ISO-NE will ask FERC to exempt energy efficiency resources from capacity performance payments, although the proposal failed to win an endorsement from the New England Power Pool Participants Committee on Thursday.

The proposal received a 58% sector-weighted vote of the PC, short of the 60% endorsement threshold, with unanimous dissent from the End User sector and all 49 Publicly Owned Entity members abstaining from the vote. The Generation, Transmission, Supplier and Alternative Resource sectors supported the change. Last month, the NEPOOL Markets Committee also failed to endorse the proposal along similar voting lines. (See NEPOOL Stakeholders Split over PfP for EE.)

However, the Participants Committee did endorse a related measure to revise the Financial Assurance Policy to exclude EE capacity supply obligations from the calculation of capacity financial assurance requirements. The motion passed with a 79% vote in favor.

The RTO says capacity performance bonuses should be limited to those resources whose performance could be at risk during a capacity shortage. The change is a recognition that EE resources permanently reduce energy consumption and have no real-time performance measures, officials said.

Other Actions

In other action, the committee approved:

• Revisions to Operating Procedures 17 and 21. The changes to OP-17 spell out in more detail the ranges of acceptable load power factors for sections of the New England Control Area and the responsibilities of ISO-NE, transmission owners and transmission customers. The revisions to OP-21 incorporate the annual generator winter readiness survey process and the yearly natural gas critical infrastructure survey, intended to ensure the interstate natural gas system is not on electrical circuits subject to automatic or manual load-shedding schemes.
• Hydro-Québec interconnection capability credits and installed capacity requirement values for Forward Capacity Auction 15. The HQICC is 883 MW for each month of the 2024/25 capacity commitment period (June through May). The ICR is 34,153 MW, with a net ICR of 33,270 MW.
• The 2021 operating and capital budgets for ISO-NE and the budget for the New England States Committee on Electricity (NESCOE). The RTO’s proposed operating budget is $178.6 million, a 2.5% increase from 2020, excluding FERC Order 1000 funding and before depreciation. Its full-time headcount remains unchanged at 587. The RTO’s capital budget is unchanged from 2020 at $28 million. NESCOE’s $2.4 million budget for next year is below the $2.5 million projected in its five-year pro forma budget.

In executive session, the committee also:

• approved an extension and amendment to the Generation Information System Administration Agreement between NEPOOL and APX; and
• approved the hiring of former National Grid executive Peter Flynn as a project administrator for the Future Grid Study and Rutgers University professor Frank Felder as a consultant on the “Transition to the Future Grid.”

Pathways Process Continues

Felder and Kathleen Spees of The Brattle Group each made presentations on “Potential Pathways to the Future Grid,” with Spees exploring the “Integrated Clean Capacity Market” and Felder the “Focus on Forward Clean Energy Market and Carbon Pricing.”

Spees said any useful path forward for New England will have to meet both resource adequacy needs and state policies supporting emission-free generation. She said that the Integrated Clean Capacity Market would be a three-year forward market that attracts the optimal resource mix for reliability and state policy goals. By co-optimizing procurement of unbundled capacity and unbundled clean energy attribute credits, it would be a “fit-for-purpose market for achieving the 80 to 100% clean electricity future,” she said.

Felder told the committee that the goal of his project is to achieve “a common understanding” that defines potential future pathways and the variations and tradeoffs among them.

He said while co-optimizing the Forward Clean Energy Market (FCEM) and Forward Capacity Market (FCM) would “in theory … maximize the social surplus of meeting states’ clean energy objectives and regions’ resource adequacy requirements … it is not clear if [it] can be implemented in practice.”

Without co-optimization, resources offering into the FCEM will have to estimate their expected revenues in the FCM, and if those estimates are incorrect, inefficient outcomes may result.

Felder added that to achieve significant carbon reductions, the emission cap for the Regional Greenhouse Gas Initiative must be “substantially reduced so that prices of emission allowances are close to the” social cost of carbon. Low and non-emitting carbon resources offering into the FCM have larger margins and recover more of their fixed costs in the energy market, enabling them to be more competitive.

CEO, COO Reports

ISO-NE CEO Gordon van Welie briefed the PC on the Board of Directors’ direction to management to prioritize the evaluation of “net carbon pricing” and an FCEM, which he discussed at FERC’s Sept. 30 technical conference on carbon pricing. (See related story, FERC Urged to Embrace Carbon Pricing.)

In prepared remarks to the FERC conference, van Welie said the primary tool for New England states “to effect rapid decarbonization has been to sponsor clean energy resources outside of the wholesale markets, which make the owners of these resources largely indifferent to market prices.” He added that the RTO “has long advocated for carbon pricing as a solution that allows markets to efficiently price emissions without harming price formation.”

Van Welie said the RTO recognizes “that any solution requires a coordinated effort with state and federal policymakers and our stakeholders. Many policymakers are concerned that carbon pricing will lead to cost increases in the wholesale markets. We believe that those increases will be significantly offset by reductions in state programs. Furthermore, we can implement a ‘net carbon pricing’ methodology whereby the emissions fees on resources are automatically rebated to wholesale buyers through our wholesale settlements systems, thereby minimizing the cost impact.”

In his committee report, ISO-NE Chief Operating Officer Vamsi Chadalavada said that the energy market value was $158 million in September, a nearly 50% drop from August and down $53 million from September 2019.

Chadalavada added that development of the 2021 Regional System Plan will start in the first quarter. He said improvements to streamline the plan are underway and include a webpage for economic studies and enhanced environmental and emissions information.

According to Chadalavada, FCA 15 values will be filed with FERC no later than Nov. 10, and 2021 annual reconfiguration auction values will be filed by Dec. 1.

Draft of ISO-NE 2021 Annual Work Plan Discussed

Chadalavada also presented a draft of ISO-NE’s 2021 Annual Work Plan for “innovating for the changing grid; adjusting to impacts of recent events; advancing operational improvements; and managing risks.”

In addition to the Future Grid project, the RTO’s major initiatives will include elements of the Energy Security Initiative, transmission planning for an evolving grid and evaluating the impact of shifting net peak loads.

The RTO also will be reviewing lessons learned from its first competitive transmission solicitation; working on improvements to operational and long-term planning forecasts, including the impact of the COVID-19 pandemic; and moving the financial transmission rights market to a clearinghouse.

Chadalavada also cited upcoming upgrades to the nGEM day-ahead market clearing software and capital projects to protect against increased hacking attempts.