HERSHEY, Pa. — Attendees at last week’s Mid-Atlantic Conference of Regulatory Utilities Commissioners conference heard strikingly different prescriptions for how to fix the wholesale energy markets from the CEOs of New Jersey utility Public Service Enterprise Group and independent power producer Dynegy.
In a presentation Monday, PSEG CEO and Chairman Ralph Izzo argued that there’s a “missing money problem” among non-emitting generators. While net-metered residential solar generators are paid a premium of up to $415/MWh for being emissions-free in New Jersey, nuclear units receive no premium for having the same attribute and are paid PJM’s clearing price in their zone.
“We believe that wholesale power markets are experiencing some basic failures,” he said.
PSEG operates the Salem and Hope Creek nuclear plants in New Jersey and is a part owner of the Peach Bottom nuclear plant in Pennsylvania. With low-cost natural gas and subsidized renewables keeping energy prices low, owners of nuclear plants say the facilities are losing money and might be closed unless the states where they’re located cough up zero-emissions premiums for them as well. Such discussions are ongoing in Ohio, Pennsylvania, New Jersey and Connecticut. So far, only Exelon has been successful in securing credits for its units in Illinois and New York.
Izzo also called for changing customers’ bills to ensure that they see the premium they’re paying for solar. Customers of PSEG’s utility arm, Public Service Electric and Gas, have indicated that they’re unwilling to pay more than $5/month for additional renewable energy, but they’re already paying this much and aren’t aware of it because “we don’t tell them,” he said.
“Over the last three years, New Jerseyans have paid over $400 million a year for renewable energy credits, producing less than 2% of the in-state electricity,” he said. “I think that they are deserving of a transparent conversation on matters such as that, and I would be the first to champion the continued payment of that, but they are deserving of knowing about it.”
Dynegy CEO Robert Flexon stressed the favorable economics of his mainly coal- and gas-fired merchant generation fleet. He argued that subsidies for uneconomic units create a “subsidy death spiral” that pushes other units into becoming uneconomic and seeking a subsidy of their own. The result is a dismantling of the market’s basic function to procure energy at the lowest possible cost.
“That’s kinda what we signed up for,” he said.
Flexon argued that “utilities have a different DNA than a merchant generator” in that they are “leaning heavily on their core competency of dealing with the politics — which the [independent power producers] aren’t nearly as good at — and working special deals that upset the flow of the marketplace.”
When utilities are losing money, they go to governments for help, he said.
“You need to help yourself,” he said. “What I think is the biggest threat to reliability is the lack of coordination between the states and PJM, and the states doing things to take the economic generators and push them to the side.”
Dynegy originally sought a bailout for its Illinois coal units while Exelon was seeking the one it ultimately received for its nuclear units. When state support became unlikely, Dynegy pivoted to fight the zero-emissions credits (ZECs), joining a federal lawsuit challenging the state’s action.
Flexon called on regulators to require utilities to “match” any subsidies they receive with equal reductions to their annual dividend distribution. He cited FirstEnergy receiving an annual $250 million distribution modernization rider in Ohio while it distributes $600 million in annual dividends. He said it is unfair for Exelon to receive millions in ZECs over the next 12 years for five of its nuclear plants when it is able to pay $1.1 billion in dividends.
“I would say to the regulators, if you’re going to give them the money, you ought to look to their dividend,” he said. “If you want to shore up the balance sheet, I need the company match.”
In a panel discussion focused on wind energy, panelists also blamed utilities for artificially stalling market forces, but they defended renewable subsidies.
“The electric utility industry is an industry made of large institutions, and these large institutions have billions of dollars invested in assets that they own and operate, so my concern is that [they believe] renewable energy is a threat to the existing [way] of doing business,” said Markian Melnyk, president of Atlantic Wind Connection.
He referenced the assertions by Izzo and Flexon that the renewable sector is subsidized and “undercuts” their business. “My concern is that the federal government would hear that message and then take action to try to limit the advancement of renewable energy,” he said.
Avangrid’s Eric Thumma also defended existing pathways for renewables development, such as state renewable portfolio standards, joking that “it’s hard to take my blankie and my teddy bear away from me.”
State goals have proven effective, he said. “We know the RPS works. We know that it gets projects built.”
Beth Treseder of DONG Energy agreed. “We, too, are primarily looking to the states for leadership,” she said, but added that her company is also investigating how it can “take advantage” of the current federal focus on infrastructure development to improve critical ports and transmission lines.
For states themselves, the push to meet constituent demand for both cheap and environmentally conscious power means focusing on both costs and results.
“We’re balancing the economic and the environmental in our state,” Delaware Public Service Commissioner Kim Drexler said. “In my opinion, we’re really looking at the least expensive way to meet those requirements.”
HERSHEY, Pa. — A panel of financial analysts at last week’s Mid-Atlantic Conference of Regulatory Utilities Commissioners conference peeled back the curtain on elements of their decision-making that can sometimes infuriate energy company executives and state officials alike.
The moderator, Diane Burman of the New York Public Service Commission, set the tone for the discussion by recounting her earliest memory of Wall Street workers. Her mother had warned her never to speak to them — a message that was reaffirmed when she joined the commission.
“The financial health of our energy industry is extremely, extremely important,” she said. “As commissioners, we struggle with what that means, and with what we do … good, bad or indifferent.”
The panel assured the audience that regulators have a major influence over how utilities are viewed by the financial sector. “We pretty much watch everything you do,” said Steve Fleishman of Wolfe Research. “We also care about how you communicate why you’re doing it.”
Analysts’ perception of the relationship between utilities and their regulators is the “primary driver of credit ratings,” said Lesley Ritter of Moody’s Investor Services.
Heike Doerr of S&P Global Market Intelligence said that one of the things that lowers ratings of commissions is inconsistency and uncertainty. Political influence tends to be a negative factor, she said.
One of the reasons why is because continuity can’t always be anticipated from state to state. “Ideally, we’d do things on a national-policy basis,” said Anthony Ianno of Morgan Stanley.
Fleishman noted another issue with a diminished federal vision.
“We’re moving into clearly ‘all of the above’ territory, and the one risk of that is it could get expensive,” he said, referring to recent moves by state legislatures to financially prop up certain types of generating resources. “If you support ‘all of the above,’ that means we’re paying for ‘all of the above.’”
He warned that “it’s crunch time” for states to determine which resources are most important to them.
“If states really have a view that they want to preserve nuclear or they want to preserve coal, they’re going to have to make that call relatively soon. … Now’s the time to make it clear what you’re trying to do,” he said. “There just needs to be an understanding that there’s costs to it, and there could be downsides to market functioning. … Maybe there’ll be a chance to do it in a more coordinated manner that keeps the functioning of markets in place.
“If we don’t figure this out,” Ianno warned, “what will end up happening is that those who can afford it will disaggregate from the grid, and the rest of the ratepayers will absorb all of the costs associated with the grid, and that’s a broken model.”
Doerr explained that her company’s state rankings are far more dynamic than might be expected. “It’s not just if your state is making improvement; it’s the pace at which improvement is coming relative to other states,” she said. “Many of you have companies operating in your jurisdictions that operate in other states, so the pipe needs to be upgraded everywhere.”
Analysts also complained about “black box” rate settlements that don’t provide any clarity on details like rate base or return on capital.
“If the law doesn’t allow it, why not change the law so there’s more transparency?” Ianno asked.
Texas regulators last week again refused to revisit their decision to reject NextEra Energy’s proposed acquisition of Oncor, the state’s largest regulated utility.
The ruling by the Public Utility Commission of Texas came just two days after Florida-based NextEra filed a 57-page request for rehearing. Commissioners Ken Anderson and Brandy Marty Marquez responded to the motion during a June 29 open meeting.
“It is time to bring this chapter in the [Energy Future Holdings] bankruptcy to a close and consider other options more suitable to Oncor and its ratepayers, as well as ERCOT and its market participants,” Anderson wrote in a memo.
Anderson said he remained unpersuaded “by [NextEra’s] regurgitation of essentially the same arguments” made in a previous rehearing request. He noted that “almost every intervenor” in the docket (No. 46238) supported the commission’s original decision and urged the PUC to deny the request.
Marquez concurred with Anderson’s memo during a discussion that lasted 30 seconds.
NextEra did not respond to a request for comment on its next steps following the decision. The company has for years eyed the purchase of Oncor, the lone successful business of bankrupt EFH. Proceeds from the sale would have been spread among EFH’s creditors, who last year reached a settlement to end a bankruptcy first declared in 2014.
NextEra filed its latest request for a rehearing June 27, arguing that the PUC overstepped its authority, ignored evidence, misinterpreted Texas laws and used bad judgment when it shot down the acquisition.
The company contended that the PUC’s opinion “constitutes arbitrary and capricious decision-making and an abuse of the commission’s discretion.” The commission’s final order contained 14 errors of law, NextEra said, and it intends to “preserve the company’s rights to judicial review.”
“The commission must determine whether a proposal to ‘change the ownership of the largest utility in Texas is in the public interest’ or whether the public interest is better served by leaving the state’s largest utility under the constraints of ownership by financial investors mired in bankruptcy,” the company said in its petition.
The PUC continues to operate with two commissioners while it waits on a replacement for former Chair Donna Nelson, who left the commission in May. Texas Gov. Greg Abbott is not expected to name Nelson’s successor until the end of the upcoming special legislative session, which begins July 18 and could last up to 30 days. (See Texas PUC Chair Nelson Stepping Down.)
Summer heat hit New England early this year, with load peaking at 20,181 MW on May 18 as temperatures in Boston and Hartford topped out in the mid-90s, resulting in transmission and unit outages and reductions that led to operational constraints, congestion and divergent pricing.
ISO-NE, which had 5,700 MW in planned outages, was hit with another 2,790 MW in forced outages at the peak hour ending at 6 p.m., COO Vamsi Chadalavada told the summer meeting of the New England Power Pool Participants Committee on Tuesday in his operations report for May.
Chadalavada said that the grid operator initiated an abnormal conditions alert (master/local control center procedure no. 2) at 9:30 a.m., which lasted until 10 p.m.
| ISO-NE
The Hydro-Quebec Phase II import limit dropped from 1,760 to 1,000 MW, while the NY-Northern Interface was nearly full at peak as total transfer capability dropped to 900 MW due to line outages. Northbound imports over the peak hours, coupled with constraints in Maine, resulted in congestion at the North-South Interface.
Fast-start generation was dispatched to meet the peak hour, pushing the average real-time price during the peak hour to $389.17/MWh, almost four times the average day-ahead price of $100/MWh. Real-time prices ranged from a high of $758.88/MWh in the Northeastern Massachusetts and Boston pricing zone, to a low of -$71.07/MWh for power from New Brunswick.
The energy market value in May was $283 million, up $3 million from April 2017 and up $67 million from a year ago. May natural gas prices were 4.7% lower than April but still 44% higher from a year earlier. Average real-time LMPs were $29.44/MWh in May, down 6.6% from April, but up 38% from a year earlier.
Committee Approves Settlement Terms for PER Complaint
Meeting in executive session, the Participants Committee on June 27 approved settlement terms that address all issues set for hearing in a dispute over the peak energy rent mechanism in the Forward Capacity Market.
In January, FERC granted a complaint by the New England Power Generators Association (NEPGA) against ISO-NE, agreeing that a penalty imposed during a summer heat wave proved that the PER is unjust and unreasonable (EL16-120). The commission agreed with the generators that the PER adjustment should be raised but said the amount should be determined in an evidentiary proceeding if stakeholders could not reach a settlement. (See ISO-NE Scarcity Rules Unfair to Generators, FERC Says.)
The settlement term sheet was approved by a show of hands with one vote in opposition and several abstentions.
The motion authorized officers of the Participants Committee to approve the formal settlement offer on the condition that all six committee officers agree. If the officers do not agree unanimously, the committee would need to hold a special meeting on July 14, 2017.
According to a memorandum from NEPOOL counsel David Doot, an agreement on Tariff language needs to wait until the commission rules on the issue of how to reflect capacity invoices issued after the refund effective date of Sept. 30, 2016. “Accordingly, the plan now is to finalize and file an offer of partial settlement without tariff language, and to approve changes to the tariff only if and after FERC rules on the proposed partial settlement and this unresolved, contested issue,” the memorandum said.
Terms of the settlement were not publicly disclosed.
NEPOOL Approves Tariff Changes for DR Integration
| ISO-NE
The Participants Committee on June 28 approved four Tariff amendments related to the June 2018 full integration of demand response resources (DRRs) into the energy, reserves and capacity markets. The changes integrate DRRs into the base Price Responsive Demand market design, as well as into new market designs implemented since the last New England Tariff filing under FERC Order 745 on DR compensation.
MISO and PJM could terminate or suspend pseudo-ties that no longer satisfy agreed-upon requirements under a joint proposal.
The RTOs’ proposal also includes a provision that would make each of them the native reliability coordinator for units pseudo-tied into the other balancing authority area, “responsible for transmission-related congestion on the transmission system where the pseudo-tied units are physically connected.”
The RTOs are adding coordinated pseudo-tie policies to their joint operating agreement. MISO last week released a first draft for stakeholder review.
The proposed rules also stipulate that pseudo-tied units must follow both PJM and MISO modeling procedures and obtain station service according to native balancing authority rules. They also make clear that pseudo-tied units committed as capacity resources in a delivery year cannot be directed to serve load in the native balancing authority when the attaining balancing authority requires the unit’s output — unless they are needed to avoid exceeding NERC operating limits in the native balancing authority. The RTOs also agree that only pseudo-tied units — and not the RTOs — are responsible for compensating an attaining balancing authority for failure to deliver energy.
“There were some common-sense coordination practices to add to the joint operating agreement,” MISO Senior Director of Regional Operations David Zwergel said during a June 29 Reliability Subcommittee call. He said MISO and PJM staff collaborated to come up with the proposed rules.
Zwergel said the RTOs expect to file the agreement changes with FERC in late July and asked stakeholders to submit written comments on the draft language by July 13. PJM is also reviewing the language with its own stakeholders, he noted.
The joint effort stems from two FERC deficiency letters in response to the RTOs’ separate attempts to implement more stringent rules in order to improve control over an increasing number of pseudo-ties between MISO and PJM. The letters asked both MISO and PJM to explain efforts they undertook to work with each other in developing the rules. (See MISO, PJM to Try Again on FERC Pseudo-Tie Filings.)
Both RTOs have said they plan to refile different versions of the stricter pseudo-tie rules. MISO initially said that adding standard pseudo-tie rules in the RTOs’ joint operating agreement was unnecessary but changed course earlier this year. It also recently asked FERC to schedule a technical conference to clarify the rules governing the implementation and use of pseudo-ties. (See MISO Asks FERC for Pseudo-Tie Technical Conference.)
During last week’s call, Entergy’s Jennifer Amerkhail asked why the RTOs also included rules governing “partial” pseudo-ties — an arrangement that accommodates generators that supply both RTOs.
Zwergel responded that earlier this year a MISO partial pseudo-tied resource failed to follow dispatch orders and overproduced on one side of the seam. The proposed rules expressly state that the portion of the generation dedicated to supplying the attaining balancing authority must follow its instructions, while the remaining generation must follow native balancing authority rules and dispatch.
Other stakeholders asked why the RTOs would include a requirement for 42-month written notice in advance of terminating a pseudo-tie.
Zwergel said the requirement is based on a six-month advance in addition to PJM’s three-year forward capacity auction. While the notice is unnecessarily long for MISO, it is necessary to accommodate the RTOs’ disparate capacity auction schedules, he said.
POUGHKEEPSIE, N.Y. — Capital markets this year are more willing than ever to finance green energy projects, said a panel at the Renewable Energy Conference last week.
“None of the terms have changed; the deals haven’t changed. What’s changed is banks’ appetite for renewables, and they’re willing to price down and move in on these deals,” said Denis O’Meara, managing director of energy and natural resources at BNP Paribas, who sat on a panel on renewable project financing.
The Business Council of New York State and the Hudson Renewable Energy Institute hosted the event at Marist College Wednesday.
“If you have a project and the project has merit, it’s going to get financed,” said panel moderator Scott Medla, managing partner at Ansonia Partners. “The institutional investors, the private equity guys, the banks — they have more money than they could possibly ever use to fund every project in America. The issue for them is finding the right project, the one that fits.”
Caroline Angoorly sat on the panel as COO of the New York Green Bank, a billion-dollar fund supported by ratepayers and part of the state’s $5.3 billion Clean Energy Fund.
“The idea of New York Green Bank is to play in what we call that one standard deviation, on either side of where current energy project financing markets play,” Angoorly said. “As these new energy models get new traction [and] become more ubiquitous, [we] provide liquidity when traditional sources of capital may not be ready.”
Medla said that significant improvements in technology are helping drive banks’ interest in financing green projects.
“We’re seeing tremendous advances in creativity around transmission lines. We’re seeing wonderful things happen in the area of storage,” Medla said. “My view is that the lithium-ion batteries … are going to get surpassed pretty quickly with some of the creativity that I see out on the margin.”
Wind projects in New York are more difficult to finance than in other parts of the country, according to O’Meara. “The reason is wind regimes and terrain, so you have to be very specific and you have to have very good wind studies to be able to build a wind turbine or wind farm here. … We’ll go up to 15 years in financing, maybe even longer depending on the [power purchase agreement]. … I’m telling you that because those are really pretty aggressive terms that we’re seeing out there in the market right now.”
Finance pricing now ranges between 1.35 and 1.75 percentage points more than the LIBOR, which O’Meara called attractive terms.
“The variable between the spreads really go to sponsor, technology, capital in, how much you’ve done — we’re going to look at all that when we make that determination of [if] we go ahead and finance,” O’Meara said.
BNP also does bond financing on wind, which tends to be a bit more lenient in its terms.
“You get a longer tenor [loan term] — sometimes less debt — but longer tenor, so you can put the deal to bed,” O’Meara said. “Solar’s more predictable: You know what it’s going to be on each season, and it works out more easily for us to think through a solar financing. Banks will go pretty long on solar as well, construction plus 18 or 20 years.”
Community Power
Angoorly cited the Green Bank’s $600 million pipeline of coming projects, including storage and microgrids, the latter supported by “a lot of pent-up demand for community-aggregated generation.”
O’Meara said he had similar experience with what is called community choice aggregation in California.
“In Marin County, they wanted to do this,” he said. “It’s a very good idea but really hard to bank at this point. … It’s not standardized. Many times I would call it the commune of power, because these people are putting these deals together and I have no idea what they’re saying. … I don’t know where they wrote it — probably in a coffee house — but it did not make sense.”
But fuzzy contracts haven’t stopped projects from moving forward.
“In fact, they’re getting the off-takers and the off-takers want to finance this,” O’Meara said. “It’s an evolving market. I guarantee you it will move into a more commercial purview shortly, but it’s not there now.”
Massachusetts officials said Friday the state’s electric distribution utilities must procure a combined 200 MWh of energy storage by Jan. 1, 2020 — an unambitious goal to some observers.
Although the Department of Energy Resources’ (DOER) announcement called the 200 MWh “an aspirational” target, some industry stakeholders expected more from Gov. Charlie Baker’s Energy Storage Initiative. The department’s State of Charge report, released in September, presented recommendations for generating 600 MW of advanced energy storage by 2025, saying it would capture $800 million in system benefits. (See Mass. Considering Storage Mandate.)
| DOE Global Energy Storage database and Massachusetts Department of Energy Resources
“Based on lessons learned from this initial target, DOER may determine whether to set additional procurement targets beyond Jan. 1, 2020,” DOER Commissioner Judith Judson said in announcing the target. The state also agreed to spend $10 million on energy storage demonstration projects in addition to the $10 million that accompanied the ESI announcement in May 2015.
Judson said the state also had begun implementing other recommendations from the State of Charge report, allowing storage to be paired with the state’s plans to procure 9.45 million MWh of clean energy and 1,600 MW of offshore wind.
She also said the state was “incentivizing” storage through the Solar Massachusetts Renewable Target (SMART) program and that storage would be funded by alternative compliance payments under the ACES Grant Program, the Peak Demand Reduction Grant Program and the Community Clean Energy Resiliency Initiative, and that storage would be eligible for future Green Communities grants.
| Massachusetts Department of Energy Resources, Massachusetts Clean Energy Center
It also is considering allowing utilities to use energy-efficiency funds for storage that provides sustainable peak load reductions and expanding energy storage in the Alternative Energy Portfolio Standard.
“It’s less of an aspirational target, something the state’s going to strive for, and more a description of what the state is already doing,” said Ted Ko, director of policy at Stem, a provider of commercial-scale energy storage. “It’s entirely possible they would have met [the target] anyway. For example, Eversource [Energy] has already proposed over 180 MWh of storage projects in a recent rate case.”
Ko said the SMART program, whose regulations were released last month, “by itself conceivably could come up with 100 MWh.”
“Essentially, by setting a low, voluntary target number, you’re not inspiring any new programs or new initiatives as outlined in the State of the Charge report,” he added.
The announcement drew similar, if more temperate, comments from others, including Chris Rauscher, director of public policy at residential solar company Sunrun.
“The decision by DOER to set a soft energy storage target of 200 MWh is a moderate first step in providing long-term market surety,” Rauscher said. “Growing the storage market in Massachusetts has the potential to support local job creation and lower costs for Massachusetts ratepayers, all while providing critical resiliency through backup power.”
Rauscher said the company would work with legislators to expand storage’s potential “by encouraging private investment in Massachusetts through programs like the Alternative Energy Portfolio Standard.”
The Energy Storage Association noted that Massachusetts utilities previously proposed “specific, albeit voluntary, procurement targets of a combination of up to 200 MW/500 MWh of energy storage. Today’s announcement is a more conservative step in that direction.
“Massachusetts is also competing for industry jobs with California, Oregon, New York and other states moving forward on their own storage procurement targets,” ESA added.
Massachusetts becomes the second state in the U.S. to mandate storage. The California Public Utilities Commission in 2013 ordered the state’s three large investor-owned utilities to add 1.3 GW of energy storage by 2020.
New York lawmakers last month passed a measure requiring the state’s Public Service Commission to set targets to increase the adoption of energy storage in the state through 2030. If signed by Gov. Andrew Cuomo, the new law would require the commission to work with the New York State Energy and Research Development Agency and the Long Island Power Authority to set up a storage deployment program. (See NY Bill Sets Stage for Storage Targets.)
HERSHEY, Pa. — Near the end of the final panel at last week’s Mid-Atlantic Conference of Regulatory Utilities Commissioners conference, PJM’s Stu Bresler was asked what it would take for the RTO to take the lead on developing a large-scale, regional transmission line from Virginia to New York City to help take advantage of offshore wind capabilities in the Atlantic Ocean.
“My knee-jerk, flippant answer is a whole lot of money,” said Bresler, PJM’s senior vice president of markets and operations. “It’s difficult at this point to build a reliability case for that kind of infrastructure investment. I think what’s required is more a business case for the generation to say that level of investment is rational.”
PJM would know. Every month, a heated debate flares up at its Transmission Expansion Advisory Committee meetings to examine the details, costs and necessity of proposed transmission projects. American Municipal Power’s Ed Tatum often leads the discussion.
As a member of a panel on transmission replacement earlier at the conference, Tatum revealed that when he was brought on at AMP, he was given a mission to reduce its members’ transmission costs. He responded that controlling their costs would be a more reasonable goal.
That could be because much of the transmission grid needs replacement, and transmission owners are often sensitive to any implication they’re overbuilding the system. Tatum’s fellow panel participant, Jodi Moskowitz of Public Service Electric and Gas, took exception to that suggestion in her opening remarks.
“We don’t look at the issue quite that way, in terms of if the transmission system is overbuilt,” Moskowitz said. “We think that the appropriate focus is to make sure that we have a safe, reliable grid for many years to come, but make sure we are planning and building in a cost-effective way.”
And even that might be more expensive than customers want to pay. Speaking on the fuel mix panel with Bresler, Rich Sedano of the Regulatory Assistance Project said the one-day-in-10-years loss-of-load expectation that PJM and other grid operators use is a handy standard, but not necessarily indicative of what the market will bear.
That clash over cost versus demand would be cleared up through increased competition and cost-containment measures in transmission construction, LS Power’s Sharon Segner said. “If you read the [court] orders on why competition was upheld, it’s because of the argument for the consumer benefits of competition.”
While Segner said that cost containment offers price assurance, Moskowitz cautioned that there will always be “uncontrollable issues” that occur during construction.
Expressing the states’ perspective, West Virginia Public Service Commissioner Brooks McCabe called for restraint on all sides. During the transmission panel, he urged slowing down the decisions to construct large-scale projects and to revisit the “fundamental ground rules” to “tweak” when and how projects should be addressed.
On the fuel mix panel, he urged everyone to “lighten up” because the “hard work” would not be solved immediately. Retaining baseload units is important, he said, because “that’s our security blanket.”
Matt Crozat of the Nuclear Energy Institute had a mixed reaction to that message. He said he can’t be relaxed like McCabe because “I know that if I lose nuclear plants, I can’t get them back.”
By Michael Kuser, Amanda Durish Cook and Rich Heidorn Jr.
Following FERC’s two-day technical conference on tensions between wholesale electric markets and state energy policy initiatives in early May, the commission invited comments on five potential paths forward (AD17-11).
The paths include a continuation of the status quo (Path 3), with the courts sorting out whether state initiatives — such as the zero-emission credits for Exelon nuclear plants in New York and Illinois — violate federal jurisdiction; changes to the minimum offer price rule (MOPR) (Paths 1 and 5); and market rule changes to accommodate state policies (Path 2) or incorporate them into RTO and ISO pricing (Path 4).
The commission also asked commenters to rate the urgency of the issue and solicited suggestions on how FERC should go forward procedurally.
More than 80 commenters responded, although many repeated their past positions and did not provide feedback on the paths the commission outlined. Based on RTO Insider’s review of the comments, below is a summary of the supporters and detractors of each path.
Paths 2 and 4 appeared to be the most popular, although there were supporters and detractors for all of the proposals.
The range of challenges to the capacity market constructs in PJM, ISO-NE and NYISO — the Eastern markets that were the focus of the technical conference — raises the prospect that FERC could relax the markets’ participation requirements. Public power advocates, who have been seeking relief for years, peppered their comments with repeated demands to let them acquire capacity via bilateral contracts, with capacity auctions playing a much smaller, “residual” role.
Path 1: Limited or No Minimum Offer Price Rule
FERC Description
“An approach that would either not apply the minimum offer price rule to state-supported resources, or limit application of the minimum offer price rule to only state-supported resources where federal law pre-empts the state action providing that support.”
Background
If FERC were to abandon the MOPR altogether, it would likely invite court challenges alleging it was allowing states to usurp its authority under the Federal Power Act. Thus any relaxation of MOPR is likely to be constrained by the Supreme Court’s 2016 rulings in Hughes v. Talen and Electric Power Supply Association v. FERC. (See Court’s Reticence Frustrates Energy Bar.)
Supporters
Load-serving entities are the biggest fans of this approach, which also is supported by the Nuclear Energy Institute (NEI) and some commenters in the renewables camp.
The National Rural Electric Cooperative Association (NRECA), American Municipal Power and Old Dominion Electric Cooperative support Path 1 or 2 or a combination of the two.
The American Public Power Association (APPA) called for “a greatly limited MOPR that provides full exemptions for self-supply and state-sponsored resources, or the ability to remove such resources from the capacity market clearing process altogether.”
The Transmission Access Policy Study Group (TAPS), which represents transmission-dependent utilities in 35 states, considers it “potentially viable.”
NEI, the Sierra Club and the Natural Resources Defense Council’s Sustainable FERC Project all expressed support, with NRDC calling it the solution “most likely to support proper price formation.”
Opposed
Groups representing consumers led the opposition, with the Electricity Consumers Resource Council (ELCON) rejecting it as “too extreme.”
A group of 60 large industrial, commercial and institutional energy consumers in New York who filed as “Multiple Intervenors” also opposed it, saying “it presumes that state public policies that unduly impact or interfere with competitive wholesale electricity markets must be accommodated in most circumstances, and that the preferred ‘solution’ in cases where federal law pre-empts state action is the application of a minimum offer price rule.”
“While MOPRs may be appropriate in certain circumstances, Multiple Intervenors disagrees that they represent the only — or even the best — response to all state public policies that trespass into the commission’s jurisdiction,” the group said.
NRG Energy also opposed Path 1, saying it would exacerbate price suppression in wholesale markets by allowing subsidized resources to enter the markets at prices below actual cost. It has proposed a “Forward Clean Attribute Market” in the New England Power Pool’s Integrating Markets and Public Policy (IMAPP) initiative.
NRG, Dynegy, Eastern Generation and the Electric Power Supply Association (EPSA) filed a federal court suit in October claiming the New York ZECs intrude on FERC’s jurisdiction over interstate electricity transactions. The same companies filed suit in February challenging Illinois’ ZECs for Exelon’s Quad Cities and Clinton nuclear plants and have also asked FERC to reject the subsidies.
Path 2: Accommodation of State Actions
FERC Description
“An approach that would accommodate state policies that provide out-of-market support with the operation of the wholesale markets by allowing state-supported resources to participate in those markets and, when relevant, obtain capacity supply obligations, subject to adjustments necessary to maintain certain wholesale market prices consistent with the market results that would have been produced had those resources not been state-supported.”
Background
Proposals for two-tiered capacity auctions that would clear subsidized resources separately fall into this path.
LSEs are the biggest supporters, with the NRECA, AMP, ODEC and Eastern Massachusetts Consumer-Owned Systems backing the concept. The American Forest and Paper Association also favored a Path 2 solution, saying “each of the other four pathways are likely to prove impractical and more expensive for consumers.”
APPA said it supports efforts to accommodate state actions, “assuming such accommodation also covers resources procured by public power and cooperative utilities. Such an accommodation should be designed broadly so that there is no determination by the RTO of what constitutes ‘legitimate’ state policies.”
The New England States Committee on Electricity (NESCOE) noted that NEPOOL’s IMAPP initiative “has focused on developing approaches that align with Paths 2 and 4.” At the conference, ISO-NE presented its proposal for a two-tiered auction that it said would incorporate state-mandated renewable generation while preventing oversupply and addressing objections to a regional carbon tax. (See ISO-NE Two-Tier Auction Proposal Gets FERC Airing.)
The Advanced Energy Management Alliance (AEMA) said FERC should direct ISO-NE, NYISO and PJM to file Path 2-type changes in capacity market rules to support “the rights of states to control their own energy policy and to procure carbon-free resources that wholesale markets can integrate cost-effectively” while ensuring they do not distort wholesale prices.
New York City said Paths 2 and 4 provide the “best opportunities to correct current market constraints” on renewable resources and new technologies procured under public policy goals.
“The appropriate future is clearly a combination of Paths 2, 4 and 5,” NRG said, adding that they are consistent with a “pro-markets approach [that] appears to have wide support from across the stakeholder community.”
Independent power producers Calpine and Dynegy also expressed support for Path 2, with Calpine calling it a “mid-term solution.” Dynegy says Path 2 “is the next step: a robust stakeholder process to fully develop and refine the proposed solutions that have recently been presented by the ISOs/RTOs (ISO-NE’s Competitive Auctions with Subsidized Policy Resources (‘CASPR’) proposal and PJM’s capacity market repricing proposal).”
Brookfield Renewable, the Conservation Law Foundation and NextEra Energy, which are promoting their Carbon-Linked Incentive for Policy Resources (CLIPR) proposal as a long-term Path 4 solution, say Path 2 may be needed in the interim.
“Feasible Path 4 solutions — like the CLIPR proposal — must be identified simultaneously with the formulation of any interim short-term proposal, as doing so will avoid the risk that the interim Path 2 solution outlives its useful life to the detriment of the market and more robust and comprehensive long-term solutions,” the “CLIPR Coalition” said.
Avangrid said a combination of Paths 2 and 3 is best for multi-state regions, “while Path 4 is better suited to single-state wholesale markets.”
Opposed
ELCON and New York’s Multiple Intervenors opposed, with ELCON rejecting it as a “kluge.”
PJM’s Independent Market Monitor, which opposed all but Paths 4 and 5, said “it would be a mistake for ISO/RTOs to explicitly accommodate state-level subsidies” in their capacity market design.
The American Wind Energy Association said any Path 2 solution should be “technology-neutral.” It questioned “the feasibility of any Path 2 solution that proposes to differentiate … ‘subsidized’ resources from ‘unsubsidized’ resources and calculate the competitive offer price of the ‘subsidized’ resources.”
The New York Public Service Commission, which is backing a plan to integrate carbon pricing into the NYISO market, said Path 2 “illustrates the limitations of the five paths.”
Path 3: Status Quo
FERC Description
“An approach that would rely on existing tariff provisions applying the minimum offer price rule to some state-supported resources, and continuing case-by-case litigation over the specific line to be drawn between categories of state actions that may, or may not, result in a state-supported resource being subject to the minimum offer price rule.”
Background
At the hearing, acting FERC Chair Cheryl LaFleur urged stakeholders to avoid “unplanned and piecemeal regulation,” saying “it would be a bad outcome for customers and market participants in terms of cost, reliability and regulatory certainty.”
Few commenters embraced the status quo, although ELCON called it the only path that is “tenable.” Duke endorsed it, saying that stakeholder discussions occurring in the RTOs/ISOs “should run their course” and that it is not necessary for the commission to take “prescriptive” action. “Threshold legal issues are pending before the courts, and the resolution of these issues should be allowed to play out before any further action is taken at the federal level,” ELCON said.
The large New York customers group said that while it is “not optimal,” it “may be the most realistic among the choices identified” by FERC.
AWEA said it would support Path 3 only if FERC continues to exempt renewable resources from the MOPR.
Opposed
TAPS called it “unsustainable and unworkable,” and NRECA and APPA also opposed, with the latter saying, “No participants expressed support for this option at the technical conference.
“The lack of support for the status quo has persisted throughout the history of the capacity markets and must be recognized in determining future paths,” APPA said.
Dynegy’s Illinois Generation Assets | Dynegy
NRDC said Paths 3 and 5, “as well as some approaches to implementing Path 2,” would violate the Federal Power Act by improperly discriminating between resources. “The act of defining what is or is not a ‘subsidy’ will inevitably entail arbitrary and discriminatory line-drawing efforts, as has become increasingly clear through FERC’s decisions regarding the application of the MOPR to resources supported by state policies,” it said.
Dynegy said Path 3 is “unsustainable.”
“Dynegy has already been negatively impacted by the ZEC subsidy programs and will continue to be negatively impacted absent relief from the courts or commission action. In a ‘status quo’ scenario, Dynegy will be unable to proceed with capital improvements [and] hiring, and will need to evaluate shutdowns of generating plants that are more cost efficient than the subsidized nuclear units.”
Path 4: Pricing State Policy Choices
FERC Description
“An approach in which state policies, to the extent possible, would value the attributes (e.g., resilience) or externalities (e.g., carbon emissions) that states are targeting in a manner that can be readily integrated into the wholesale markets in a resource-neutral way. For those state policies that cannot be readily valued and integrated into the wholesale markets, Path 4 would also require consideration of what, if anything, the commission should do to address the market impacts of these state policies. For instance, other approaches for these state policies may include accommodation, application of the minimum offer price rule or an exemption from the minimum offer price rule.”
Background
A carbon price adder is one potential Path 4 solution, but it has been rejected by the New England states.
Supporters
The NYPSC said its work with NYISO to incorporate carbon into the wholesale electricity markets “might be viewed as an endorsement of Path 4.”
Path 4 also won support from Dominion Energy, Calpine, Dynegy, Exelon, NEI, Vitol and the Solar Energy Industries Association (SEIA).
EPSA gave Path 4 conditional support. “The challenge will be to define those resource attributes (e.g., flexibility) or externalities (e.g., carbon emissions) that should be integrated into the wholesale market, and then to develop a mechanism to value those qualities in a resource-neutral manner,” EPSA said, adding that it “is confident that, if these objectives can be identified, the ISOs/RTOs and market stakeholders can establish workable and efficient means to integrate these objectives into competitive market structures.”
APPA also gave a qualified endorsement, saying it could result in “an efficient means of achieving environmental or other policy goals if it were limited to a single price adjustment, such as a carbon tax or adder.” The group said it would only support this “achieve” approach “if it were done along with and not as a replacement to an accommodation of state policies or a move to a voluntary residual capacity market.”
AWEA said Path 4 is its first choice and would allow the markets to “better value the benefits and externalities of renewable energy that are not being currently captured.”
It also expressed concern that the five paths could tread on state sovereignty, asking FERC to consider carbon pricing. “Since there is currently no real conflict between state-supported renewable energy resources and wholesale markets, nor has there been one over the decades for which these policies have been in place, there is no basis for the commission to suddenly upset this balance by infringing upon state sovereignty and undoing the intent of state laws that seek to promote renewable energy.”
The Brookfield “CLPR Coalition” said Path 4 is preferable to Path 2. It asked FERC to issue a policy statement directing the RTOs to submit “achieve” solutions to the commission in the near term and requiring them to file quarterly reports on their progress.
Opposed
Opponents include the Natural Gas Supply Association, NRECA, TAPS and the large New York customers, the last of which said they were skeptical that it could be implemented effectively and benefit customers.
ELCON said the proposal would be the “most prone to abuse” of the alternatives. “It would fail in real-world conditions because some states would not respect market-based solutions. They would concoct attributes that are not realistically fungible or tradable for the purpose of selectively internalizing externalities or for socializing the costs of command-and-control mandates.”
AEMA said FERC should allow RTOs and stakeholders to develop solutions but not force them to file proposals. “Pricing state policy into energy and ancillary markets, through mechanisms such as carbon adders, raises several controversial issues. Capacity market solutions are not plagued with such controversial questions, and if the commission were to direct ISOs to pursue both capacity and energy market solutions simultaneously, it would slow the progress of the capacity market solution,” AEMA wrote.
Economist James F. Wilson said the commission should set a long-term goal “of seeing more revenues from the energy and ancillary services markets, and eventually phasing out the capacity constructs, or converting them to voluntary mechanisms, recognizing the changing nature of `resource adequacy.’
“The energy and ancillary services markets hold the potential to efficiently guide the changing resource mix over time, including incorporating public policy objectives such as decarbonization that presently are not reflected in the markets; the capacity constructs cannot do this,” Wilson continued. “Reducing the role of the capacity constructs will require resisting the frequent pressures to change them in ways that raise capacity prices and/or lead to clearing substantial excess capacity.”
Cliff Hamal, managing director of Navigant Economics, said “the most fundamental assumption” underlying capacity markets — setting capacity prices based on the cost of building new gas-fired generation — may no longer be valid. “What if policy options, such as those that promote low-carbon resources and demand reductions have eliminated the need for regular additions of gas-fired generation? A case could be made that we have already reached that point, or might do so in the near future. If so, the fundamental basis for setting capacity prices through the net-[cost of new entry]-based demand curve auction is no longer valid.”
Path 5: Expanded Minimum Offer Price Rule
FERC Description
“An approach that would minimize the impact of state-supported resources on wholesale market prices by expanding the existing scope of the minimum offer price rule to apply to both new and existing capacity resources that participate in the capacity market and receive state support.”
Background
The MOPR came up frequently at the technical conference with some witnesses calling for its expansion and others seeking its relaxation or abolition. (See Uncertain Future for MOPR.)
Supporters
EPSA and EPSA members Dynegy and Calpine would like to see this path pursued immediately, while the NGSA says it is fine as a short-term fix but not as a long-term solution. Calpine also sees it as a “near-term” fix.
Competitive Power Ventures called for expansion of the MOPR to reserve price signals, the implementation of a “universal” carbon price into the energy markets and RTO dispatch decisions and improvements to price formation.
Opposed
NRDC, which said it would not be just and reasonable, was joined in opposition by Hydro-Quebec, the New York Power Authority, NEI, Dominion, FirstEnergy, East Kentucky Power Authority, the New York Multiple Intervenors, the PJM Industrial Customer Coalition, ELCON, TAPS, NRECA and APPA.
APPA called it “the worst possible outcome,” which would result in “an overly administered noncompetitive market that would frustrate resource development pursuant to policy decisions.”
“This would greatly benefit the pure merchant facilities, leading to a significant decline in resource diversity, a higher cost of capital and a lack of any type of planning or optimization of resources. Because the states will likely continue to seek to procure or retain resources based on policy preferences, an expanded MOPR also increases the risk of overbuilding and double-payment for capacity.”
The Multiple Intervenors was also opposed, saying that MOPRs “have the effect of sheltering incumbent generation owners from competition and impeding market entry.”
AWEA said it could open “the door to widespread mitigation of legitimate state policies and, in turn, uncertainty for renewable energy investors.”
“If the commission approves a MOPR based on factors other than limiting the application of the MOPR to only state-supported resources where federal law pre-empts the state action, then it becomes difficult to draw a clear boundary limiting commission interventions,” AWEA said. “As this path has no discernable limit to what types of public policies would be exposed to a MOPR, it could lead to an environment where legitimate state renewable energy policies could be impeded by the risk of being mitigated.”
In a joint filing, AWEA, Advanced Energy Economy, Alliance for Clean Energy New York, American Council on Renewable Energy, Mid-Atlantic Renewable Energy Coalition, RENEW Northeast, and Wind on the Wires also opposed expanding MOPR.
“All energy resources benefit from subsidies and/or favorable policies and, therefore, a singular focus on incentives for certain resources such as renewables, would be discriminatory,” they said. “Contrary to the claims of some of the panelists at the technical conference, Northeast power systems are performing better as a result of the availability and integration of renewable energy into the resource mix. Negative pricing is rare and, more importantly, not responsible for negative economic impacts on other generation sources. Gas prices, not renewables, are the primary factor reducing revenues for nuclear, coal, and other supply sources.”
Economist James F. Wilson also opposed Path 5. “The markets are not nearly as fragile, and the impacts of public policy resources not nearly as substantial, as some stakeholders suggest,” he said.
Rob Gramlich of Grid Strategies said FERC should continue to treat public policies as “exogenous, as a factor that may affect market participants’ behavior and willingness to pay or accept money for a transaction, but not something for the commission to mitigate or undo. One can disagree with some of the laws state and federal legislatures pass, and FERC can offer its input into legislative processes, but it would be a major shift in the regulatory paradigm for the federal electricity market regulator to go beyond intervening to remedy market power and manipulation and enter the realm of mitigating public policy.”
“A wide range of state and federal policies have affected quantities and prices in power markets since the inception of U.S. electricity markets,” Gramlich continued. “For example, there might not be any nuclear generation in operation were it not for the Price-Anderson Act limiting liability for unit owners. We might not have as much natural gas generation if intangible drilling costs were not allowed to be deductible as a current business expense under federal tax law.”
NEI and IPPs — though on opposite sides of the nuclear subsidy debate — agreed on the need for a speedy resolution. NEI said RTO markets are not just and reasonable if they don’t provide sufficient revenues to retain nuclear generation threatened by low-cost natural gas.
EPSA said immediate action is needed to “insulate” wholesale markets “from current distortive state actions while all stakeholders collaborate on identifying market structures that help address defined public policy goals.” Also calling for urgency were Calpine, Eastern Generation, the Independent Power Producers of New York, the New England Power Generators Association, LS Power and NRG, which said that competitive markets are “under siege.”
NRG said FERC should actively participate in suits challenging the ZECs and act on pending complaints before the commission on the subject of the MOPR.
The R Street Institute, a free-market think tank, said FERC should have “an extremely high sense of urgency.”
Dynegy also called for swift action, criticizing Exelon Senior Vice President of Competitive Market Policy Kathleen Barron, who told FERC on May 1 that “we have some time to talk about where we go.”
No
Exelon responded that FERC should implement energy market fixes to eliminate the need for ZECs before considering any of the paths identified.
The PJM ICC said there was “no need for rush to judgment” and ELCON said the “problem at hand is too important to be rushed.”
NRDC said there is no evidence of a “crisis,” pointing out that reserve margins in PJM, ISO-NE and NYISO are all currently higher than their targets.
The Union of Concerned Scientists said the “proposed solutions are premature due to lack of [a] coherent argument” for action. “The calls for urgent action by stakeholders have presumed that there is clarity regarding the nature and size of the alleged problem with the capacity markets,” it said. “As far as the renewable portfolio standards, there is neither urgency, nor a clear statement sorting the issue.”
Procedural Steps
NRECA and Exelon said FERC should convene technical conferences in each region and require the grid operators to file progress reports on their stakeholder processes.
ELCON said any action should be a common solution across all RTOs to avoid exacerbating seams issues. Xcel Energy — which doesn’t operate in the three Eastern RTOs — said FERC should reiterate that the docket is limited to RTO/ISO markets, urging it to “do no harm” to unbundled states.
EPSA said energy price formation should be a priority, calling for completion of Notices of Proposed Rulemaking on the pricing of fast-start resources (RM17-3) and addressing uplift allocation and transparency (RM17-2). (See FERC Seeks More Transparency, Cost Causation on Uplift.)
The R Street Institute called for FERC to issue a new NOPR setting a “bright line” on state policies that would be subject to the MOPR or legal challenges. “This would offer a more proactive approach than retroactive litigation, deter egregious interventions and perhaps disarm state-federal tensions.”
Public Citizen said the paths outlined by FERC are too narrow to solve the problems and that competitive markets may not always be the best solution. It said the commission should start by conducting an evidentiary hearing on whether RTO markets are resulting in just and reasonable outcomes. It also called for governance changes to allow non-governmental organizations voting rights in the RTO/ISO stakeholder process.
New England’s public power utilities aren’t convinced that ISO-NE’s proposed two-tiered capacity auction is the best way to incorporate state clean energy procurements into the wholesale markets.
At FERC’s May 1-2 technical conference on state policies and wholesale markets, ISO-NE presented its Competitive Auctions with Subsidized Policy Resources (CASPR) proposal, which it said would incorporate state-mandated renewable generation while preventing oversupply and addressing objections to a regional carbon tax. (See ISO-NE Two-Tier Auction Proposal Gets FERC Airing.)
In post-conference comments filed with the commission, several major New England stakeholders indicated they were willing to consider the RTO’s plan.
The Massachusetts Department of Public Utilities said it “generally agrees” with the four objectives of the ISO-NE proposal: “(1) competitive capacity pricing; (2) accommodating the entry of state policy resources into the [Forward Capacity Market] over time; (3) avoiding cost shifts; and (4) a sustainable, market-based approach.”
The New England States Committee on Electricity (NESCOE) said it will provide analysis later this year “on a variety of mechanisms through which states could execute policy objectives,” including Path 4 long-term “achieve” proposals and near-term Path 2 “accommodate” proposals such as CASPR. “NESCOE will continue to work with ISO-NE, market participants and others to explore potential solutions that could improve upon the status quo,” NESCOE told FERC.
However, the RTO’s plan got a wary response from the Eastern New England Consumer-Owned Systems (ENECOS). “The history of New England’s Forward Capacity Market (FCM) has not been a happy one from the perspective of small, vertically integrated utilities,” the group wrote. “To suggest — as some have in the technical conference — that the answer to the ‘threat’ posed by the prospect of large-scale entry of variable-energy, renewable resources into the current centralized auction construct is to create yet another centralized auction construct [invites] extreme skepticism.”
The group said any solution “should be coupled with restoration of the right of self-supply for load-serving entities as a means of satisfying their share of regional capacity obligations.”
ENECOS said both Paths 1 and 3 are “preferable to the more structurally profound proposals — such as carbon ‘adders,’ or creation of yet another centralized capacity auction construct for ‘clean’ energy.”
The Northeast Public Power Association (NEPPA) also had doubts, saying “the capacity market construct is ill-equipped to achieve the policy outcomes FERC, states and consumers desire.”
“When ISO-New England announced the settlement creating the FCM, NEPPA members worked to ensure not-for-profit load-serving entities (LSEs) retained the right to use their own existing resources to meet their capacity obligations,” NEPPA said. “That negotiated benefit was lost when FERC approved the minimum offer price rule (MOPR), which suddenly made the FCM a mandatory construct. ISO-New England is now effectively the single buyer and single seller of wholesale electricity in the region.”
NEPPA also criticized the MOPR as a “flawed construct.” It attached to its comments a concurring opinion by former FERC Chair Norman Bay, a parting shot before his resignation in February in which he called MOPR “unsound in principle and unworkable in practice.” (See Bay Blasts MOPR on Way Out the Door.)
The MOPR would be applied only in the first of the auctions under CASPR. In the first stage, ISO-NE would clear the auction as it does today, applying the MOPR to new capacity offers to prevent price suppression. In the new second “substitution” auction, generators with retirement bids that cleared in the primary auction would transfer their obligations to subsidized new resources that did not clear because of the MOPR. Because the substitution auction will not use the MOPR, it will clear at lower prices than the primary auction, enabling existing resources to buy out their obligations at a lower cost in return for retiring, the RTO says.
CASPR arose out of the New England Power Pool’s Integrating Markets and Public Policy (IMAPP) initiative — a response to state officials’ concerns that consumers could face excessive costs if state renewable procurements were not incorporated into the capacity market and generators’ fears that out-of-market resources will suppress capacity prices. New England states are set to procure more than 3,600 MW of nameplate renewable generation.
Another proposal that arose from IMAPP is the Carbon-Linked Incentive for Policy Resources (CLIPR), proposed by Brookfield Renewable, the Conservation Law Foundation and NextEra Energy.
The “CLIPR Coalition” said long-term Path 4 proposals are preferable to interim Path 2 plans. It asked FERC to issue a policy statement directing the RTOs to submit “achieve” solutions to the commission in the near term and requiring them to file quarterly reports on their progress.
Under the CLIPR proposal, LSEs would pay state “policy” resources an energy price premium that would fluctuate based on the “marginal carbon intensity” of the dispatch, “a direct analog to the LMP but computed as lbs-CO2/MWh instead of $/MWh.”
Urgency
The New England stakeholders also disagreed over how quickly the region must act and how involved FERC should be in the process.
State officials generally downplayed the urgency. NESCOE said “the overall level of state-sponsored clean energy procurements that have taken place or are expected in the near-term comprises a small percentage of installed resources on the system.” It also defended state sovereignty and urged the commission not to take “prescriptive action.”
The Massachusetts DPU noted that the states’ procurement of clean energy resources “will extend over many years.”
“There is no evidence to suggest the current market construct is causing any decrease in merchant investment,” said a joint filing by the Connecticut Department of Energy and Environmental Protection, Public Utilities Regulatory Authority and Office of Consumer Counsel. “On the contrary, New England has attracted a large amount of new investment over the last several years, including renewable generation.”
The New England Power Generators Association (NEPGA) sees it differently. “NEPGA believes that the wave of out-of-market resources beginning to crest in New England threatens the very viability of a competitive wholesale electricity market,” it said. “The need is urgent, with a necessary direct and swift response from FERC and the wholesale markets.”
