ISO-NE proposes market adjustments to improve cost-effectiveness

ISO New England is pursuing refinements to improve cost-effectiveness while preserving the reliability benefits of its Day-Ahead Ancillary Services market.

A joint filing from ISO-NE and the New England Power Pool Participants Committee seeks to preserve the basic design of the market while fine-tuning four of its parameters. The proposed adjustments align with recommendations from the ISO’s Internal Market Monitor.

The filing was submitted to the Federal Energy Regulatory Commission in mid-July. It asks the commission to issue an order by Sept. 14, which would allow the adjustments to take effect Oct. 22.

The Day-Ahead Ancillary Services (DA A/S) market was developed through an extensive stakeholder process and approved by FERC. Its goal is to strengthen reliability by ensuring resources are available when the power system is stressed.

Participating resources, such as dispatchable generators and energy storage, can help the grid compensate for short-term fluctuations in supply and demand. They help ensure reliability when generators unexpectedly provide less electricity to the grid; for example, when a unit trips offline or when renewable resources like solar and wind are affected by cloud cover or other factors.

Since launching in March 2025, the DA A/S market has represented less than 7% of total wholesale energy costs while showing promising metrics on grid reliability and system operations. Prior to 2025, participating services were procured outside of the competitive market framework. Their inclusion now provides a more transparent and efficient way to procure essential reliability services, reflecting the value of these services through the market while providing strong performance incentives to suppliers.

Costs associated with all wholesale markets ISO New England administers make up about a third of the average residential customer’s annual electricity costs.

The Internal Market Monitor estimated the cost impact of DA A/S in its first year of operation at less than 1 cent per kilowatt-hour of wholesale electricity served. Its analysis found that 12 days, most of which were associated with multi-day periods of stressed system conditions, accounted for approximately 50% of DA A/S costs. That included five consecutive days in January.

This past winter was one of the coldest New England has experienced over the last two decades. Extended periods of below-freezing temperatures drove electricity demand higher, increased demand for fuels used to generate electricity, and contributed to higher wholesale energy costs across the country.