A group of municipally owned utilities from across New England is seeking additional information related to the cost-of-service agreement between ISO-NE and the Mystic power plant in Massachusetts, arguing that the RTO has not provided adequate transparency to consumers.

ISO-NE entered into the two-year agreement with Constellation Energy in 2018 (ER18-1639) to address fuel security in the region. The Mystic generation station, the primary customer of the Everett Marine Terminal, was slated to retire when its capacity supply obligation expired in 2022. The Mystic agreement will keep the plant operating through the winter of 2023/24.

Everett is one of just three LNG import terminals serving New England and therefore is not subject to gas transmission reliability concerns. Mystic and Everett are both owned by Constellation.

Under the agreement, ISO-NE is responsible for the bulk of Mystic’s and Everett’s operating costs, which are eventually passed on to New England ratepayers. The agreement gives ISO-NE the right to perform detailed audits of Constellation’s compliance with the agreement to ensure that it is operating at the least cost to ratepayers.

FERC in 2018 ordered ISO-NE to “allow redacted versions of its reports to be publicly available and allow less redacted versions to be available to state commissions and other administrative nonparticipant bodies.”

The D.C. Circuit Court of Appeals denied a challenge to the agreement in 2022, but it did require FERC to order on remand that “interested parties may review and challenge the tank congestion charges during the true-up process.”

In a May 19 filing, a coalition of groups representing municipally owned utilities — including Massachusetts Municipal Wholesale Electric Co., Connecticut Municipal Electric Energy Cooperative, New Hampshire Electric Cooperative and Vermont Public Power Supply Authority (dubbed “Public Systems” in the proceedings) — argued that ISO-NE has not disclosed enough information for consumer groups to review and challenge the charges. They called for the release of a wide range of information related to the Mystic agreement.

The request said the agreement cost ratepayers more than $436 million in its first 10 months, “most of which appears to reflect the cost of rejecting or disposing of excess LNG procured by Constellation.”

As LNG costs skyrocketed this winter, the costs associated with the Mystic agreement dramatically increased, despite the fact that lower temperatures and natural gas prices reduced energy costs overall across the region. Much of the LNG procured by Everett was ultimately unnecessary to meet the region’s energy needs, with a large portion of the costs going toward managing the LNG storage tanks as new shipments came in. (See ISO-NE Market Monitor Reports Decreased Winter Energy Costs.)

“Given the magnitude of the charges passed through so far and how little information ISO-NE and Mystic have made public to justify them, we respectfully request that the commission act to require disclosure of information necessary to ensure that ISO is doing an adequate job of supervising Mystic’s fuel-management practices,” Public Systems wrote in their May request to FERC. “Requiring disclosure should help to enable New England ratepayers to take appropriate action to protect themselves against unwarranted charges.”

Public Systems’ letter included requests for monthly details about specific fuel supply costs related to the Mystic agreement, documents used to evaluate Constellation’s fuel supply plan and documents concerning the results of the monthly fuel supply audits conducted by Levitan & Associates Inc. (LAI) on behalf of ISO-NE. The letter also requested information regarding ISO-NE’s selection of LAI to conduct the audits, as well as the contract between ISO-NE and LAI.

In responses to this motion June 9, representatives from Connecticut’s Department of Energy and Environmental Protection, Office of Consumer Counsel and Office of the Attorney General expressed their support for the motion, while Constellation Energy opposed it, citing procedural issues and calling it “unnecessary and potentially harmful.”

ISO-NE proposed to make limited additional disclosures, smaller in scope than Public Systems’ request. It offered to disclose redacted versions of the fuel supply audits and hold three question-and-answer sessions for stakeholders with LAI. However, ISO-NE resisted the broad disclosure demands, arguing that “Public Systems have made no showing that the ISO’s exercise of its audit rights under the agreement has been deficient, that LAI’s auditing has been deficient or that charges incurred to date under the agreement are erroneous.”

The RTO in May released a public summary of the audits and the auditing rights of the RTO related to the Mystic agreement.

The Connecticut agencies argued that the audit summaries released by ISO-NE thus far remain inadequate, saying the disclosures “offer insufficient insight into how the auditor reached its conclusions, let alone facilitate an independent evaluation of whether the procurement strategies that have been employed, and their resultant costs, are just and reasonable.”

Conversely, ISO-NE argued that the audits commissioned by the RTO have been in line with the agreement and that Public Systems’ requests go beyond the level of disclosure required.

“The breadth of Public Systems’ requests here suggests an effort to ‘audit the auditor,’ a process that would enmesh the ISO in highly burdensome discovery over the audits’ conclusions,” the RTO wrote.

Constellation argued in its response that factors related to weather and global LNG prices are beyond the companies’ control and are not a valid reason to alter the existing agreement.

“It was always well understood that Mystic would manage its fuel supply to provide reliability and that such tank management could be costly,” Constellation wrote.

The company added that some of the information requested could lead to security issues, violate nondisclosure agreements and lead to the release of competitively sensitive information.

“The only ‘new’ fact here — the increase in global LNG prices that is the primary basis given by movants for their requested relief — was not of Constellation’s making and provides no basis for second-guessing the already audited tank-management decisions made by Constellation,” the company wrote.

Representatives of Constellation, ISO-NE and the Public Systems declined to comment for this article.

Audit Impartiality

Public Systems specifically asked for additional information about how ISO-NE selected LAI to audit Constellation’s fuel supply activities and charges, requesting disclosure of the RTO’s request for proposals to perform the audit along with the audit contract.

They added that ISO-NE has not disclosed “the basis on which ISO-NE determined that Levitan — which has testified repeatedly about the importance of retaining Everett and the need for Mystic to fund Everett’s operations — is sufficiently impartial to conduct the fuel supply audit.”

In its response to the filing, ISO-NE resisted disclosing additional information about the selection of LAI to perform the fuel supply audit.

“The ISO employed a request-for-proposal process that was typical of similar contracting efforts by the ISO, received multiple responses, and selected LAI based on qualifications and cost,” ISO-NE wrote. “The ISO respectfully submits that, in the absence of a showing that LAI is unqualified to perform the audits capably, these requests distract from the task of administering the” agreement.

Richard Levitan, president of LAI, said the disclosure of information related to the RFP and the contract is ISO-NE’s decision.

“If they’re comfortable, then we’re comfortable. If they’re not comfortable releasing it, we understand,” Levitan told RTO Insider. “I just would want to be sure that commercially sensitive information to Levitan & Associates is not swept up with such disclosure.”

Levitan dismissed concerns about the impartiality of the firm and said LAI is well positioned to identify any issues, given its specialization in fuel and renewable energy procurement.

“If after 30-some-odd years of business we failed the impartiality test, we would have long since shut our doors,” Levitan said.