United States of America Before the Federal Energy Regulatory Commission
New England Power Generators Association, Inc. v. ISO New England Inc. | Docket No. EL21-26-000
Protest of the New England States Committee on Electricity
Pursuant to Rule 211 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (“Commission” or “FERC”), 18 C.F.R. § 385.211 (2020), and the Commission’s December 15, 2020 Notice of Complaint, the New England States Committee on Electricity (“NESCOE”) files this protest in response to the complaint that the New England Power Generators Association, Inc. (“NEPGA”) filed against ISO-NE on December 11, 2020 (the “Complaint”).
The Tariff requires ISO-NE to recalculate the Cost of New Entry (“CONE”) and Net CONE at least every three years. In the years between these recalculations, ISO-NE is required to adjust CONE and Net CONE for each Forward Capacity Auction (“FCA”) using a list of indices contained in Section III.A.21.1.2(e) of the Tariff.
NEPGA asserts in the Complaint that ISO-NE violated the Tariff and the filed-rate doctrine in connection with its recalculation of Net CONE and its review of that calculation with New England Power Pool (“NEPOOL”) stakeholders. NEPGA states that it “anticipates ISO-NE will file its updated Net CONE values later this month, including its proposed tariff revisions,” but it is “compelled to file this complaint in advance of ISO-NE’s filing, rather than raise these specific concerns as objections to ISO-NE’s filing.” NEPGA asks the Commission to “reject ISO-NE’s proposed Net CONE value for FCAs 16-18 that will be filed later this month” and to “direct ISO-NE to apply the Tariff-defined annual adjustment factors to the [FCA] 15 Net CONE value to be used for the FCA 16 Net CONE value.”
NESCOE understands that ISO-NE will today file its update to the values reflected in the Forward Capacity Market (“FCM”) for CONE, Net CONE, and other parameters beginning with FCA 16 pursuant to section 205 of the Federal Power Act (“CONE Update Filing”). Based on ISO-NE’s review with stakeholders of changes that will be reflected in that filing, its submission to the Commission will include redlined tariff language related to the Net CONE definition that lies at the core of NEPGA’s preemptive Complaint.
NESCOE expects to comment on the Tariff language addressing Net CONE that is the subject of the Complaint as part of the more comprehensive CONE Update Filing proceeding. To the extent the Commission acts on the merits of the Complaint, NESCOE respectfully asks the Commission to consider the record in the CONE Update Filing proceeding and to withhold action on the Complaint until that record has been developed. Additionally, the Commission should reject NEPGA’s request to hurry action on its Complaint through fast-track processing. Such fast-track processing is particularly inappropriate if the Commission has before it a recently-made section 205 filing addressing the very issues about which NEPGA complains.
NESCOE strongly objects to the relief that NEPGA seeks in the Complaint, a directive to ISO-NE “to apply the Tariff-defined annual adjustment factors to the [FCA] 15 Net CONE value to be used for the FCA 16 Net CONE value.” In making its request, NEPGA does scarcely more than reference the Tariff provision, Section III.13.2.4, that requires ISO-NE to perform annual updates to CONE and Net CONE in the years that ISO-NE does not undertake the more significant recalculations that must take place at least every three years. NEPGA’s brevity on this point suggests that the remedy would be of little consequence. It would be a big deal.
To begin, deferring ISO-NE’s recalculation of Net CONE for FCA 16 cannot be viewed as simply a one-year postponement. NEPGA’s proposed remedy requires context. In December 2018, the Commission granted a request from ISO-NE and NEPOOL for a single-year delay in the recalculation of CONE, Net CONE, and other values for FCA 15 given unique regional circumstances. In making the request, ISO-NE and NEPOOL stated that the values would be updated for FCA 16. NEPGA’s proposal to delay the recalculation yet again would thus have the effect of transforming a required triennial update into a five-year pause.
The indices that ISO-NE uses to update its FCM parameters between the triennial update are no substitute for the detailed, “bottom-up” recalculation that ISO-NE undertakes to ensure that it accounts for changes in market conditions and technologies. For example, for FCA 16, ISO-NE commissioned an independent analysis from Concentric Energy Advisors, Inc. and its subcontractor, the engineering firm Mott MacDonald, to update CONE/Net CONE values and other parameters to be used beginning with that auction. The CEA Report describes the detailed study scope and process used to examine, develop, and provide recommendations for the CONE/Net CONE values and Offer Review Trigger Prices for FCA 16. This included the screening of resources types and, for those resources passing the screens, the completion of a substantial evaluation of costs and revenues covering the entirety of the resource’s expected life.
Such a bottom-up methodology is foundational to the administration of the FCM. The indexed values used in the annual updates serve a practical purpose—“[u]pdating the FCM parameters is a significant undertaking on behalf of both the ISO and stakeholders.” But, like repointing a chimney, annual updates are not intended to or capable of identifying and addressing issues that lie at the foundation. NEPGA’s requested relief, if granted, would unreasonably delay key work that is overdue.
Moreover, the impact of NEPGA’s requested delay in updating Net CONE and other values would likely be substantial. ISO-NE has calculated the Net CONE value corresponding with FCA 15 as $8.707/kW-month. For FCA 16, based on the comprehensive bottom-up review ISO-NE has provided, the proposed Net CONE value is $7.024/kW-month. Notwithstanding the requirement of Rule 206(b)(4), NEPGA does not even attempt to quantify the potential financial impact of the relief it requests, which would replace ISO-NE’s proposed value with a calculation derived from applying updates to the indices set forth in Section III.A.21.1.2(e) of the Tariff. While those updates are not yet available for the period corresponding with FCA 16, recent annual adjustments illustrate that NEPGA’s requested remedy could force a dramatic increase compared to the value that ISO-NE is expected to file with the Commission for FCA 16.
Applying the escalated calculations corresponding with the last three annual adjustments (for FCAs 13-15) provides a range of potential outcomes for an FCA 16 value using the method NEPGA requests. As shown in the table below, the escalations have ranged from a .38% increase from FCA 13 to FCA 14, to a 6.35% increase in the latest adjustment for FCA 15.
|Capacity Commitment Period||Net CONE Value|
|2021-2022 (FCA 12)||$8.04|
|2022-2023 (FCA 13)||$8.156||1.44%|
|2023-2024 (FCA 14)||$8.187||.38%|
|2024-2025 (FCA 15)||$8.707||6.35%|
When applying these escalations to an FCA 15 to FCA 16 adjustment, at a low-end the Net CONE value for FCA 16 would be $8.740/kW-month (.38% increase), and the high-end value would be $9.260/kW-month (6.35% increase). Applying a three-year average of the percentage increases, 2.72%, translates to a Net CONE of $8.943/kW-month. All of these values are substantially higher than the $7.024/kW-month calculation that ISO-NE has proposed for FCA 16, a value derived from a current, fundamental review of FCM parameters.
It is unjust and unreasonable for consumers to incur costs arising from such an overstated Net CONE value. This outcome stands in stark contrast to the limited one-year extension granted in 2018, where ISO-NE represented to the Commission that it did not identify “any significant reason to believe that postponing the updates of the FCM parameters will negatively impact the administration of FCA 15.” Given the recalculations that ISO-NE has already performed for FCA 16, there is no credible claim for postponing the application of those updated values without materially impacting the outcome of the auction and negatively affecting consumers through the imposition of unreasonable rates.
For the reasons stated herein, NESCOE respectfully requests that the Commission consider this protest in determining its action on the Complaint.
/s/ Jason Marshall
New England States Committee on Electricity
424 Main Street
Osterville, MA 02655
Tel: (617) 913-0342
Date: December 31, 2020