The Sierra Club, the Union of Concerned Scientists and the Conservation Law Foundation jointly filed for rehearing Tuesday over FERC’s approval of changes to ISO-NE’s Inventoried Energy Program (IEP) (ER23-1588), arguing that ISO-NE failed to adequately justify the program and that it likely would increase costs for consumers.

The groups wrote that FERC’s approval of the program “errs in failing to examine whether tripling the costs of the [IEP] is just and reasonable in light of the lack of evidence that IEP payments would incent oil and gas generators to procure more fuel than they would otherwise.”

The nonprofits added that the commission’s decision also “errs in failing to consider new information about winter energy adequacy that is relevant to the need for the IEP, and thus to whether consumers would receive benefits proportionate to the enormous additional cost proposed.”

ISO-NE’s IEP is intended to compensate generators for keeping stored fuel onsite to ensure the region’s winter grid reliability, while the disputed changes to the program include the introduction of indexed rates meant to reflect changes in natural gas prices.

In ISO-NE’s original filing of the IEP changes, the RTO argued the changes “are designed to align key parameters of the IEP rates, terms and conditions with current market conditions and to make other improvements necessary to attract sufficient investment in incremental inventoried energy to support winter reliability.”

FERC unanimously approved ISO-NE’s proposed changes in an August ruling. (See FERC Approves Updates to ISO-NE Inventoried Energy Program.) In the order, FERC dismissed a range of complaints from the organizations and state consumer advocates related to the cost and justification of the program.

“The purpose of the Inventoried Energy Program is to incentivize resources to maintain inventoried energy to support winter reliability, and ISO-NE’s proposed revisions are designed to improve the program’s ability to achieve this goal,” FERC wrote.

In the rehearing request, the environmental organizations called FERC’s ruling “arbitrary and capricious.”

The groups wrote that FERC did not adequately consider the effect of changes to the region’s winter risk profile since the creation of the IEP, or whether the program actually would spur changes in behavior of generators. (See Study: Limited Exposure to Supply Shortfall for ISO-NE During Extreme Weather.)

“Most of the generators who receive a payment under the IEP, they’re already obligated to perform as capacity resources,” Casey Roberts, senior attorney with the Sierra Club Environmental Law Program, told RTO Insider. “In order to do that, they have to have fuel, otherwise they can’t run.”

Roberts argued FERC’s lack of scrutiny of the program’s justification and benefits sets a bad precedent for the approval of reliability programs.

“This really goes down to FERC’s core responsibility of protecting consumers from paying excessive rates,” Roberts said.

If FERC stands by its ruling, the environmental organizations could appeal FERC’s decision in court.

In June 2022, the U.S. Court of Appeals ruled the IEP could not compensate coal, hydro, biomass and nuclear generators because the incentive would not change their inventory operations. However, the court left the rest of the IEP in place, ruling that oil, natural gas and refuse generators are eligible for payments. (See Court Strikes a Blow to ISO-NE Winter Plan.)