FERC has approved a proposal by ISO-NE reducing its Forward Reserve Market (FRM) offer cap from $9,000/MW-month to $7,100/MW-month and delaying the publication of offer data from about four months to a year after each auction (ER24-1245).
ISO-NE designed the market changes in response to concerns raised by its Internal Market Monitor that recent summer FRM auctions had been “structurally uncompetitive” and that future auctions could be susceptible to market power.
FRM auctions, held twice annually to procure reserve capacity, will be replaced by ISO-NE’s new day-ahead ancillary services market in March 2025. (See FERC Approves ISO-NE’s Day-Ahead Ancillary Services Initiative.)
The IMM concluded the previous $9,000 offer cap “substantially overstates a reasonable upper bound on competitive forward reserve supply offers,” while the shorter timeline for offer publication “may provide strategic information to participants” in subsequent auctions.
In an April 12 order, FERC found that the offer cap reduction provides “sufficient flexibility for resources to participate at their expected costs within the upper end of a competitive offer, while also providing protection from the potential exercise of market power.”
Then commission also found the delay of offer data publication “balances the need for market transparency with the need to limit the possibility that market information may lead to noncompetitive outcomes.”
The changes take effect on April 15, 2024, in time for the opening of the first 2024 FRM auction April 17.
