1. PROTEST OF THE ISO-NE PROPOSAL

The ISO-NE Proposal, commonly referred to as an “expanded” program, does not promise an expanded reliability benefit. It would certainly expand payments made by consumers by paying more resources, but those expanded payments would provide no assurance that Newly Eligible Resources will modify their behavior to provide incremental capacity in exchange for program incentive payments. Nor has ISO-NE demonstrated that incremental capacity beyond what Winter Program II provided is even needed in the first place. Rather, in its attempt to develop a more “market-based” approach—which is not in fact achieved—ISO-NE has put forward a flawed and unduly expensive program. The Commission should reject the ISO-NE Proposal in favor of the NEPOOL Proposal.

1. The ISO-NE Proposal Would Provide Incremental Payments Without a Demonstrated Corresponding Incremental Reliability Benefit, Has Not Been Proven to Be Needed, and Would Result in Excessive Costs

1. Increasing Program Payments Without Obtaining Additional Reliability Is Inconsistent with Program Objectives and Is Not Just and Reasonable

In general, the Winter Reliability Program “identifies a few ‘holes in the FCM fence’”—i.e., what ISO-NE “now considers to be a flaw in the definition of the reliability service” provided by resources with a Capacity Supply Obligation (“CSO”)—then takes action “to patch those holes until the longer-term market-based solution (as part of the PfP reforms) can be implemented.”[42] It is a temporary mechanism for bolstering the CSOs that were secured through the relevant Forward Capacity Auctions.[43]

ISO-NE has observed, without any qualification, the successes of past winter programs in patching these holes. Shortly before the July 15 Filing, ISO-NE explained in a letter to a Massachusetts state agency that these programs “have proven to be a cost-effective short-term solution to help keep the lights on in New England during the winter.”[44] ISO-NE has characterized Winter Program I as having proven “to be critical to reliability” and touted the oil inventory procured through Winter Program II as “instrumental in allowing the region to withstand [2015] severe weather conditions.”[45]

Last year’s winter program succeeded in “patching the holes,” and it did so at a reasonable price, by providing the hedge system operators needed “when pipelines were constrained and gas-fired generators had limited access to pipeline gas.”[46] ISO-NE now seeks to alter that successful program by expanding eligibility to all resources that have on-site fuel storage, with the apparent driving factor that such a program would “more closely resemble a market-based solution” and “better approximates the results of a market-based construct.”[47] However, as explained in Section IV.A.3 below, the ISO-NE proposal is neither market-based nor resource neutral.

Moreover, and critical to judging the prospects of the program’s success, ISO-NE’s material change to the program would significantly increase its cost without providing any basis to conclude that Newly Eligible Resources would provide incremental capacity. The Wilson Testimony underscores this critical shortcoming, explaining that the ISO-NE Proposal “would result in many sellers receiving additional compensation without taking on any substantial additional obligations or costs, or providing any additional service.”[48] Mr. Wilson, who, working with NESCOE, was closely engaged in the stakeholder process on Winter Program III, explains:

The ISO does not assert that its proposal would result in additional capacity available during the wintertime, nor am I aware of any work by stakeholders or from other sources suggesting that incremental capacity would be made available from the additional resource types as a result of incentives offered through the Winter Reliability Program. These resources simply do not face fuel decisions that the program’s incentives are at all likely to influence.

For example, the ISO Proposal would make compensation available to 4,041 MW of nuclear capacity. However, nuclear units run baseload, and their fuel needs are predictable and steady over time. Nuclear units typically refuel every 18 months during off-peak times, and the outages are coordinated with the ISO approximately 6 months in advance; the Winter Reliability Program compensation would not influence fuel planning for a nuclear unit. Similarly, coal and biomass resources, also included in the ISO Proposal, are unlikely to modify their fuel arrangements in a manner that would result in incremental capacity as a result of the incentives offered through the Winter Reliability Program (they might, however, modify fuel arrangements to ensure maximum payments under the program).[[49]]