After months of debate by ISO-NE and stakeholders, the RTO’s proposal to revamp its Forward Capacity Market is now in the hands of FERC.

In a detailed filing to federal regulators last week, ISO-NE laid out its reasoning both for eliminating the contentious minimum offer price rule (MOPR) and for doing so after a two-year delay.

The proposal largely reiterates the points that the grid operator has made during a monthslong stakeholder process in NEPOOL, but the document is the first time its entire reasoning has been laid out in one place.

ISO-NE is calling for the creation of a “more nuanced mechanism for evaluating new resource capacity market offers,” exempting both clean or renewable resources and merchant generators from a new resource-specific, buyer-side market power review.

But to avoid a flood of new state-sponsored resources into the capacity market and a corresponding rash of “inefficient retirements,” it proposes a two-year transition period during which the MOPR would remain in effect but up to 700 MW of renewables could get exemptions from it.

“The ISO is concerned that the immediate entry of large quantities of state-sponsored resources could pose an unacceptable risk to the existing resources upon which the region currently relies, prompting the retirement of these resources before the point at which we are in a position to fully ascertain and account for the relative reliability benefits of the retiring resources and the new resources replacing them,” ISO-NE COO Vamsi Chadalavada said in testimony attached to the filing.

A History of Failure

As a backdrop to its latest proposal, ISO-NE lays out a history of admitted failures at accommodating state-sponsored resources into the capacity market.

The 2014 renewable technology resource (RTR) exemption had caps that were too small, and rules too restrictive, to qualify many of the renewable resources trying to get into the capacity market.

The RTO’s Competitive Auctions with Sponsored Policy Resources (CASPR) construct — which created a second, “substitution” auction, in which existing resources can transfer their capacity supply obligations (CSOs) to state-sponsored resources — has also failed to have the intended results. In the four auctions since its implementation, only 54 MW of state-sponsored resources have been awarded a CSO through a substitution auction, the RTO said.

A New Plan

In light of those failures, and with clean energy procurements on the rise even more in the New England states in the last few years, ISO-NE needed a new plan.

Its proposal excludes certain new resources from having their capacity market offers mitigated if they “lack either the ability or the incentive to exercise market power (or both), or because exclusion of those resources will address the inefficient overbuild concerns related to the accelerated state procurement of sponsored resources,” the RTO wrote.

In addition to federally or state-sponsored resources, new projects with a capacity less than or equal to 5 MW, passive demand response resources and new resources that are not receiving revenues outside of RTO-administered wholesale markets from a load-serving entity, state or subdivision of a state will also be exempt from the buyer-side review and any mitigation.

FERC’s Response in the Balance

Now the ball is in FERC’s court, and while sometimes the federal agency’s response is predictable, this is not one of those times.

Arguably the most pertinent question is whether the two-year delay complies with FERC Democrats’ recent pointed, if nonbinding, directive to remove the MOPR “expeditiously.” (See FERC Weighs in as ISO-NE Prepares for Capacity Auction.)

FERC typically responds to filings under Federal Power Act Section 205 within 60 days, and there are a number of ways it could respond, said Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School.

It could approve the filing as is, and it would go into effect. It could reject the filing, keeping the status quo. It could also issue a deficiency letter asking for more information or call for a paper hearing, extending the deadline.

Or, Peskoe said, “it could reject the filing, and with that rejection issue a Section 206 order finding that the status quo is unjust and unreasonable and order ISO-NE to change it. That could be a specific order to put into place an immediate end to the MOPR.”

FERC took that route with PJM’s MOPR in 2018, and the resulting process took another year and a half to complete. But, Peskoe said, because the immediate cessation of the MOPR was already on the table and under discussion in New England, it could likely develop much more quickly.

D.C. politics could end up playing into the decision too: There’s a possible scenario in which FERC ends up split 2-2 in 2023 after approving ISO-NE’s two-year transition. If the RTO were to backtrack at that point on its decision to remove the MOPR altogether, its decision could end up being approved by the split FERC by operation of law.

Eyes on the RTO

The debate over the MOPR removal and especially the transition proposal has generated an unusual amount of scrutiny of ISO-NE and NEPOOL, which often operate under the radar.

In particular, opponents of the delay have cried foul and accused the grid operator of being an impediment to the clean energy transition.

“ISO-NE, New England’s energy operator, just decided to push back letting clean energy into the regional market by two more years,” tweeted Melissa Birchard, senior regulatory attorney for power grid reform at the Acadia Center. “This is a mistake for the climate and sticks consumers with extra costs. FERC should reject this and direct the ISO to let clean energy compete now.”