ISO-NE requests four-month extension to file market reforms to address energy security risks

More time is needed to flesh out the details, but implementation in 2024 will not be delayed

In a motion submitted Friday, January 18, 2019, ISO New England asked the Federal Energy Regulatory Commission (FERC) for a four-month extension to file the significant tariff changes required to implement a market-based solution to New England’s winter energy security risks. The ISO is seeking an extension to November 15, 2019, to file its proposal, but the postponement would not delay the plan to implement the new design for 2024-2025.

In an order issued July 2, 2018, FERC set a July 1, 2019, deadline for the ISO to submit permanent tariff language that would address the region’s energy security concerns. The ISO has proceeded with conceptual design work and engaged in substantive discussions with stakeholders on solution concepts, and stakeholders have raised important questions, requested detailed information on the ISO’s approach, and some have proposed alternatives.

Without an extension, many important elements of the market mechanism would lack sufficient detail, or might not be worked out at all before July 1. As a result, stakeholder discussions would be limited in depth. An extension would provide time for more robust, substantive, and productive stakeholder discussions.

With additional time, the ISO can:

• Get stakeholder input at the March NEPOOL Markets Committee meeting on the elements to be included in a technical paper on the core design
• Produce the technical paper, with supporting design detail and numerical examples, by April 1
• Conduct initial quantitative market impact analyses and present them at the July NEPOOL Markets Committee meeting
• Begin reviewing tariff language in August with stakeholders
• Finalize the technical paper, impact analyses, and tariff language in October
• Obtain a final stakeholder vote at the November 1, 2019, NEPOOL Participants Committee meeting

The paper, quantitative analyses, and additional time for discussion will give stakeholders a more solid foundation for understanding and assessing the ISO’s proposal, as well as stakeholder alternatives.

The additional analysis and discussions will support progress on a sound technical blueprint for what promises to be a major redesign of the day-ahead energy market. The interrelated market enhancements under consideration would include a shift from the current one-day-ahead energy market to a multi-day-ahead market, a new ancillary service product compensating resources for maintaining an energy “buffer stock” and, eventually, a new voluntary forward market for energy inventory. The solution is focused on the energy markets because fundamentally, New England’s winter energy security issues are an energy supply problem, not a capacity shortfall problem.

Implementation of these major market changes would not be delayed by an extension because any design work that could not be finished in time for a July 1 filing would nevertheless need to be completed before software development and other implementation tasks are begun.

Since FERC’s July 2, 2018, order was issued, the ISO has worked on several parallel paths to address energy security issues ranging from the immediate—the retention of the Mystic 8 and 9 units to ensure regional energy security in 2022-2023—to this initiative to develop a permanent market design that would incentivize resources to optimize their fuel inventory over a multi-day operating horizon. Meanwhile, the ISO has also made changes in operational and market procedures in advance of winter 2018/2019 to enhance power system reliability.

On August 31, 2018, the ISO proposed interim tariff changes that would spell out procedures for retaining retiring resources when they are needed for energy security, and FERC accepted the interim tariff changes in a December 3, 2018, ruling. Those interim rules will be in effect for the 13^th, 14^th, and 15^th Forward Capacity Auctions. Those auctions will procure capacity for the 2022-2023, 2023-2024, and 2024-2025 capacity commitment periods.  The interim tariff changes will then expire as the permanent market-based mechanism is implemented.