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Tuesday
Jan172017

Update on the 2016/2017 Winter Reliability Program

5/3/17 update: The chart has been updated with final program participation results.

For the fourth year in a row, a winter reliability program is in effect to help augment fuel adequacy in New England. In September 2015, the Federal Energy Regulatory Commission approved a program for the winters of 2015/2016 to 2017/2018 to address seasonal reliability challenges created by constraints on New England’s interstate natural gas pipeline system. The previous programs proved to be cost-effective, short-term solutions to help keep the lights on in New England during very cold winter days.

Program objective

New England’s winter reliability programs are designed to incentivize eligible power resources to secure sufficient fuel at the beginning of winter. Developed collaboratively through the ISO’s stakeholder process, the programs serve as a stop-gap measure until longer-term capacity market changes—Pay-for-Performance (PFP) incentives—go into effect on June 1, 2018.

About 45% of the total generating capability in New England uses natural gas as its primary fuel. However, multiple studies and the ISO’s operating experience show that the pipelines carrying natural gas into the region are running at or near full capacity to serve heating demand during most of the winter. Particularly on the coldest days, there is little to no remaining pipeline capacity available for sale to power generators. Per the ISO’s 2016/2017 winter outlook, about 3,450 MW of natural-gas-fired generation is at risk of not being able to get fuel when needed (not counting generators already scheduled to be out of service). Liquefied natural gas (LNG), which is brought into New England on tanker ships, may also not be available unless generators contract for it ahead of time. And while resources that run on oil can help pick up the slack, this is only true if they have sufficient on-site fuel supplies.

Eligibility and program caps

Eligibility, qualification, and compensation caps are the same as last year’s program:

  • Oil: The winter reliability program is open to oil-fired generators or natural-gas-fired generators with dual-fuel capability that establish a specified amount of on-site oil inventory. Program qualification is limited, per generator, to oil inventory as of December 1 that meets or exceeds the lesser of either 85% of usable fuel storage or the supply to operate for 10 days at full load. At the end of the program, compensation is capped at the lesser of March 15 inventory, the eligible December 1 inventory, or inventory in December that is 95% of usable fuel storage or the supply to operate for 10 days at full load.
  • Liquefied natural gas (LNG): Natural-gas-fired generators that contract for LNG can also participate. Per winter, the program is limited to all qualifying contracts on a first come, first served basis that, in aggregate, do not exceed 6 billion cubic feet (Bcf) and the daily output of the providers of LNG. Six Bcf is equivalent to about 100 million barrels of oil and 6,000,000 million British thermal units (MMBtu). At the end of the program, compensation is capped at the lesser of the December 1 and March 1 contract volumes, and may not exceed the amount of fuel necessary for the resource to operate for four days at full load.
  • Demand response (DR): DR resources with additional capacity beyond obligations in the Forward Capacity Market can participate as well. Per winter, no more than 100 assets at a level not to exceed 100 MW can participate; each asset can be dispatched for a maximum of 180 hours.

Participation update

The table below reflects program participation as of 5/3/17, which may have changed from earlier reports. See the program rules in Market Rule 1, Appendix K for details on eligibility requirements at various stages, inventory caps, etc., as well as for the factors that go into the calculation of program payments. Compensation is based on the carrying costs of fuel oil that is unused at the end of the winter, unused LNG contract volumes, or supplemental demand response provided. All participants are also subject to nonperformance charges. For results of last year’s program, see the Winter Program Payment Rate webpage.

Type Participants Amount
eligible for compensation
Payment rateProgram usageProgram costs
Oil 84 units
3.052 million barrels
$10.21 per barrel 114,010 barrels (December: 76,967; January: 12,737; February: 18,663; March 1–15: 5,643)
$30,309,795 (after penalties of $674,169)  based on 3,034,668 barrels of unused eligible inventory at program end
LNG 2 units 171,000 MMBtu $1.70 per MMBtu None $277,868 (after penalties of $13,037)
DR 6 assets 23 MW $1,021 per MW-month, plus energy payments if dispatched
All assets dispatched 6:39 a.m.–
9:04 a.m. on 1/10/17
$126,480 ($84,769 monthly payments; $41,711.63 energy payments)**

*For oil and LNG, program compensation is based on unused eligible inventory at the end of each winter. See the program rules for other factors that go into the calculation of program payments, such as resource types, inventory caps, and performance requirements.

**The 2016/2017 DR payments may be adjusted after final meter readings.

Dual-fuel commissioning update

Continued from the 2014/2015 program were incentives for natural-gas-fired generators to add dual-fuel capability and also have sufficient oil in the tank at the start of each winter through December 1, 2017. (The date for establishing eligibility has passed, and no new dual-fuel commissioning is being accepted.) The cost incurred for this facet of the program was $1.54 million, of a total cost cap of $5.7 million. Six units commissioned dual-fuel capability, for a total winter seasonal claimed capability addition of 1,774 MW:

  • 4 units for 2014/2015 (1,039 MW)
  • 2 units for 2015/2016 (735 MW)

Learn more