FERC Accepts ISO-NE Tariff Changes Intended To Enhance Liquidity In Forward Capacity Market

On October 18, 2016, FERC accepted proposed changes to ISO New England Inc’s (“ISO-NE”) Transmission, Markets and Services Tariff (“Tariff”) intended to enhance liquidity in ISO-NE’s Forward Capacity Market (“FCM”). According to ISO-NE’s proposal, the changes – proposed jointly by ISO-NE and the New England Power Pool Participants Committee – will give qualified resources additional opportunities to provide capacity to the New England region.
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As FERC explained in its order, ISO-NE holds a Forward Capacity Auction (“FCA”) each February to procure capacity for its forward market. New resources that clear ISO-NE’s FCA commit to provide capacity for a year-long delivery period (the “Capacity Commitment Period”) that runs from June 1, three years after the FCA, through the following May 31. ISO-NE explained in its filing to FERC that the proposed Tariff changes modify certain FCM qualification rules to allow new capacity resources to supply capacity beginning four months after participating in their first FCA. ISO-NE also clarified that a new resource seeking to provide capacity under the modified FCM qualification rules will be required to demonstrate to ISO-NE that it will be ready to provide capacity by the start of a Capacity Commitment Period that commences prior to the Capacity Commitment Period for which the new resource was initially selected in the FCA.

Prior to FERC’s acceptance of the proposed Tariff changes, the New York Public Service Commission and the New York Independent System Operator (“NYISO”) challenged the proposed changes on grounds that they would result in “material pricing efficiencies” that could trigger certain export sales from NYISO to ISO-NE before the 2017-2018 Capacity Commitment Period, leading to higher clearing prices in NYISO and thus increasing costs for New York consumers by an estimated $341 million. NYISO thus requested a one-year deferral of the proposed changes so that NYISO could develop counter measures to mitigate the potential loss to consumers. While ISO-NE took no position as to the alleged harm to New York consumers, ISO-NE noted that the proposed changes to its FCA rules were not alleged to be unjust and unreasonable, thus the filing should be accepted without modification.