FERC accepts ISO-NE’s capacity zone modeling proposal

ISO New England has targeted the ninth Forward Capacity Auction (FCA #9), scheduled for February 2015, to implement changes to the modeling of zones in the region’s Forward Capacity Market (FCM).

About Capacity Zones

New England’s FCM has always used a zonal structure that ensures the right amount of capacity is procured in parts of New England with high demand or transmission limitations. The ISO modeled two zones in the initial auctions and expanded to four zones in the most recent auctions. However, this zonal structure is not flexible enough to accommodate changes that can over time in the transmission system’s capabilities and locations of highest need. To address these concerns, the ISO and stakeholders have developed a process to determine the appropriate number of and boundaries for capacity zones modeled in each FCA as the system evolves and conditions change.

Developing the New Process

On May 31, 2013, FERC issued an order requiring the ISO to develop a new capacity zone modeling process. The ISO filed a schedule for developing the process with FERC on July 30, 2013, held discussions with stakeholders throughout the year, and then submitted its proposal in a January 31, 2014, compliance filing. FERC accepted the ISO’s capacity zone compliance filing, on April 28, 2014.

Effective immediately, the ISO will follow a two-step process to determine which zones to model for each FCA. The ISO will annually identify and evaluate all boundaries and interface transfer capabilities and will then apply an objective criteria to revise the number and boundaries of capacity zones automatically as conditions change. In particular, the ISO will look at actual (and expected) constraints on the system that result, for example, from generator retirements and delist bids.

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