United States of America Before the Federal Energy Regulatory Commission
Docket Nos. ER18-1153-000, ER17-2153-002, EL16-120-002
ISO New England Inc.
Limited Protest of the New England States Committee on Electricity
Pursuant to Rule 211 of the Federal Energy Regulatory Commission’s (“Commission” or “FERC”) Rules of Practice and Procedure, 18 C.F.R. § 385.211 (2018), the New England States Committee on Electricity (“NESCOE”) files this limited protest in response to ISO New England Inc.’s (“ISO-NE”) March 22, 2018 compliance filing in this proceeding (the “March 22 Filing”). On February 20, 2018, the Commission issued an order accepting an Offer of Settlement (“Settlement”) regarding the Peak Energy Rent (“PER”) adjustment. The Settlement Order resolved a September 30, 2016 complaint asserting that the PER mechanism had become unjust and unreasonable because of higher Reserve Constraint Penalty Factors.
The Settlement Order directed ISO-NE to file Tariff changes revising the methodology for calculating the PER Strike Price (the “Adjusted PER Strike Price”) for a specific time period beginning on September 30, 2016 and ending on May 31, 2018 (the “Refund Period”). While NESCOE supports the Adjusted PER Strike Price (as it did as an active party to the Settlement), NESCOE protests the application of that methodology beyond the Refund Period.
NESCOE respectfully requests that the Commission reject the March 22 Filing as non-compliant with the Settlement Order. The Settlement Order required ISO-NE to revise the PER Strike Price for the Refund Period, i.e., September 30, 2016 through May 31, 2018. The end of the Refund Period corresponds with the end of Capacity Commitment Period 8 and the commencement, on June 1, 2018, of Capacity Commitment Period 9. The March 22 Filing, if accepted, would use the Adjusted PER Strike Price to calculate monthly capacity payments to resources for at least some, and potentially all, of Capacity Commitment Period 9. This outcome is inconsistent with the Settlement Order.
The March 22 Filing appropriately revises the PER mechanism to reflect the Adjusted PER Strike Price for the Refund Period. NESCOE was an active party to the Settlement and supported that change as a fair and balanced resolution of a contested issue. That methodology, however, should be applied solely to the Refund Period and should not be carried into payments in Capacity Commitment Period 9. The Tariff changes ISO-NE has proposed can and should be further revised to ensure that the fair balance achieved in the Settlement is not unwound due to a misunderstanding of the Commission’s directives.
NESCOE recognizes ISO-NE’s challenge in developing Tariff language to comply with the Settlement Order. The March 22 Filing discussed, in general, ISO-NE’s calculation of PER and the operation of a twelve-month average of Monthly PER values to determine adjustments to capacity payments. ISO-NE stated that “absent contrary direction from the Commission,” it would “calculate Average Monthly PER (including for Obligation months that occur after the end of the Refund Period) to include, where applicable, Monthly PER values that may be affected by the revised Daily PER Strike Prices.”
It is understandable that ISO-NE would require the Commission’s guidance in this area. On March 1, 2018, NESCOE filed with the Commission a request for clarification of the Settlement Order to confirm that ISO-NE’s compliance filing should appropriately limit the application of the Adjusted PER Strike Price to capacity payments through May 31, 2018 (i.e., the end of the Refund Period). The Clarification Request, which is included herein as Attachment A, remains pending before the Commission. ISO-NE has taken no position regarding the Clarification Request, but it noted at a March 6, 2018 New England Power Pool Markets Committee meeting that there were no technical impediments to implementing Tariff changes consistent with the view that NESCOE expressed in the Clarification Request (the same view reflected in this filing).
The March 22 Filing confirms that, without the Commission’s guidance, the Adjusted PER Strike Price will be inappropriately applied to capacity payments in Capacity Commitment Period 9. In the March 22 Filing, ISO-NE informed the Commission that “impacted PER Events within the refund period occurred in October 2017.” Because PER calculations are based on a twelve-month average of Monthly PER values, the Adjusted PER Strike Price will be used to calculate payments months after the Refund Period has expired. This is inconsistent with the Settlement Order, which required ISO-NE to revise the PER Strike Price for the September 30, 2016 through May 31, 2018 period. For this period of time (the Refund Period), NESCOE agrees that the Adjusted PER Strike Price should be used in calculating monthly capacity payments. However, beginning on June 1, 2018, ISO-NE’s adjustment for PER must revert to the methodology that was in effect prior to the Settlement.
ISO-NE’s use of the Adjusted PER Strike Price to calculate capacity payments in Capacity Commitment Period 9 will impose unfair and excessive charges on consumers. NESCOE explained why in the Clarification Request. Unlike resources with Capacity Supply Obligations (“CSOs”) during the Refund Period, resources with CSOs in Capacity Commitment Period 9 could have accounted for the increased Reserve Constraint Penalty Factors in their supply offers. Those supply offers would have been based on the unadjusted PER Strike Price and not on the more Settlement methodology. Resources participating in Capacity Commitment Period 9 thus would have expected monthly capacity payments to include rebates reflecting the existing PER methodology at the time of the auction, not the Settlement methodology. However, under the approach set forth in the March 22 Filing, these resources will now receive a windfall, at consumers’ expense, in the form of reduced rebates. ISO-NE has confirmed that this will occur in relation to the October 2017 PER Events, and it will occur in relation to all other impacted PER Events through May 31, 2018.
In reviewing compliance filings, the Commission’s objective is “to ascertain whether the modifications are appropriate.” While the March 22 Filing properly includes a revision to the PER methodology that is consistent with the Settlement Order, it deviates from the Settlement Order’s directives regarding the application of that methodology to the Refund Period. In so doing, it imposes unjust and unreasonable costs on consumers.
For the reasons stated herein, NESCOE respectfully requests that the Commission reject that part of the March 22 Filing that expands the application of the Adjusted PER Strike Price to capacity payments made in Capacity Commitment Period 9 and direct ISO-NE to file Tariff changes that limit the application of the Adjusted PER Strike Price to the Refund Period.
/s/ Jason Marshall
New England States Committee on Electricity
655 Longmeadow Street
Longmeadow, MA 01106
Tel: (617) 913-0342
Date: April 12, 2018