Update on the 2017/2018 Winter Reliability Program

6/11/18 update: Final program values posted. Please note that the number of program oil barrels used differs from the actual amount of oil burned regionally because participation is capped for each participating generator. Additionally, not all generators participate in the program. Read “Winter 2017/2018 recap: Historic cold snap reinforces findings in Operational Fuel-Security Analysis” to learn why the winter reliability program provided critical support again this winter.

For the fifth year in a row, a winter reliability program is in effect in New England to address seasonal reliability challenges created by constraints on New England’s interstate natural gas pipeline system. The program is a short-term, cost-effective effort to help ensure eligible generators have the fuel needed to operate reliably during very cold winter periods.

Program objective

About 45% of the total generating capability in New England uses natural gas as its primary fuel. However, multiple studies and the ISO’s operating experience show that the pipelines carrying natural gas into the region are running at or near full capacity to serve heating demand during most of the winter. Particularly on the coldest days, little to no pipeline capacity remains available for sale to power generators, putting significant amounts of natural-gas-fired generation at risk of not being able to get fuel when needed. Liquefied natural gas (LNG), which is brought into New England on tanker ships, may also not be available unless generators contract for it ahead of time. The region then relies on oil-fired resources to fill the gap, provided that these plants have sufficient on-site fuel supplies throughout the winter.

New England’s winter reliability programs are designed to incentivize eligible power plants to secure sufficient fuel at the beginning of winter by offsetting some of the carrying costs for unused oil or LNG contracts at the end of the winter. Demand-response resources are also incentivized to be available to help reduce winter demand. Developed collaboratively through the ISO’s stakeholder process, the programs serve as a stop-gap measure until longer-term capacity market changes—Pay-for-Performance (PFP) incentives—go into effect on June 1, 2018.

Eligibility and program caps

Eligibility, qualification, and compensation caps are the same as last year’s program:

• Oil: The winter reliability program is open to oil-fired generators or natural-gas-fired generators with dual-fuel capability that establish a specified amount of on-site oil inventory. Program qualification is limited, per generator, to oil inventory as of December 1 that meets or exceeds the lesser of either 85% of usable fuel storage or the supply to operate for 10 days at full load.
• Liquefied natural gas (LNG): Natural-gas-fired generators that contract for LNG can also participate. Per winter, the program is limited to all qualifying contracts on a first come, first served basis that, in aggregate, do not exceed 6 billion cubic feet (Bcf) and the daily output of the providers of LNG. Six Bcf is equivalent to about 100 million barrels of oil and 6,000,000 million British thermal units (MMBtu).
• Demand response (DR): DR resources with additional capacity beyond obligations in the Forward Capacity Market can participate as well. Per winter, no more than 100 assets at a level not to exceed 100 MW can participate; each asset can be dispatched for a maximum of 180 hours.

See the program rules in Market Rule 1, Appendix K for details on eligibility requirements at various stages, inventory caps, and how program payments are calculated. Compensation is based on the carrying costs of fuel oil that is unused at the end of the winter, unused LNG contract volumes, or supplemental demand response provided. All generators are also subject to nonperformance charges.

2017/2018 participation update

The table below reflects the final status of the 2017/2018 winter program as of 6/11/18.

Type	Participants	Amount eligible for compensation	Payment rate	Program usage (oil inventory changes, LNG usage, and DR events)	Program costs
Oil	86 units	2.867 million barrels	$10.33 per barrel	December: 548,410 barrels January: 524,447 barrels February: 192,113 barrels March: 43,536 barrels	$24,535,344 (after penalties of $2,075,709) based on 2,576,094 barrels of unused eligible inventory at program end
LNG	0 units	0.0 MMBtu	$1.72 per MMBtu	None	$0.00
DR	3 assets	7.5 MW	$1,033 per MW-month, plus energy payments if dispatched	None	$34,177 ($13,946 monthly payments; $20,232 energy payments)

Previous winters’ participation and results

Results of the 2015/2016 and 2016/2017 programs can be found on the Winter Program Payment Rate webpage. Information on the two earlier winter programs can be found in “New England power system performed well through winter 2014/2015” and “Oil inventory was key in maintaining power system reliability through colder-than-normal weather during winter 2013/2014.”

While participation has varied from year to year, the winter program has been an important insurance policy, helping to ensure reliability during hard-to-predict winter temperatures. Those temperatures largely determine program fuel usage. For example:

• During the record-setting warm weather of winter 2015/2016, only 254,845 barrels of program oil were used.
• In comparison, close to 3 million barrels of program oil were burned to help keep the lights on during winter 2014/2015, which included February 2015—the coldest month on record, based on ISO data since 1960.

No program LNG has ever been used, and this year no generator has registered to participate in the LNG program. For the past few years, pre-winter contracting for LNG (a requirement for program participation) has been at a higher price than the prices for other fuels or demand response during winter. The program doesn’t guarantee participants will be called to run. Instead, as usual, the lowest-cost resources among all those participating in the market are dispatched first to meet demand.

Dual-fuel commissioning

Incentives were offered during winters 2014/2015 and 2015/2016 for natural-gas-fired generators to add dual-fuel capability and also have sufficient oil in the tank at the start of each winter through December 1, 2017. (The date for establishing eligibility to participate has passed, and no new dual-fuel commissioning is being accepted.) The cost incurred for this facet of the program was $1.54 million, of a total cost cap of $5.7 million. Six units commissioned dual-fuel capability, for a total winter seasonal claimed capability addition of 1,774 MW:

• 4 units for 2014/2015 (1,039 MW)
• 2 units for 2015/2016 (735 MW)

Learn more

• Materials related to the development of the program can be found at Winter Reliability Solutions for 2015/2016 to 2017/2018 Key Project.
• See the Federal Energy Regulatory Commission’s order approving the program for the winters of 2015/2016 to 2017/2018 to address seasonal reliability challenges created by constraints on New England’s interstate natural gas pipeline system.
• Learn about the fuel adequacy challenge for natural-gas-fired generation.