FERC on Jan. 22 partially granted a complaint by the New England Power Generators Association (NEPGA) about the design of ISO-NE’s Pay-for-Performance mechanism (EL25-106).

The commission directed ISO-NE to cap the PFP balancing ratio at 1.0 but rejected NEGPA’s complaint about the RTO’s method of allocating stopped losses.

ISO-NE’s PFP rules incentivize performance during capacity scarcity events. While all resources are eligible to earn credits, only resources with capacity supply obligations (CSOs) are subject to penalties for underperformance.

The complaint stems from a scarcity event on June 24, 2025, that coincided with ISO-NE’s highest peak load in more than a decade. PFP credits totaled about $114 million during the event.

In a complaint filed in late July, NEPGA contended that a pair of “flawed rules” caused capacity resources to accrue $51 million in “improper charges” during the three-hour scarcity event.

The balancing ratio, which is used to calculate resources’ performance responsibilities during scarcity events, averaged about 1.031 during the June 24 event, causing “$25 million in improper charges to capacity resources,” NEPGA wrote in its complaint. It argued for a cap on the balancing ratio, writing that capping the ratio at 1.0 would prevent resources from being required to supply more than their CSOs. (See NEPGA Seeks Relief for ‘Improper’ Pay-for-Performance Costs in ISO-NE.)

The association also called for changes to ISO-NE’s rules spreading the costs of under-collected PFP penalties across all capacity resources. Monthly stop-loss limits on the total penalties each resource can incur can cause under-collection of credits. Instead of charging these losses to all resources with CSOs, NEPGA proposed to deduct under-collected credits from the payment pool for overperforming resources.

The association noted that there was a $26 million under-collection of credits during the June 24 event. This deficit was charged to all capacity resources that did not hit their stop-loss limit during the event.

In response to NEPGA’s complaint, ISO-NE did not oppose capping the balancing ratio but opposed the proposed changes to the allocation of under-collected credits. The RTO argued it is fair to allocate stopped losses to capacity resources because the stop-loss rules benefit these resources by limiting their financial risks. (See ISO-NE Open to PFP Changes Following NEPGA Complaint.)

In its ruling, FERC agreed with NEPGA’s contention that the lack of a balancing ratio cap is not just and reasonable, noting that “in the absence of such a cap, resources with capacity supply obligations in ISO-NE may be subject to financial charges even when they are providing their maximum possible physical output during capacity scarcity conditions.”

The commission wrote that, under the current design of ISO-NE’s Forward Capacity Market, resources are frequently accredited near their maximum capability. Notably, this could change under the new rules proposed by the RTO in its Capacity Auction Reform project, which would accredit resources based on their expected reliability contributions during periods of shortfall and likely would reduce the overall accreditation value for many resources.

Capping the balancing ratio appears unlikely to hurt reliability, FERC wrote, reasoning that resources still would have received a significant performance incentive if the ratio had been capped on June 24. Capping the ratio at 1.0 would have lowered the effective performance rate from $9,337/MWh to $7,243/MWh during the event.

Regarding NEPGA’s complaint about the allocation of stopped losses, FERC agreed with ISO-NE’s argument that all capacity resources benefit from the stop-loss rules. It found the existing methodology to be “consistent with the beneficiary-pays principle.”

“The stop-loss mechanism provides each capacity resource with insurance against the possibility of suffering net financial losses in excess of the stop-loss limit,” FERC wrote. “Even a capacity resource that performs at its capacity supply obligation benefits from the stop-loss mechanism and should pay its share of the mechanism’s costs.”

FERC gave ISO-NE 180 days to file tariff changes capping the balancing ratio at 1.0.