FERC on Thursday ordered CAISO, ISO-NE, MISO, NYISO, PJM and SPP to report on how their system needs are changing with their shifting resource mixes and how they intend to meet them (AD21-10).

The commission said the reports would build on the record developed during four technical conferences last year and provide a foundation for potential market changes.

“At this time, we do not propose a generic solution to address changing system needs across the RTOs/ISOs because of the diversity of those needs and the lack of a compelling record to support any one-size-fits-all solution for meeting those needs,” the commission said. “Instead, we believe that it is appropriate to gather additional information from the RTOs/ISOs … to enhance our understanding of the changing system needs in each RTO/ISO and potential mechanisms for addressing those needs as they change over time. We will review the reports and comments to determine whether further action is appropriate.”

The grid operators must report on:

• • • current system needs under changing resource mixes and load profiles;
    • how each expects its system needs to change over the next five and 10 years;
    • whether and how each plans to change its energy and ancillary services (E&AS) markets to meet expected system needs over the next five and 10 years; and
    • information about changes to resource adequacy programs or other market changes, including to capacity markets, that would help each meet changes in system needs.

The commission gave the grid operators 180 days to file reports in response to the order, with public comments due 60 days later.

Democrat Richard Glick called for the proceeding after taking over the commission chairmanship last year.

The commission said the record developed in the docket indicated that “RTOs/ISOs currently face changing system needs that vary significantly by RTO/ISO. The time horizon (minutes, hours, days, seasons) of system needs, particularly with respect to net load variability and uncertainty, also appears to vary significantly across RTOs/ISOs.”

While the issues have been most acute in regions with the highest penetration of variable resources, such as CAISO and SPP, “other RTOs/ISOs also expect their system needs to change in the future, and the commission and stakeholders would benefit from additional information from all RTOs/ISOs on the subject.”

Concurring Statements

Although the commission unanimously supported the order, the panel’s two Republicans offered some additional comments in concurring statements.

Commissioner James Danly called for “a sincere effort to take the lessons learned in our markets and reevaluate whether and how those markets work.

“A single, basic set of questions must be at the heart of our examination: Are price signals providing the proper incentives for the orderly entry and exit of the correct type and quantity of generation to ensure resource adequacy and reliability?” he said. “What we should not do is try to engineer a record by which we might later justify commission action in pursuit of narrow, preordained policy goals.”

Commissioner Mark Christie said that although the primary focus of the reports ordered by the commission related to the E&AS markets, MISO’s latest capacity auction results “are only the latest evidence that the future of all RTO/ISO market constructs should be considered” in the docket. (See MISO’s 2022/23 Capacity Auction Lays Bare Shortfalls in Midwest.)

“Specifically, I propose fundamental questions regarding pricing and compensation in the energy, ancillary services and capacity markets that merit discussion due to their potential impact on reliability and fairness to consumers. For example, I think it is time to put the all-important question of the continued use of locational marginal pricing in these market constructs on the table for serious scrutiny and discussion,” he said.

Technical Conferences

In March 2021, FERC held its first technical conference in the docket, which focused on capacity markets in PJM, ISO-NE and NYISO and featured broad criticism of the minimum offer price rule. (See PJM MOPR in the Crosshairs at FERC Tech Conference.)

That led to PJM’s proposal to apply MOPR only to resources connected to the exercise of buyer-side market power or those receiving state subsidies conditioned on clearing the capacity auction. The new rule took effect Sept. 29 “by operation of law” after the commission deadlocked 2-2. The rule change is the subject of a challenge by merchant generators before the 3rd U.S. Circuit Court of Appeals. (See FERC Declines Rehearing of PJM MOPR; Ball now in 3rd Circuit Court.)

A second conference on May 25 focused on ISO-NE’s markets. ISO-NE CEO Gordon van Welie told the commission markets are “never going to work very well” with inadequate infrastructure supporting them and cited a “misalignment” between the RTO markets and state policies. (See Regulators, ISO-NE Discuss Market Changes at FERC Tech Conference.)

A Forward Clean Energy Market, which is under consideration, could relieve some of the tensions, van Welie said. But he said problems will persist “until the region figures out how it wants to socialize some of these costs for reliability that are outside of the market.”

After months of debate, ISO-NE earlier this month filed a proposal to eliminate its MOPR after a two-year delay. (See ISO-NE Sends MOPR Filing to FERC, Teeing up Big Decision and Mass. Democrats Take on ISO-NE over MOPR.)

On Sept. 14, the commission held the first of two conferences on E&AS markets, with a focus on the need for flexible ramping products to compensate for shortfalls in forecasted wind and solar output. (See Flexible Ramping Grows as Ancillary Service.) FERC staff had teed up some of the issues in a Sept. 7 white paper.

The discussions continued at a conference Oct. 12, where speakers agreed that market participation rules should be revised to ease the entry of new and emerging resource types. (See Stakeholders Ask FERC to Support E&AS Market Changes.)

“One of the recurring themes we’ve heard from a number of participants is that increasing reliance on intermittent generation resources and changes in load profiles associated with the growth of behind-the-meter generation requires additional system flexibility,” Glick said at Thursday’s open meeting. He said the commission seeks feedback from market participants as well as grid operators. “That will help enable the commission to assess whether modifications of the markets we oversee are necessary and to address the changing needs of the system.”