Saturday, March 23, 2019

ISO-NE Pulls off Fuel Security, CASPR Measures

By Michael Kuser

ISO-NE closed out 2018 like a trucker wheeling a wide load down a twisting service road on the flanks of Mount Washington. Despite a few bumps, scrapes and scares along the way, it delivered on time — in this case dispatching key market initiatives.

The RTO’s most important issues are winter fuel security and addressing the states’ desire to bring in more carbon-free resources, but it also must plan to operate a grid that is already experiencing a surge in renewable energy resources — with massive amounts of offshore wind energy now visible on the horizon. (See Mass. Offshore Lease Auction Nets Record $405 Million.)

The bumps and scrapes last year came in a contentious stakeholder process over both issues and in FERC approvals accompanied by criticisms, dissents and partial dissents by various commissioners.

FERC last month approved the ISO-NE’s interim proposal to use an out-of-market mechanism to address concerns about fuel security in a region heavily reliant on natural gas and in March approved its two-stage capacity auction to accommodate state renewable energy procurements. (See ISO-NE Fuel Security Measures Approved; Split FERC Approves ISO-NE CASPR Plan.)

Controversy in the Details

Soon after a severe cold snap last January, ISO-NE published an operational fuel security analysis that found the New England grid is vulnerable to a season-long outage at any of the region’s major energy facilities. (See Report: Fuel Security Key Risk for New England Grid.)

In a related issue, Exelon in March said it would retire its 2,274-MW Mystic Generating Station in Massachusetts after the facility’s capacity obligations expire in May 2022.

FERC in July denied an ISO-NE a Tariff waiver to enter a cost-of-service agreement to keep Mystic Units 8 and 9 running after the expiration, instead directing the RTO to revise its rules to allow such agreements to address fuel security.

The commission last month finally approved a Mystic agreement, including payments to the Exelon-owned Distrigas LNG facility that supplies the plant with fuel, while also ordering a paper hearing on the issue of return on equity for the units. (See FERC Approves Mystic Cost-of-Service Agreement.)

Winter LNG deliveries to New England interstate pipelines | ISO-NE

Reserve Energy Bank

In a concurring opinion in last month’s fuel security order, FERC Commissioner Richard Glick said “ISO-NE’s apparent need to retain units for fuel security is the result of a market failure” (ER18-2364).

“Winter energy security is a good problem for markets,” said a report on fuel security prepared by Brattle Group on behalf of NextEra Energy Resources. “New England’s energy security challenge can be converted into demand for clearly defined products that many, diverse resources can compete to provide at least cost … [but it’s] essential that any chosen solution will provide planners/operators with the certainty that winter reliability will be maintained, thus avoiding any need for out‐of‐market intervention.”

In a related effort to address fuel security issues holistically, ISO-NE Vice President for Market Development Mark Karl said in November that the RTO is proposing to incorporate into the real-time market an additional constraint that looks at the ability to provide energy storage — or an energy bank.

“I want to be careful here because it’s easy to think about this from the standpoint of conventional generator fuel, but this will apply to any sort of resource that has the ability to maintain essentially a reserve bank of energy that can be converted into electricity when needed,” Karl said.

The idea is to optimize the use of limited energy over more extended periods compared with how markets are currently designed to optimize energy over the course of an operating day, he said. (See New England Talks Energy Security, Public Policy.)

New Renewables

ISO-NE proposed the Competitive Auctions with Sponsored Policy Resources (CASPR) construct last January to address state regulators’ concerns about ratepayer costs for policy-driven resources and generators’ fears that out-of-market procurements would suppress capacity prices.

In the commission’s March ruling on CASPR (ER18-619), Commissioner Robert Powelson dissented, while commissioners Cheryl LaFleur and Richard Glick criticized the minimum offer price rule (MOPR) included in the measure.

Under CASPR, ISO-NE will clear the Forward Capacity Auction as it does today, applying the MOPR to new capacity offers to prevent price suppression. In the second Substitution Auction generators with retirement bids that cleared in the primary auction will transfer their obligations to subsidized new resources that did not clear because of the MOPR. The RTO will phase out the renewable technology resource exemption, which has allowed it to clear 200 MW of renewable generation in its capacity auction annually (to a maximum of 600 MW) without regard for the MOPR.

Integration of new renewable resources is not a problem for the RTO and likely won’t be for the next decade, ISO-NE Vice President of Market Operations Robert Ethier told industry stakeholders in November. It’s a two-fold economic challenge involving the energy and capacity markets.

“Bring in these zero-marginal-cost resources and insert them into our real-time supply stack, and it lowers energy prices for everyone … [and] when the states contract for these resources, they don’t just affect the energy market, they also affect our capacity market,” Ethier said.

Having new state-sponsored resources buy out old resources in the market will help manage and ration the entry of these resources into the market and prevent price suppression, he said. (See Canada, New England Talk Trade, Politics and Clean Energy.)

The CASPR filings include proposed Tariff revisions to allow a renewable technology resource to be located out of state — such as in federal waters offshore — and still qualify for a MOPR exemption.

Renewable energy advocates RENEW Northeast supported the RTR revision, as did Vineyard Wind, a partnership between Avangrid Renewables and Copenhagen Infrastructure Partners that last May won the contract to supply Massachusetts with 800 MW of offshore wind energy. (See Mass., R.I. Pick 1,200 MW in Offshore Wind Bids.)

Progress on Emissions

The RTO last month issued its draft 2017 ISO New England Electric Generator Air Emissions Report, which showed that since 2001 sulfur-dioxide emissions have declined 98%, nitrogen oxide by 74% and carbon dioxide by 34%.

Regional emissions of SO2, NOX and CO2 declined in 2017 compared to the previous year, according to preliminary data, with lower emissions due largely to a decline in electricity generation by power plants that use fossil fuels, said the report. The year-over-year declines continued long-term reductions in the emissions produced by New England power plants.

ISO-NE Total System Emissions: 2016 and 2017 New England system emissions (ktons) and emission rates (lb/MWh) (all figures are preliminary). | ISO-NE

NEPOOL Press Ban Proceeding

In August, the New England Power Pool asked FERC to approve amendments to its Agreement to codify an unwritten policy of banning news reporters and the public from attending the group’s stakeholder meetings (ER18-2208). The group drafted the revisions after RTO Insider reporter Michael Kuser applied for membership in NEPOOL’s Participants Committee as an End User customer in March.

RTO Insider responded to NEPOOL’s filing with a Section 206 complaint asking the commission to overturn the organization’s ban or terminate the group’s role and direct ISO-NE to adopt an open stakeholder process like those used by other RTOs (EL18-196). New England is the only one of seven U.S. regions served by RTOs or ISOs where the press and public are prohibited from attending stakeholder meetings.

In a motion to dismiss RTO Insider’s protest, NEPOOL said FERC lacks jurisdiction to force changes and that the publication lacks standing to challenge the rules. (See NEPOOL: FERC Can’t Change Press, Public Ban.)

RTO Insider’s filed response included letters submitted by six U.S. senators and 12 members of the House of Representatives calling on FERC to open the meetings. (See New England Senators Urge FERC to End Press Ban.)

It also included a copy of a Sept. 6 RTO Insider article quoting former FERC Commissioners Pat Wood and Nora Brownell as saying they were unaware of NEPOOL’s closed-door policy when they approved it as ISO-NE’s stakeholder body. (See Wood, Brownell: Unaware of Press Ban When OK’d NEPOOL.)

Public Citizen filed comments challenging NEPOOL’s claim that its members “voted overwhelmingly against having press reporters as NEPOOL members” at the June 26 Participants Committee meeting. Only 115 of NEPOOL’s more than 500 members were present or had proxies at the meeting.

While 32 votes were cast in favor of the press ban, 24 members were opposed and 59 abstained. In addition, NEPOOL records show that six officers or their associates represented companies that provided 21 of the 32 votes for the ban.

The six have conflicts of interest in voting for the ban because they earn income selling “intelligence” about NEPOOL proceedings, said Tyson Slocum, director of Public Citizen’s Energy Program.

The matter is pending before the commission.

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