United States of America Before the Federal Energy Regulatory Commission
ISO New England Inc., New England Power Pool Participants Committee
Docket No. ER15-2208-0000
Protest and Comments 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 (2014), and the Commission’s July 15, 2015 Notice of Combined Filings #2, the New England States Committee on Electricity (“NESCOE”)[1] hereby files this protest to the winter reliability program proposed by ISO New England Inc. (“ISO-NE” or “ISO”) for the 2015/2016 through 2017/2018 periods (the “ISO-NE Proposal”) and comments in support of the New England Power Pool (“NEPOOL”) Participants Committee winter program for the same period (the “NEPOOL Proposal”).[2] Both proposals—each of which would constitute a “Winter Program III”—are contained in a “jump ball” filing made by ISO-NE and NEPOOL on July 15, 2015 (the “July 15 Filing”).[3]

1. INTRODUCTION

The Commission has before it two competing proposals for Winter Program III. NESCOE strongly supports the NEPOOL Proposal because only it meets ISO-NE’s identified winter reliability need through a targeted, proven, and cost-effective program. The NEPOOL Proposal would effectively continue the successful design employed for the most recent winter program, which ISO-NE has called a “proven . . . cost-effective interim means to assure fuel inventory”[4] and which the Commission found to be a just and reasonable approach to winter reliability.[5] The NEPOOL Proposal maintains an appropriate and justified level of procurement for incremental reliability benefits, and it targets incentive payments only to those resources that are expected to modify their fuel management practices (or would provide additional demand response service) in exchange for program payments. NESCOE agrees with 87% of NEPOOL market participants and stakeholders—representing every sector—that the region should stay the course for the next three years and employ a successful and reasonably priced approach to winter reliability that New England has relied upon to meet its needs.

There is, quite simply, no need to remake a program that has worked. Yet, that is precisely what ISO-NE proposes. The ISO-NE Proposal would extend payments to additional resources, potentially costing New England consumers an additional $100 million or more over the life of the three-year program (above and beyond what the NEPOOL Proposal would cost), in an expensive, and, given the circumstances, unnecessary pursuit of a “more market-based” construct. As discussed below, ISO-NE’s expanded program eligibility does not promise corresponding incremental reliability benefits, nor is there a demonstrated need for incremental capacity beyond what the most recent program provided. The ISO-NE Proposal would potentially compensate 9,500 MW of additional resources beyond those that participated in the most recent winter program. That almost doubles the incremental capacity expected from oil-fired resources participating in the program, which ISO-NE identified as being capable of addressing winter reliability needs on their own.[6] In short, the ISO-NE Proposal is unsupported and imposes unneeded costs on consumers.

NESCOE appreciates ISO-NE’s early efforts to explore with states and stakeholders the possibility of expanding program eligibility to more resources, consistent with the Commission’s expectation that ISO-NE would “work with stakeholders to expand” the program.[7] Since the first winter program, both ISO-NE and NESCOE have expressed support for the concept of exploring a more resource-neutral approach,[8] which could provide consumer benefits in the form of increased competition. Winter Program II was adjusted to be more resource neutral (with LNG added), and ISO-NE has stated that Winter Program II was resource neutral to the maximum extent possible.[9]

However, as alternative structures were considered in greater detail over the past year, a transition away from past successful winter programs began to look increasingly imprudent. First, ISO-NE raised serious concerns around implementation of a market-based solution, citing the potential for a less efficient and effective program and questioning whether the complexity and cost of such an approach was justified for what would be a three-year stopgap measure.[10] Then, when ISO-NE presented to stakeholders its proposal for an “expanded” program, questions arose about the potential high cost of the program relative to past programs and whether expanded eligibility would achieve any incremental reliability benefits.

Since the introduction of winter programs in 2013, NESCOE has urged ISO-NE to pay particular attention to consumer cost implications associated with requiring consumers to fund incremental reliability, given that consumers have already paid for commitments through the Forward Capacity Market (“FCM”). As discussed below, without providing any indication of incremental reliability benefits, the ISO-NE Proposal could triple the cost of the winter program each year compared to the expected cost of the NEPOOL Proposal.[11] Unfortunately, rather than explain to the Commission why an expanded program would not be justified given the additional costs, ISO-NE continued to pursue its flawed and unnecessarily costly approach.

The NEPOOL Proposal is the only just and reasonable approach before the Commission, and it is consistent with the Commission’s past findings on the winter program. In contrast, the ISO-NE Proposal runs directly contrary to the Commission’s finding regarding the most recent winter program that “it would not be appropriate to make separate payments intended to incent resources to make the same fuel procurement decisions that they would have made, and been compensated for, absent the [winter program].”[12] NESCOE urges the Commission to reject the ISO-NE Proposal and to accept a continuation of the core winter reliability program it has already found to be just and reasonable.