By William Opalka

FERC last week accepted rule changes meant to prevent generation owners in ISO-NE from exercising market power by retiring resources that are still economic (ER16-551).

The commission approved revised Forward Capacity Market rules that will require retiring generators to declare their intention with de-list bids in March rather than October, while moving the “show of interest” deadline for new capacity market entrants from February to April.

The order also gives the Internal Market Monitor greater leeway in determining whether an economic generation resource is being retired to raise capacity prices.

“ISO-NE’s proposal includes several changes to the FCM timeline, which will benefit the market,” FERC wrote. “By requiring retirement bids to be submitted in March and by requiring ISO-NE to post shortly afterwards information regarding the amount of existing capacity that may exit the FCM, project sponsors that are considering developing new resources will have better and more timely information about when and where new capacity may be needed.

“By moving the show of interest window to a date after the retirement bid deadline, new entrants will be able to use the information about potential retirements to inform their decision on whether to enter the FCM in the next auction,” the commission said.

The rules will take effect with the 11th Forward Capacity Auction next year for the 2020/21 commitment period.

Generators submit de-list bids that specify a price below which an existing resource would not provide capacity. A static de-list bid signifies a one-year absence from the capacity market; a permanent de-list bid means the resource will exit the market. A capacity supplier wishing to permanently retire an existing resource regardless of price would submit a non-price retirement request.

IMM Review

The order also approved rule changes to address premature retirements of economic resources, a need ISO-NE said was identified by both its IMM and External Market Monitor. The RTO defines “uneconomic” retirement as the retirement of a capacity resource that would be expected to remain profitable if it continued running.

ISO-NE proposed that its IMM issue a determination on the reasonableness of generators’ cost assumptions and the appropriateness of their proposed bids. Based on that, the RTO will file with the commission either the supplier’s original bid or a mitigated bid.

Generators objected, saying the IMM should not be given such discretion, but FERC was not persuaded.

“The proposed reforms permit flexibility in the submitted forecasts and inputs of a retirement bid, so long as a supplier can show that those forecasts and inputs are reasonable,” FERC said. “We find that this process will not result in an undue preference for the IMM’s estimates of a supplier’s retirement costs, but rather will initiate a dialogue whereby suppliers would have the opportunity to demonstrate that their proposed inputs to their retirement bids are reasonable.”

Generators also contended there was no evidence of market power abuses in New England. But the commission said such proof was unnecessary.

“It is irrelevant whether suppliers have previously used physical withholding through retirement as a means to exercise market power. Our review here is limited to whether ISO-NE’s proposal is just and reasonable and not preferential or unduly discriminatory,” FERC wrote.

Brayton Point Allegations

The backdrop for the rule changes is the Utility Workers Union of America’s contention that the 1,517-MW Brayton Point plant in Massachusetts is being closed to raise capacity prices.

Energy Capital Partners did not offer the plant in capacity auctions for 2017/18 and 2018/19 after announcing the plant would close in 2017. Brayton Point was sold last year to Dynegy, which said it would close the plant as scheduled.

The commission has repeatedly denied union complaints seeking to have the results of FCAs 8 and 9 voided. (See FERC Again Rebuffs Brayton Point Union.)

On April 14, the union filed a new challenge, citing ISO-NE’s retirement rule changes to bolster its case for throwing out the results of FCA 10 (ER16-1041).

“As both ISO-NE and the commission have recently recognized … omitting ‘retiring’ capacity entirely from the calculation of the Forward Capacity Auction price, as has occurred here, rather than including it at a ‘proxy’ or other price which represents its true costs, results in the auction being non-competitive and the resulting prices not just and reasonable,” the union wrote.