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Commissioner Cheryl A. LaFleur Statement
March 9, 2018
Docket No. ER18-619-000

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The ISO-NE Competitive Auctions with Sponsored Policy Resources Proposal

"In today’s order, the Commission finds that ISO New England, Inc.’s (ISO-NE) Competitive Auctions with Sponsored Policy Resources (CASPR) is a just and reasonable proposal that accommodates actions taken by New England states to procure certain resources to achieve policy objectives outside of the ISO-NE’s competitive wholesale markets.1 I strongly support the Commission’s approval of CASPR. I am concurring, however, because I disagree with the generic guidance set forth in the order regarding how the Commission should address the interplay of state policies and the wholesale markets. Because that guidance is not directly pertinent to the CASPR proposal, and in my view is not necessary to support the Commission’s decision today, it has no bearing on my determination to approve CASPR.

"How to address the interplay of competitive wholesale markets and state policy initiatives is one of the most important and complex issues facing the Commission and the nation’s electricity markets. Last May, the Commission held a two-day technical conference to closely examine this interplay, and to consider how ISO-NE, the New York Independent System Operator Inc., and PJM Interconnection, L.L.C., which rely on mandatory centralized capacity markets for resource adequacy, should approach it. At that technical conference, I strongly encouraged those RTOs and ISOs to develop market design proposals to either accommodate or achieve state policy initiatives through forward-looking market reforms. ISO-NE developed such a proposal, CASPR, and I am pleased to support the Commission’s order approving it today.

"I am a strong supporter of wholesale capacity markets, which I believe have delivered substantial benefits to customers through regional resource selection and deployment, protecting reliability at least cost, and promoting innovation and efficiency. At the same time, I recognize that these markets exist due to the decisions of the states to change the structure of their regulated utilities, leading the regions to rely upon mandatory centralized capacity markets to sustain resource adequacy and reliability.

"In recent years, some states in these regions have increasingly focused on supporting specific resources through out-of-market compensation to promote various policy objectives, rather than relying on market prices to attract desired investment. I agree with ISO-NE that there is an inherent tension between relying on capacity markets to attract investment and state-mandated support for specific resources. Indeed, there were strong disagreements among stakeholders, and even among states, regarding the path that ISO-NE should take to address this tension. To its credit, I believe that ISO-NE crafted a just and reasonable proposal that balances these competing objectives. I particularly appreciate that ISO-NE utilized a competitive, auction-based approach to introduce state-supported resources into the wholesale capacity market. I intend to closely monitor the effectiveness of this market construct in practice. As noted in the order, I also appreciate ISO-NE’s commitment to continue to work with stakeholders on the definition of sponsored policy resources if state laws and regulations change.2

"I agree with today’s order that the minimum offer price rule (MOPR) is an important tool that the Commission can utilize in certain instances to address the interplay between state policies and our wholesale markets. I reject the notion, however, that we should use the MOPR as a “standard solution” – a blunt instrument – against the impacts of all state policies. First of all, I believe that there are different MOPR constructs that could be developed to protect market pricing in those instances where out-of-market subsidies undermine the goals of the wholesale capacity markets. For example, those constructs could include certain exemptions to the MOPR or, like CASPR, allow resources subject to the MOPR to obtain a capacity award while not impacting or necessarily receiving the market clearing price. In addition, other market design constructs, such as, carbon pricing, can also achieve state objectives within the market. I expect that other proposals will emerge over time as these issues are considered.

"I acknowledge that these issues are not easy, as evidenced by the split Commission decision today. I also believe that these issues do not lend themselves to a cookie-cutter solution to be broadly applied across all regions. I therefore hope we receive market design proposals developed by other RTO/ISOs and their stakeholders. Without pre-judging any specific proposal, I believe we should be open to region-specific solutions of different types.

"As I have stated many times, the nation is undergoing a transformation in its energy resource mix, and clean energy policies set by individual states to address climate change and other environmental goals are a key driver of this transformation. If the affected regional markets do not adapt their market design to the reality of the growing number of state targets and initiatives, I fear that the result could be gradual, unplanned reregulation, making the transition to clean energy in those regions more expensive than necessary and less reliable for customers. The value of markets to customers makes it well worth the effort to adapt them to accommodate or achieve state policy objectives, and today’s order approving CASPR is an important milestone in that ongoing effort.

For these reasons, I respectfully concur."






                                               

    1 ISO New England Inc., 162 FERC ¶ 61,205, at P 22 (2018).
    2 Id. at P 47.
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