By William Opalka

The Federal Energy Regulatory Commission last week accepted ISO-NE’s plan to increase its scrutiny of energy importers to mitigate market power in its capacity auctions.

FERC had issued a show cause order in September directing the RTO to strengthen market rules that prevented its Internal Market Monitor from fully evaluating the capacity bids of import resources. FERC had expressed concern that a declining capacity surplus had left the RTO vulnerable to market power abuses.

Under the previous rules, the Market Monitor determined only whether an importer’s bid was consistent with its actions in previous capacity auctions, rather than evaluating it against its net risk-adjusted going-forward costs, as is done for internal resources.

The revisions will allow ISO-NE to determine which new import resources have market power and apply mitigation to them in a way similar to what is applied to existing resources.

“ISO-NE’s current proposal represents a significant step to address the problem identified by the commission in the Show Cause Order, namely, the need to prevent resources participating in the FCA [Forward Capacity Auction] from exercising market power and leaving the auction at prices inconsistent with their net risk-adjusted costs,” FERC wrote (ER15-117).

The order is effective for FCA 9, which will be held in February for the 2018/19 delivery year.

Suppliers had asked for an opportunity to provide multiple offers in the auction, but FERC agreed with ISO-NE that there wasn’t enough time to implement required software changes for FCA 9. FERC ordered ISO-NE to implement the changes in time for FCA 10.

FERC also rejected a protest filed by Public Citizen to reopen FCA 8. The group had claimed that participants had used market power to increase prices, a contention the commission had previously rejected.