The NEPOOL Markets Committee devoted all three days of its summer meeting last week to continued discussion of ISO-NE’s revised proposal for FERC Order 2222 compliance and removal of the minimum offer price rule (MOPR) from the RTO’s capacity market.

Order 2222: ISO-NE Answers Questions on EAS Markets Participation

During the July MC meeting, there were several stakeholder questions during the presentation on energy and ancillary services (EAS) markets participation, to which ISO-NE wanted to provide follow-up answers, including:

• understanding whether a facility can participate in different aggregations, and if multiple parties can take ownership in an aggregated resource; and
• clarifying if a distributed energy resource aggregation (DERA) can participate under multiple models in the energy markets.

The RTO defines a facility as an electricity-consuming or -producing device located in homes and buildings, such as batteries, water heaters, electric vehicle chargers, HVAC systems and rooftop solar. Different capabilities of a facility can participate in different aggregations, ISO-NE said.

A facility’s energy withdrawal capability, for example, can be in a different aggregation from its demand reduction or energy injection capabilities as energy withdrawal is measured separately from demand reduction or energy injection. However, only one aggregator can register the energy withdrawal capability of a facility. Similarly, a facility’s regulation capability can be in a different aggregation from its demand reduction, energy injection or energy withdrawal capabilities but registered to only one aggregator.

In a change from its July presentation, the RTO said demand reduction and energy injection capabilities at a facility cannot be split among different aggregations. The implication was that the demand reduction capability of houses could be part of a demand response DERA and the energy injection capability could be part of a separate settlement-only DERA. ISO-NE said that was “problematic” because it would not provide the proper financial incentives for the demand response DERA to follow the dispatch instruction.

The demand response resource model avoids that problem by requiring a facility’s demand reduction and energy injection capabilities to be in the same aggregation.

Each DERA must participate under a single participation model in the energy markets based on its mix of capabilities. A DERA can choose from six energy market participation models: generator asset, binary storage facility (BSF), continuous storage facility (CSF), settlement-only DERA, demand response DERA or demand response resource.

The rules would also prohibit offering separate portions of a DERA into individual participation models because it acts as a single resource in the market, represented by a single set of requirements and offer parameters. All participation models include a specific set of requirements and offer parameters. A DERA must choose the model that best represents its combined capabilities.

However, a DERA participating under the demand response DERA, settlement-only DERA or demand response resource models in energy markets may simultaneously use the alternative technology regulation resource (ATRR) model to participate in the regulation market. DERAs that join under the generator asset, BSF or CSF models do not need to use the ATRR model to participate in the regulation market because they already include participation.

MOPR: Framing the Debate

Mark Spencer of LS Power gave a presentation making the case that eliminating the MOPR without accompanying changes to address supply-side buyer power may not yield a just and reasonable rate. The Federal Power Act, FERC precedents and the ISO‐NE tariff explicitly require regulators “to balance seller and buyer interests,” he said.

Spencer added that supplier-side mitigation reforms are needed to prevent the exercise of supplier market power for financial gain. In the current framework of the dynamic delist bid threshold (DDBT), all market participants, regardless of portfolio size or pro-rata quantity, that wish to delist must submit a cost workbook months in advance and lock in their bids. By removing the MOPR, mitigation will only be applied to existing merchant resources, not existing subsidized resources or new entry. The DDBT is calculated on the preceding auction clearing price, which is presumed to be a competitive result, and it ignores the administrative barriers that prevent market participants from submitting competitive offers

It also does not account for the effects of the MOPR elimination, which will likely result in an uncompetitive auction clearing price.

Spencer said potential solutions include:

• a DDBT based on a simulated competitive result;
• applying a net benefits test to determine which market participants are capable of wielding market power and allowing the others to submit competitive bids; and
• examining the need for a sealed bid auction framework to address concerns of start‐of‐round market power.