United States of America Before the Federal Energy Regulatory Commission
ISO New England Inc. | Docket No. ER19-291-000 
Limited 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, and the Commission’s November 6, 2018 Notice of Filings #1, the New England States Committee on Electricity (“NESCOE”) hereby files this limited protest in the above-captioned proceeding.[1] On November 6, 2018, ISO New England Inc. (“ISO-NE” or the “ISO”) filed with the Commission the proposed Installed Capacity Requirement (“ICR”) and related values for the 2022-2023 Capacity Commitment Period (the “ICR Filing”).[2] The Forward Capacity Auction (“FCA”) scheduled for February 2019 (“FCA 13”) is the corresponding primary auction for the 2022-2023 Capacity Commitment Period. Among other things, ISO-NE proposes to change its system reserve assumption for the determination of the ICR. NESCOE does not support this change.

1. LIMITED PROTEST

ISO-NE has changed a long-standing, material assumption used to calculate the ICR-Related Values.[3] In calculating the ICR-Related Values for FCA 13, ISO-NE increased the level of modeled system reserves from 200 MW to 700 MW.[4] According to ISO-NE, this change alone results in an increase in the ICR of 550 MW.[5] ISO-NE’s rationale for the change is that the “Tariff requires that the determination of the ICR and related values include an amount of system reserves that is consistent with those needed for reliable system operations during emergency conditions.”[6] ISO-NE contends that FCA 13 is the appropriate time to change the system reserves assumption for the first time since 1980.[7] ISO-NE has not provided sufficient information for supporting the rate change and has not demonstrated that its filing is just and reasonable. The Commission should reject ISO-NE’s material change to this long-standing assumption and require ISO-NE to recalculate the ICR-Related Values under the previous assumption.

1. ISO-NE Fails to Support its Proposed System Reserve Assumption Value

The Tariff section governing the modeling assumptions for capacity resource needs specifically calls for including an adequate amount of ten-minute synchronized reserves.[8] In support of increasing this assumption from 200 MW to 700 MW, a 350% increase, ISO-NE refers to increases in the peak load since 1980, the size of credible contingencies, limited tie capability with neighboring systems, and the changing resource mix. The ICR Filing describes these factors qualitatively but provides no analysis to support an increase of this magnitude. Notably, the ICR Filing includes no discussion (or analysis) of the ten-minute spinning and operating reserve products that its markets procure every day or their relationship to the system reserve assumption in planning studies.[9] Moreover, the testimony supporting the ICR Filing describes the single-largest contingency at its technical rating of 2,000 MW, rather than its normal operating limit of 1,400 MW.[10] Simply put, ISO-NE’s focus on operational needs in the control room, in real time, do not necessarily translate into a modeling need more than three years ahead of time. ISO-NE has the burden under Section 205 of the Federal Power Act to support its ICR Filing with information and analysis to justify the proposed rate change. ISO-NE has not met this standard with respect to the increased system reserve assumption.

The closest that the ICR Filing comes to providing an analysis of the impact of the increased system reserve requirement is the following question and answer in the Sedlacek-Scibelli Testimony:

Q: DOES THAT MEAN THAT THE INSTALLED CAPACITY REQUIREMENT FOR FCA 13 IS 550 MW HIGHER THAN THE INSTALLED CAPACITY REQUIREMENT FOR FCA 12?

A: No. Due to the decline in the projected loads determined as part of the load forecast for 2018 versus those forecasted in 2017, the net Installed Capacity Requirement for FCA 13 (33,750 MW) is only 25 MW higher than the net Installed Capacity Requirement for FCA 12 (33,725 MW). Thus, the impact of the increase in the system reserve assumption is effectively netted out by the decline in the load forecast for 2018 used in the calculation of the FCA 13 ICR-Related Values. [11]

Importantly, the objective is to establish an ICR value to meet an agreed upon level of resource adequacy. It is patently incorrect to assert that adding 550 MW to ICR is acceptable simply because the new ICR value is roughly equivalent to the prior year. Taken at face value, this testimony would suggest that ISO-NE is trying to achieve a set ICR value rather than determine the amount needed to meet resource adequacy requirements. The reduction in load forecast, based upon a methodology accepted by the Commission,[12] produced meaningful reductions in ICR and thus eventual reduction in costs to consumers. ISO-NE’s proposal counteracts the reduction in the load forecast, and adds costs, but fails to acknowledge or provide a sufficient underlying rationale for doing so.

1. The Materiality of ISO-NE’s Proposed Change Is Exacerbated by its Over-Estimates of Resource Adequacy Requirements

ISO-NE’s proposal to increase the system reserve assumption, and its proportional impact on ICR, is especially concerning in light of ISO-NE’s resource adequacy forecasting experience.[13] As shown in the table below, ISO-NE develops an ICR for each of the Capacity Commitment Periods in the Forward Capacity Market.[14] The initial ICR is used in the primary FCA more than three years in advance of the commitment period. The final or latest ICR MW quantity represents the resource adequacy target used in the last Annual Reconfiguration Auction (“ARA”) just before the beginning of the relevant commitment period or, in the case of FCAs 11 and 12, the most recent ARA.[15] The column on the right presents the difference in the ICR used in the primary FCA versus the final or latest ARA.

The table above indicates that ISO-NE has over-forecasted regional resource adequacy needs in the last five capacity commitment periods in a row. For this period, ISO-NE has over-forecasted ICR by an average difference of 611 MW.[16] Through this lens, a 550 MW increase to the ICR calculation is concerning to the region’s electricity customers — the majority of which pay capacity prices based on the higher, primary auction ICR MW quantities.

ISO-NE is aware of stakeholder concerns regarding the region’s experience with ICR forecasting.[17] In May, ISO-NE presented the results of an analysis to investigate bias in the net ICR calculations.[18] The analysis found that lingering effects of an economic recession beginning in 2009, less growth in electricity demand, and rapid growth of behind-the-meter photovoltaic resources had contributed to decreases in the ICR from the values calculated for the primary FCA to those calculated for the final ARA.

ISO-NE’s proposed change to the system reserve assumption should be considered within this context. These factors include a systematic over estimation of load growth as described in ISO-NE’s analysis of potential bias in the ICR calculation. Since the initial ICR is used to set the sloped demand curve used in the primary auction, an initial overestimate of ICR results in unwarranted higher costs to consumers. Over the last twelve FCAs, ISO-NE has ultimately lowered the ICR for all but two Capacity Commitment Periods, but the damage is done as far as consumers are concerned. ISO-NE has not demonstrated that it needs to purchase an extra 550 MW in the primary auction in order to ensure that they are purchasing adequate capacity because, at minimum, other factors in the calculation have resulted in material over procurement year after year. If the ICR calculation was working as it should, the initial ICR would be slightly higher in some years, and slightly lower in others. But it is consistently skewed in the same higher direction, on average by a significant amount, year after year. ISO-NE has not provided sufficient information necessary to justify increasing the initial purchase in order to ensure that there are an adequate amount of real time reserves three years later. To the contrary, historical evidence shows that the rest of the assumptions in the calculation lead to over procurement by more than enough to cover this amount.

ISO-NE has not sufficiently demonstrated that the proposed change to the system reserve assumption results in a just and reasonable rate. The proposed change to the system reserve assumption has a significant impact on the ICR-Related Values and associated capacity prices. The Commission should reject ISO-NE’s material change to this long-standing assumption and require ISO-NE to recalculate the ICR-Related Values under the previous assumption.

1. CONCLUSION

For the reasons stated herein, NESCOE respectfully requests that the Commission consider the above protest in this proceeding.

Respectfully submitted,

/s/ Benjamin S D’Antonio
Benjamin S D’Antonio
Counsel and Analyst
New England States Committee on Electricity
655 Longmeadow Street
Longmeadow, MA 01106
Tel: (603) 828-8977
bendantonio@nescoe.com

Date: November 27, 2018