3. The ISO-NE Proposal is Neither Market-Based Nor Resource Neutral

NESCOE appreciates that the impetus behind the ISO-NE Proposal was likely to attempt to satisfy the Commission’s expressed preference for a fuel-neutral or market-based approach.[74] However, despite ISO-NE’s attempt to portray its proposal as a more market-based or resource neutral program, it is neither of these. And in any event, as discussed below, a market-based program cannot serve as a preferable approach in the context of the narrow and time-limited objectives of the Winter Reliability Program.

1. The ISO-NE Proposal Is Not Market-Based.

ISO-NE’s description of its program as “better approximat[ing] the result of a market-based construct” is based on the eligibility of a greater number of resources for compensation under the program.[75] But paying more resources and spending more money does not make a program more market-based. Mr. Wilson explains that under a market-based structure, there needs to be a defined “product or service” that entities compete to provide, and that the purpose of such a market-based approach is “to achieve some of the potential benefits of markets.”[76] Although market-based approaches are generally preferable “where they can achieve the short-term and/or longer-term benefits of competition,” Mr. Wilson concludes that the ISO-NE Proposal “would not lead to any additional competition or economic efficiency” and, therefore, any “resemblance [to a market-based program] is entirely superficial.”[77] He explains that the ISO-NE Proposal “would extend payments to additional resources without much prospect of influencing any actions by these resources” and that “[c]onsumers should not be asked to pay tens of millions of dollars to dress up the Winter Reliability Program so that it looks more like a market-based mechanism, but with no additional value provided.”[78] Mr. Trotta is succinct in his assessment: “[T]he ISO-NE Proposal is no more market-based than the NEPOOL Proposal – it just sends more consumer dollars to more generators.”[79] NESCOE agrees.

1. The ISO-NE Proposal Is Not Resource Neutral.

Similarly, the ISO-NE Proposal cannot be characterized as “resource neutral.” Like Winter Program II (and the NEPOOL Proposal), the ISO-NE Proposal would limit eligibility to certain resources. The Bentz Testimony explains why calling the ISO-NE Proposal an “expanded” program is thus a misnomer:

[The ISO-NE Proposal], by way of example, would favor nuclear and coal-fired resources over demand response, solar and wind resources. . . . In actuality, it simply substitutes some resources for others. Neither the ISO-NE Proposal nor the NEPOOL Proposal can claim to be “resource neutral.”[[80]]

Similarly, Mr. Flumerfelt testifies that “simply including additional fuel types” in a proposed non-market solution does not result “in a fuel neutral program.”[81]

There are, of course, compelling reasons to structure market mechanisms in the most resource neutral manner as possible.   Mr. Wilson discusses why, in general and for the Winter Reliability Program, this is an important objective:

[A]s a general matter, market design elements that are resource neutral are preferred, despite the complexity that inevitably is introduced by attempting to accommodate very different resource types.

There are two principal reasons why, in general, we should strive for resource neutrality. First, markets will be most competitive and efficient when they are open to the broadest participation possible. Markets that are only open to certain types of resources will generally be less competitive, and result in higher prices, than markets for which the product definition and eligibility requirements have been designed to accommodate a broader group of resource types.

Second, when market design elements are crafted in a more resource-neutral manner, they are more likely to avoid potentially unfair or discriminatory treatment of some resource types. This can be a difficult challenge, because different resource types have different characteristics which ultimately may be of some commercial significance. For instance, in most contexts, it is not appropriate to overlook that some resource types are intermittent, or that some have slower ramp rates, than others.