ISO-NE and NEPOOL members discussed how to address market power, tie benefits and resource qualification in a prompt capacity market during a three-day meeting May 6 to 8.

The RTO is working to transition its Forward Capacity Market — which features auctions held three years prior to each capacity commitment period (CCP) — to a prompt market, with auctions held one month before each CCP.

The move to a prompt market is intended to increase the accuracy of available information prior to each auction and eliminate the phenomenon of in-development resources receiving capacity supply obligations (CSOs) but not coming online quickly enough to meet them.

The RTO plans to file its prompt market proposal in late 2025. Once it completes the prompt market design, ISO-NE plans to begin working on the details of a separate proposal for seasonal capacity market changes, which would split CCPs into separate six-month winter and summer periods.

Market Power Mitigation and Resource Retirements

Responding to feedback from NEPOOL members at the Markets Committee in April, ISO-NE has walked back a proposal for a penalty to prevent the abuse of market power in the new auction format.

The market power charge would have applied to retiring resources that fail a pair of ISO-NE tests to determine whether the resource is economically viable and whether its retirement would provide net benefits to the resource owner’s generation portfolio. (See ISO-NE Outlines Market Power Mitigation Measures for CAR Project.)

“Multiple sectors shared concerns on potential issues associated with an imposition of the market power charge,” said Kevin Coopey, principal analyst at ISO-NE. He said the feedback included concerns about the “individualized nature” of market power penalties on participants found to be exercising market power, compared to the “potential regional harm.”

He said ISO-NE “continues to believe that there could be benefits to a [market power charge] and may further assess such a framework after CAR [the Capacity Auction Reform initiative] is completed.”

In place of a penalty, ISO-NE plans to adapt its existing process of proxy supply offers. Proxy offers would apply only to resources that fail both the conduct test and the net-portfolio benefits test and would last for one year after a resource’s retirement.

Stakeholders at the MC generally expressed appreciation for the elimination of the proposed market power charge, while some continued to advocate for more flexibility around retirement submissions. ISO-NE still proposes to require retirement notifications to be submitted two years in advance and would not allow participants to withdraw submissions.

ISO-NE also adopted a proposal made to the MC in April by LS Power to allow accelerated retirements for requests that pass reliability and market power tests. Once a resource is approved for accelerated retirement, it would be able to retire as soon as its first month without a CSO.

Buyer-side Market Power Mitigation

ISO-NE also plans to largely maintain its existing format for mitigating buyer-side market power, economist Andrew Copland said.

Buyer-side market power occurs “when a participant with a large load-side interest attempts to lower its total capacity market costs through the uneconomic entry of a resource,” he noted.

New passive demand response resources and resources smaller than 5 MW are exempt from buyer-side market power mitigation, along with new resources supported by federal or state governments to support decarbonization and resources “that do not receive out-of-market revenues from [a load-serving entity], state or political subdivision of a state.”

Resources also could avoid mitigation by passing a conduct test or providing evidence showing that their sponsoring LSE “is unlikely to realize a material net financial benefit.”

If a market entrant does not meet any of these criteria, it would be subject to an offer floor price imposed by the ISO-NE Internal Market Monitor.

Tie Benefits

Also at the MC, members debated how ISO-NE accounts for tie benefits in the capacity market.

Tie benefits describe the level of support the RTO expects to receive from neighboring control areas during grid emergencies. ISO-NE assumes about 2,000 MW of tie benefits, which reduces the amount of capacity it needs to procure in its capacity auction.

In recent months, New England generators have pushed back against this assumption and have argued the RTO should not treat tie benefits as equivalent to resources with CSOs.

Bruce Anderson, general counsel for the New England Power Generators Association (NEPGA), said that because tie benefits are not supported by CSOs or subject to Pay-for-Performance penalties, ISO-NE should not reduce its installed capacity requirement to account for them.

“Rather than reduce the capacity market demand quantity based on a probabilistic estimate of the amount of energy ISO-NE can rely on during capacity deficiencies, the value of import megawatts should be grounded in actual, firm offer and delivery requirements,” Anderson said.

He argued that the current approach “compromises system reliability” and “displaces resources willing to assume a capacity supply obligation, including those both within New England and in neighboring control areas.”

Ben Griffiths of LS Power expressed particular concern about Hydro-Quebec interconnection capability credits (HQICCs) on the Phase II transmission line between New England and Quebec. HQICCs reduce the capacity charges for interconnection rights holders that financially support the line.

Griffiths argued the current methodology gives HQICCs “preferential treatment compared to capacity,” while non-interconnection-rights-holding participants are effectively “compelled to purchase HQICCs at above-market rates even when true performance-backed capacity is available at the same price.”

He said ISO-NE should conform its treatment of HQICCs “with either PTF [pool transmission facilities] or capacity obligations” to boost market equity and improve reliability.

He also emphasized the uncertain emergency benefits associated with the lines, noting that Hydro-Quebec has not given emergency assistance to New England over at least the last seven years.

“We have no idea how much, if any, emergency assistance [Hydro-Quebec] could provide New England when needed,” Griffiths said.

Other stakeholders pushed back on NEPGA and LS Power’s arguments, saying that tie benefits are an important input into the ICR and are supported by agreements between neighboring regions.

At the April MC meeting, Matthew Ide, of the Massachusetts Municipal Wholesale Electric Co., said that “network load customers pay for all the tie benefits that come from the PTF ties through regional transmission rates. In return, load receives the benefit of a lower ICR and less need to procure capacity to meet the ICR.” (See NEPOOL Markets Committee Briefs: April 8-9, 2025.)

Resource Qualification

Jennifer Engelson, supervisor of resource qualification at ISO-NE, detailed the RTO’s current thinking on resource qualification in a prompt auction.

New resources that have not achieved commercial operations will be allowed to participate in auction qualification activities but must come online prior to a “capacity demonstration deadline” in early April prior to the auction in May, she said. ISO-NE plans to issue preliminary qualified capacity (QC) values in February but would not finalize these values until after the demonstration deadline and a period for participants to challenge their QC values.

For intermittent resources, QC will be based on “the average of the median of the resource’s net output in reliability hours for the most recent five seasonal periods,” Engelson said.

For non-intermittent resources, QC will be based on the median seasonal claimed capability for the past five years. QC for non-intermittent imports and distributed energy capacity resources will be based on seasonal audit values.