Saturday, March 23, 2019

ISO-NE, NEPOOL Answer Generators on FCM Test Price

By Michael Kuser

ISO-NE on Wednesday urged FERC to reject a protest filed by the New England Power Generators Association over the RTO’s proposed “test price” mechanism to be applied to resources seeking to retire capacity through the RTO’s substitution auction (ER19-444).

The complaint stems from the Nov. 30 joint filing by ISO-NE and the New England Power Pool proposing several Tariff changes to help implement the RTO’s Competitive Auctions with Sponsored Policy Resources (CASPR). FERC approved the RTO’s two-stage capacity auction designed to accommodate state renewable energy procurements last March. (See Split FERC Approves ISO-NE CASPR Plan.)

ISO-NE control room | ISO-NE

As part of the proposed changes, ISO-NE is seeking to introduce the concept of a test price that approximates a resource’s competitive price to acquire a capacity supply obligation.

“Without some mechanism to assure competitive bidding, stakeholders worried that a participant would have incentive to reduce its primary auction delist bid below competitive levels in order to clear the primary auction and, as a result, qualify for ‘severance’ payments in the substitution auction,” NEPOOL explained in a separate answer to NEPGA’s protest filed Jan 7.

The test price would “serve as a screen for competitive behavior in the primary auction to determine whether an existing capacity resource’s demand bid can enter the CASPR substitution auction,” according to the RTO. It is intended “to thwart uneconomic bidding behavior in the primary auction of the Forward Capacity Market that, if unchecked, could reduce the primary auction clearing price below its competitively based level.”

ISO-NE noted that its Tariff currently requires its Internal Market Monitor to make two annual filings with FERC showing various inputs for the Forward Capacity Auction slated for the following year. One of those filings, submitted each July, covers retirement delist bids from participants that intend to retire a resource.

“Since the CASPR test price is an auction input that is established as part of the IMM’s review of retirement bids (and uses largely the same formula specified in the current Tariff for calculating retirement delist bids), the CASPR-related changes contemplate the filing of the test price values as part of the July filing of the retirement bids,” the RTO explained.

While NEPGA does not oppose the filing of the test prices, it does contend that the IMM should be required to file participant-submitted test price values — not the values determined by the IMM.

NEPGA argued that prioritizing the IMM’s values would usurp a market participant’s sole right under the Federal Power Act to file a retirement delist bid as its rate for acceptance by the commission and that “the test price likewise is a rate, term or condition” of the participation in the FCA.

ISO-NE countered that NEPGA’s argument is an “abbreviated repeat” of arguments the organization made in a protest of the previous Tariff revisions related to market rules for retirement of resources.

“In that proceeding, NEPGA argued that the proposed Tariff changes denied market participants their Section 205 filing rights to seek a determination of their own rates by requiring the IMM to file, in the July retirements filing, the IMM-determined delist bid price for a retiring resource, rather than the delist bid price submitted to the IMM by the market participant,” ISO-NE said. “The commission squarely rejected NEPGA’s contention.”

The RTO said Section 205 rights are not at issue in the proceeding, “as the test price — like many other inputs into the auction — is not a rate, term or condition.”

NEPOOL contended that instead of “unnecessarily” disrupting the stakeholder process, NEPGA should have “appropriately presented an amendment to the test price mechanism” at stakeholder meetings, in which case “NEPOOL may have supported an alternative approach that could have assuaged NEPGA’s concern.”

While it participated in the stakeholder meetings, neither NEPGA nor any other stakeholder suggested this alternative proposal, NEPOOL said. Stakeholders considered and debated the entire package of CASPR-related changes over last summer before a final vote at the Participants Committee in November, it said.

Resolving the Mystery

In the same filing, the RTO also answered NEPGA’s Jan. 8 motion to lodge a Dec. 28 decision by the D.C. Circuit Court of Appeals (Exelon v. FERC, 17-1275) into the test price proceeding.

In the decision, the court remanded back to FERC its order accepting ISO-NE’s retirement delist bid mechanism in the FCA, based on the commission’s own explanation at oral argument that a market participant — and not ISO-NE or the Monitor — has the right to show that its filed rate is just and reasonable and will be entered into an auction regardless of the Monitor’s proposed offer price. (See FERC OKs Lower Delist Threshold in ISO-NE.)

“We see no way to skirt the question Exelon tees up: Under ISO-NE’s new Tariff rules, does a supplier’s rate enter the auction so long as it convinces the commission that the rate is just and reasonable, over contrary claims of the Market Monitor?” the court said.

It remanded the case to FERC “to resolve the mystery,” saying the commission “should issue its clarification expeditiously, and in no event later than Feb. 1, 2019.”

“NEPGA agrees with commission counsel that it is the market participant’s right and obligation to make that showing, and as it explained in its limited protest in this proceeding, the law likewise applies to the test price market participants will be required to file for acceptance by the commission if the commission accepts the test price design in this proceeding,” NEPGA said.

The RTO reiterated its contention that NEPGA’s assertions are an “abbreviated” recycling of prior arguments rejected by FERC and that “NEPGA has made no attempt in its protest to explain why the same assertions do not similarly fail when aimed at the test price mechanism.”

In addition, the RTO said the D.C. Circuit’s remand “decides nothing regarding the issues in contention here regarding the test price” and that “at this stage, therefore, there is nothing of relevance to be gleaned from the D.C. Circuit’s opinion.”

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