FERC accepts ISO-NE’s 1st batch of capacity market reforms

The Federal Energy Regulatory Commission (FERC) has accepted ISO New England’s first batch of proposed reforms to the capacity market. The reforms are intended to improve power system reliability and cost-effectiveness as the region’s resource mix evolves.

FERC’s acceptance is the culmination of the first phase of the Capacity Auction Reforms (CAR) key project. The ISO worked closely with stakeholders on the effort over more than two years. The first phase involves moving capacity auctions to a “prompt” timeline, as well as updating the process for resources exiting the capacity market. The ISO plans to conduct its first auction under the new framework in 2028.

Prompt auctions

Past capacity auctions were held more than three years before the delivery period. Future auctions will be held about a month before delivery. Benefits include:

Better forecasts: Up-to-date projections for supply and demand allow the ISO to establish more accurate auction parameters and resource owners to make better-informed decisions about their costs for selling capacity.

No “phantom” entry: Resources must be operational before they can sell capacity. This ensures they enhance system reliability and that consumers get what they pay for.

Simplicity: The shorter schedule streamlines administration for the ISO and participation for resource owners.

Deactivation process

The process through which resources exit the market will shorten from four years to one. The ISO will continue performing reviews intended to deter attempts at market manipulation and safeguard against deactivations that jeopardize transmission security.

Capacity market basics

The capacity market helps ensure the region has the power it needs by driving investment in energy resources and securing obligations from them to supply electricity or reduce demand.

It’s part of a suite of wholesale markets administered by ISO New England to attract, retain, and compensate the resources needed to ensure a reliable power system for the region. Overall compensation can shift between markets depending on individual resource characteristics. Some resources recover more of their costs through the energy markets while others recover more in the capacity market.

Next steps

Stakeholder discussions continue around CAR’s second phase, which will focus on establishing separate auctions for winter and summer capacity commitment periods and updating resource accreditation standards. A FERC filing on this phase is expected at the end of 2026.

The Capacity Auction Reforms fact sheet provides more information. Additionally, the CAR Proposal Information Summary is updated frequently and breaks down details of the proposal and links to relevant presentations.