By Michael Kuser and Rich Heidorn Jr.

ISO-NE’s controversial proposal to compensate resources for maintaining inventoried energy during the winter months is now effective “by operation of law” because of inaction by FERC stemming from a lack of quorum (ER19-1428-001).

The commission issued an unusual Chapter 2B notice Tuesday, saying, “Pursuant to Section 205 of the Federal Power Act, in the absence of commission action on or before Aug. 5, 2019, ISO-NE’s proposal, as amended, became effective … May 28, 2019. The commission did not act on ISO-NE’s filing because of a lack of quorum at this time.”

“Since we know Commissioner LaFleur has been recused from ISO-NE matters, that means one of the other three is either (1) recused or (2) choosing not to participate for some reason. If (2) is what’s happened, that strikes me as very rare,” tweeted former FERC attorney Jeff Dennis, now general counsel for Advanced Energy Economy.

Sierra Club spokesman Brian Willis issued a statement calling FERC’s action “odd and infuriating.”

“Back in May, FERC gave ISO-NE a laundry list of what was wrong with its controversial market proposal that would have forced New England ratepayers to shell out about $150 million a year for several years to uneconomic fossil fuel plants through a ‘inventoried energy program.’ The inventoried energy program was broadly opposed by New England stakeholders, who presented evidence that ISO-NE’s program was discriminatory and unnecessary. ISO-NE refused to provide any of the additional information requested by FERC. In light of this, it appeared likely FERC would reject the inventoried energy program outright or order ISO-NE to rewrite its rules based on new principles, legal precedent or with greater consideration for costs to ratepayers.”

Dennis, however, had a different perspective. “Some version of the inventoried energy program has been approved every winter for MANY years now. No one likes it, FERC always wrings its hands when it approves it, but it always does.”

“The ISO will move forward with implementation of the short-term program as we continue working on the long-term, market-based solutions to the region’s energy security challenges,” ISO-NE spokeswoman Marcia Blomberg said in a statement. (See “Assessing ESI Risk Premiums,” NEPOOL Markets Committee Briefs: July 30, 2019.) She pointed to the RTO’s June 6 response to FERC’s request for additional information.

Chatterjee, Glick Split

Section 205 of the FPA requires each commissioner to explain his or her views with respect to the Chapter 2B changes.  On Thursday, the commissioners filed their comments, with LaFleur and Commissioner Bernard McNamee indicating they had not participated.

Chairman Neil Chatterjee said he would have approved ISO-NE’s filing, saying it “provides reasonable interim compensation, which can serve as a bridge to development of the longer-term market solution.”

“It is well settled that the entity filing a proposal need only demonstrate that the proposed revisions are just and reasonable, not that the proposal is the most just and reasonable proposal,” he said. “While some parties argue that ISO New England’s previous winter reliability programs are less expensive and may be more effective than the proposal in this proceeding, those programs are not the subject of this proceeding and are not before the commission.”

Chatterjee said the program “also aims to ameliorate the misaligned incentives issue” that prior programs did not address.

But Commissioner Richard Glick said he would have opposed the program as “patently unjust and unreasonable.”

“The program will cost New England consumers as much as $300 million without any evidence to suggest that it will actually improve the region’s fuel security or that any improvement is likely to be worth the cost. Indeed, the program goes so far as to hand out substantial payments to nuclear, coal and hydropower generators with no indication that these payments will change their behavior in the slightest,” Glick wrote. “That is a windfall, not a just and reasonable rate.”

FCAs 14 & 15

The RTO’s fuel security program is an interim plan for its 14th and 15th Forward Capacity Auctions, covering the capacity commitment periods of 2023/24 and 2024/25. In March, it filed Tariff revisions; the commission on May 8 said the filing was deficient; and the RTO submitted its response on June 6.

At a July 15 technical conference, New England regulators and stakeholders told FERC that ISO-NE’s fuel security proposal could increase costs without solving the region’s winter supply concerns and urged the commission to postpone the RTO’s Oct. 15 filing deadline and require it to provide more analysis before drafting Tariff changes. (See FERC Staff Hear Doubts on ISO-NE Fuel Security Plan.)

Jeff Bentz, the New England States Committee on Electricity’s director of analysis, testified the schedule could be delayed by six months without impacting the proposed implementation.

New England Power Pool Chair Nancy Chafetz, of Customized Energy Solutions, asked the commission to “keep an open mind” on the proposals. Although NEPOOL has the “jump ball” right to propose an alternative to the RTO’s proposal, Chafetz said the stakeholder body wouldn’t have an official position until it votes in October.

According to an email from Day Pitney attorney Pat Gerity, “while NEPOOL intervened in the Chapter 2B proceeding, it took no substantive position, and absent express direction from the [Participants] Committee, will not challenge the Chapter 2B Notice.”

Gerity noted FERC had previously been unable to act on an ISO-NE filing, but Congress has since stepped in to allow such non-action by the commission to be challenged on rehearing and appeal. “Specifically, the ‘Fair Ratepayer Accountability, Transparency, and Efficiency Standards Act’ was included as part of ‘America’s Water Infrastructure Act of 2018’ (Oct. 23, 2018), the result of which will be to treat the Chapter 2B notice for purposes of rehearing to be an order issued by the FERC accepting the changes,” Gerity said, adding that any request for rehearing of the Chapter 2B notice will be due on or before Sept. 4.

Section 205 of the FPA requires each commissioner to explain his or her views with respect to the Chapter 2B changes, though none has yet filed a written comment.

In a related matter, the New England Power Generators Association asked the commission Tuesday to reverse its decision to require generators needed for fuel security to offer at zero in FCA 14. It asked the commission to issue a rehearing order by Sept. 26, “before key deadlines lapse” for the auction (ER18-2364-001 and EL18-182-002).