ISO-NE is planning to decouple resource retirements from the capacity auction process and adopt a two-year notification timeline for retiring generators, the RTO told stakeholders at the NEPOOL Markets Committee meeting Jan. 14.
The proposal is one component of ISO-NE’s wide-ranging capacity auction reform project, which aims to transition the region to a “prompt” capacity market held just months before each capacity commitment period (CCP), instead of the current time frame of over three years. (See ISO-NE in 2025: Capacity Reforms, Tx Solicitation and FERC Orders.)
While retiring resources are currently required to submit de-list bids through the forward capacity auction process over the four years prior to the relevant CCP, “the move to a prompt capacity auction necessitates a new mechanism to collect resource retirements,” said Kevin Coopey of ISO-NE.
Coopey added that the new process “will be the mechanism to reduce or eliminate interconnection service” for both capacity interconnection rights and energy-only interconnection rights. ISO-NE plans to use the term “deactivation” for resources that are permanently exiting both the capacity and energy markets, and “capacity market deactivation” for resources strictly exiting the capacity market.
Coopey said there are “natural tensions” between adopting a shorter versus a longer retirement notification timeline.
“A shorter timeline allows participants to improve the efficiency of deactivation decisions by having better market information,” he said, while “a longer timeline allows the market, including entrants and the ISO, to better respond to deactivations.”
ISO-NE also emphasized the importance of simplicity in the new retirement design to prevent confusion and allow participants “to access market information in a timely manner that enhances efficient decision-making.”
Zeky Murra Anton of ISO-NE noted that the RTO “evaluated timelines ranging from four years to six months” before landing on the two-year timeline. Relative to the current timeline, a two-year notification period would give generators more up-to-date information to enable more efficient retirement decisions while still providing time for the RTO and other participants to respond to issues created by retirements, he said.
ISO-NE is planning to review deactivation notifications for reliability and market power issues before publishing the information prior to each capacity auction.
Murra Anton acknowledged that the shorter retirement notification timeline could present challenges if transmission issues are identified.
“Experience with transmission construction shows the time from needs identification to completion is frequently longer than two years,” he said.
If solutions are not feasible within the two-year time frame, ISO-NE’s tariff authorizes reliability must-run agreements to retain resources for local transmission reliability issues.
ISO-NE will continue to work with stakeholders on the proposal at the MC in February. It is planning to file with FERC the resource retirement and prompt auction reforms by the end of 2025, followed by a second filing in 2026 focused on resource accreditation and dividing CCPs into seasonal periods. The changes are intended to take effect for the 2028-29 CCP.
