ISO-NE begins work to eliminate minimum offer price rule

ISO New England is working with the New England states and New England Power Pool (NEPOOL) stakeholders to eliminate the Minimum Offer Price Rule (MOPR) from the Forward Capacity Market (FCM).

“The elimination of the MOPR is part of a much broader transition of the power system and the markets,” said Anne C. George, ISO New England’s vice president of external affairs and corporate communications. “We are engaged with the states and stakeholders on a series of studies and analyses to anticipate the next phase of the power system’s evolution. There is much work to do, but we are moving, together, in the right direction.”

Formal discussion on the removal of the MOPR will begin at the June 9^th meeting of the NEPOOL Markets Committee. The ISO aims to file a proposal to eliminate the MOPR with the Federal Energy Regulatory Commission (FERC) in the first quarter of 2022 so that the changes can be in place for Forward Capacity Auction (FCA) #17, scheduled for February 2023.

History of the MOPR

Implemented in 2013 to comply with a FERC directive, the MOPR is aimed at ensuring competitive capacity prices in the FCM. Over the past decade, the New England states have sought to reduce greenhouse gas emissions and meet climate goals through various pricing mechanisms outside of the region’s competitive wholesale markets, including mandates that state-regulated utilities enter into long-term contracts with renewable resource developers. In recent years, these efforts have grown in both scope and scale. These actions have consequences for the FCM; specifically, resources that can offer into the FCM at reduced levels because of out-of-market contract revenue can depress market prices for many years, thereby altering the market’s ability to retain or attract all resources needed for reliability.

To address these issues, the current FCM rules subject new capacity resources to the MOPR, which requires these sponsored assets to bid into the FCM at their unsubsidized cost. The result is that the MOPR precludes some of these resources from obtaining capacity supply obligations (CSOs) in the annual Forward Capacity Auctions (FCAs).

The Competitive Auctions with Sponsored Policy Resources (CASPR) rules have been in effect for the past three capacity auctions as a way to increase the amount of state-sponsored resources providing capacity service. These rules include a secondary auction in which would-be retiring resources trade their CSO with a new, sponsored resource looking to enter the market. The states, however, have been dissatisfied with the slow pace of resources participating in the CASPR auction.

Considerations moving forward

While the elimination of the MOPR will remove the barrier to participate in the capacity market for all sponsored policy resources, it will cause greater uncertainty for unsponsored resources, both existing and new, with regard to future capacity market prices. This creates a reliability risk to the region as it may cause early retirements of existing resources, or the failure of the market to attract required new resources. The ISO is now working on the elimination of the MOPR, but in a way that doesn’t jeopardize either power system reliability or competitive pricing in the FCM. 

In the longer term, additional enhancements to the wholesale markets will be needed to ensure the reliable operation of the future grid. The ISO will continue to work with the New England states and NEPOOL stakeholders as the power system evolves.