New England states, and a supermajority of market participants and stakeholders.
ISO-NE’s proposed updates reflected in the 2020 CONE Filing follow a highly technical and lengthy regional stakeholder process. Like some market participants and stakeholders, NESCOE did not agree with every input and assumption that ISO-NE used in updating the CONE/Net CONE values. NESCOE raised concerns with ISO-NE on the derivation of certain inputs and offered amendments during the stakeholder process that would have produced downward adjustments to the Net CONE values. While NESCOE preferred the adoption of some alternative inputs and assumptions, ISO-NE has demonstrated the overall reasonableness of the updated values it proposes beginning in FCA 16, supported by the detailed CEA Report that is part of the 2020 CONE Filing. ISO-NE has adhered to the process required in the Tariff for developing the CONE/Net CONE parameters. NESCOE respectfully asks the Commission to accept the proposed updates to CONE/Net CONE and the Capacity Performance Payment Rate as just and reasonable.
NESCOE also supports the revised language in Tariff Section I.2.2 defining “Net CONE.” ISO-NE describes these revisions as clarifying a long understood and established design intent to calculate Net CONE based on a system that is modeled under long-term equilibrium conditions (otherwise known as “at criterion”). ISO-NE explains how this approach contrasts with the recent advocacy of the New England Power Generators Association (“NEPGA”) which, in a complaint that is pending before the Commission, argues that Net CONE should be calculated based on a system modeled “as expected”—i.e., what NEPGA describes as “reasonable expectations of first year revenues and, separately, future year conditions in the non-capacity market revenue forecasts.” NEPGA asserts that ISO-NE’s revisions are not simply a clarification but instead constitute a material change to the meaning of Net CONE, which ISO-NE has applied in contravention of the filed rate.
The Commission need not referee the contest between those contending that the revisions are a “clarification” and those advocating that they are a “material change.” It’s a distinction without a difference given the facts at play here. The method that ISO-NE has used to update Net CONE—and the resulting calculation itself—is before the Commission as part of this proceeding. Even if the existing Net CONE definition were as prescriptive as NEPGA claims, an argument to which ISO-NE forcefully objects, the methodology ISO-NE has employed applies prospectively to FCA 16 parameters and is currently under the Commission’s review pursuant to section 205 of the Federal Power Act (“FPA”) in this docket. NEPGA appears to read into the FPA a non-existent limitation on the Commission’s authority under section 205 to accept proposed Tariff revisions.
Moreover, ISO-NE’s explanation that it has always modeled system conditions “at criterion” in calculating Net CONE turns the table on the NEPGA Complaint. ISO-NE recounts how it has applied this methodology since 2014, when it first implemented Net CONE as an FCM design element in the Tariff. Given this consistent course, had ISO-NE agreed with NEPGA’s current view and began applying an “as expected” approach to calculating Net CONE during the most recent stakeholder process, that action would diverge materially from what ISO-NE describes as its long-time prior practice and potentially expose it to the same types of claims that NEPGA asserts in its complaint.
Additionally, ISO-NE has described how modeling the system “as expected” could overcharge consumers by departing from an essential design feature of the FCM, the procurement of capacity based on a 1-day-in-10 Loss of Load Expectation. ISO-NE explains:
NEPGA’s re-interpretation of the Net CONE definition would expressly upset this central design objective of the Forward Capacity Market, institutionalizing the procurement of excess capacity. Worse yet, and contrary to sound market design, it would do so for a system that, by NEPGA’s own characterization, is presently expected to face excess supply conditions. If Net CONE were to be based on market conditions consistent with a capacity level that exceeds the Installed Capacity Requirement (such as under the current excess supply conditions), then the [Energy and Ancillary Services] revenue offsets would be smaller (in dollar terms) than if calculated for a system at criterion. The smaller revenue offsets would increase the value of Net CONE and, in doing so, produce an excessive value of Net CONE that would incent new entry even when the system does not need additional capacity. This would be neither cost effective, nor consistent with the Forward Capacity Market’s stated 1-in-10 resource adequacy objective.[]
NEPGA fails to explain how such an outcome would be just and reasonable.
NESCOE strongly agrees with ISO-NE that the relief NEPGA requests in its complaint is both problematic and inappropriate. The NESCOE Protest explained why no credible claim exists for postponing the application of ISO-NE’s updated CONE/Net CONE values without materially impacting the outcome of FCA 16 and imposing unjust and unreasonable rates on consumers. ISO-NE describes how granting NEPGA’s request “would result in an inappropriate increase in consumer payments on the order of tens of millions, and possibly over a hundred million, dollars in FCA 16.” Moreover, “NEPGA is aware of the tight timing considerations at issue here, and that a recalculation based on its new interpretation of Net CONE would be impossible to accomplish in time for use in FCA 16.” The Commission should reject NEPGA’s ploy and allow ISO-NE’s updated values—recalculations that are foundational to proper price formation in the FCM—to take effect.
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
424 Main Street
Osterville, MA 02655
Tel: (617) 913-0342
Date: January 21, 2021
Protest of the New England States Committee on Electricity
Docket No. EL21-26-000