By Michael Brooks
ISO-NE will issue more than $20 million in refunds to capacity resources that were prevented from reducing their offers in Connecticut for reliability reasons in the 2008 Forward Capacity Auction under an order issued by FERC last week (ER08-633).
Under the RTO’s “proration” rule at the time, the total payment to all listed capacity resources had to equal the clearing price multiplied by the installed capacity requirement. To achieve this, resources could either receive capacity payments lower than the clearing price (price proration) or reduce their capacity supply (quantity proration). All proration, however, was subject to a reliability review.
Public Service Enterprise Group complained that ISO-NE barred it from prorating its capacity supply in Connecticut, forcing the company to offer at a lower price, which the company said cost it $2.8 million. When its protest and rehearing request were denied by FERC, the company sued in federal court. The D.C. Circuit Court of Appeals ruled in favor of PSEG and remanded the case back to the commission.
Last year, FERC reversed its decision, saying, “We now find that where resources needed for reliability were prohibited from prorating quantity under the proration rule, they should have received the full market clearing price for each megawatt offered.” It ordered ISO-NE to provide a plan for resettlement.
The RTO reported that 5,870 MW would have been prorated had plants been allowed to. The clearing price for FCA 1, conducted in February 2008, was $4.50/kW-month. To determine how much each plant would be owed, ISO-NE took the difference between the clearing price and the prorated price, $4.254/kW-month, converted it to megawatt-years and multiplied it by 5,870. The result was about $17.3 million in refunds, plus about $3.1 million in interest. The RTO said it would recalculate the interest owed upon FERC’s order, so the final amount refunded to companies will be higher.
“We find the resettlements … appropriate to ensure that PSEG and other Connecticut resources that were not able to prorate quantity be paid the full capacity clearing price for each of the megawatts that cleared FCA 1,” the commission said.
Eversource Energy, which was Northeast Utilities at the time of the auction, will pay the bulk of the refunds, at almost $15.6 million. UIL Holdings, now part of Avangrid, will pay about $3.8 million.
