Commissioner Robert F. Powelson
July 2, 2018
Docket Nos. ER18-1509-000, EL18-182-000
“I partially support today’s order because it seeks to find a legitimate, just and reasonable solution to a real problem in the New England region. I strongly support the decision to reject the waiver of certain ISO-New England tariff provisions, which, if granted, would have amounted to an end-run around the ISO-New England stakeholder process. I cannot, however, support prematurely clearing a path towards out-of-market, cost-of-service payments to generators without having fully exhausting all other alternatives. Accordingly, I respectfully dissent in part.
“In order to evaluate the potential reliability risks associated the potential lack of sufficient fuel supply to meet the regions electricity demand and maintain system reliability throughout an entire winter, ISO-New England commissioned an Operational Fuel Security Analysis (the Study) in early 2018. The Study highlighted several potential risks in the ISO-New England footprint that could materialize if certain generators or other facilities are taken out of service. According to the Study, potential reliability risks due to the retirement of the Mystic resource could begin to materialize in the 2024-2025 timeframe.
“With Exelon’s announced retirement of the Mystic units in 2022, ISO-New England is again at a pivotal moment where it must decide, with its stakeholders, whether the current challenges can be addressed through market-based solutions or whether more drastic action is warranted. In either case, all stakeholders, including the states, should work together to evaluate and answer this question. Unfortunately, rather than working through the stakeholder process, ISO-New England acceded to the demands of Exelon and chose to file a tariff waiver.
“While the majority appropriately denies ISO-New England’s waiver request, I disagree with the first part of the Order’s show cause directive: an interim short-term, cost-of-service agreement to be filed within 60 days of the date of this order, and permanent tariff revisions reflecting improvements to its market design to better address regional fuel security constraints.1
“As justification for this directive, the order notes that states, through policy or permitting authority, have effectively prevented investors from adequately responding to price signals sent by the market. While I agree that states have certainly interfered with market outcomes, by no means is this indicative of a market failure, nor does it justify a logical leap to the conclusion that out-of-market support to retain certain existing resources may be necessary.
“As noted above, the reliability concerns identified in the Study could materialize in the 2024 and 2025 delivery years, more than five years from today. This is more than enough time for stakeholders in the region to address the problem through the standard processes. The Study should be viewed for what it is: a good-faith effort by ISO-New England to inform all interested stakeholders on potential concerns the region could face in years to come. The region needs to have a serious conversation about the future of competitive electricity markets and the direction stakeholders feel is most appropriate to address the region’s needs. The Study provides the foundation for that discussion.
“It is important that stakeholders not rule out changes to existing market-based mechanisms, such as Pay-for-Performance, if they find such changes necessary and sufficient to address the problem. While I recognize that Pay-for-Performance only recently became effective, the very essence of the Pay-for-Performance market design was to provide financial incentives to market participants to ensure they would be available to perform during stressed system conditions, the same conditions ISO-New England’s waiver is supposed to address. The New England region has yet to either test, or see the benefits of, the Pay-for-Performance reforms. As ISO-New England has correctly noted, additional fuel-security will likely come with a price. However, market participants should be able to compete to provide necessary services to ensure winter preparedness or fuel-security, passing the benefits of competition – lower costs – ultimately to consumers.
“Absent additional natural gas infrastructure in the New England region, I do not want to preclude the potential that the fix may ultimately require an out-of-market mechanism. However, the region should thoroughly identify, analyze, and accurately estimate the costs of any and all alternative solutions. It has not been adequately demonstrated that an interim, short-term cost-of-service mechanism is necessary to meet the region’s needs. While I support the majority’s finding that within 60 days of the order, ISO-New England must show cause as to why its tariff remains just and reasonable in the short- and long-term such that one or more tariff revisions is unnecessary, I would have preferred a more narrow show cause order directing ISO-New England to show why its current tariff is just and reasonable in light of potential fuel-security issues.
“Finally, the New England region appears to have competing interests. On one hand, increasing amounts of renewable resources are seeking to gain access to the wholesale electric markets. On the other hand, ISO-New England appears to be reluctant to let older resources leave the market due to a perceived lack “fuel security.” Given this, I am further concerned that the recently approved Competitive Auctions with Sponsored Policy Resources (CASPR) will not work.2
The Mystic resource appears to be the perfect candidate resource for exit through the CASPR mechanism, potentially making room for a large amount of state-supported renewable energy resources. I recognize that CASPR rules are not in effect yet, so the mechanism could not address this particular situation. However, I am concerned that conflicting interests will ultimately frustrate market mechanisms intended to incorporate state-preferred resources, leading to more tariff revisions down the road.
“As I have said on many occasions, the New England region would benefit from additional natural gas infrastructure. Such infrastructure would relieve constraints on the region’s electric grid and natural gas distribution systems. I still believe such an outcome would represent the least-cost option. However, in light of the political climate in the New England region and New York, such an outcome is unlikely at this time. Nonetheless, we should not rush to an out-of-market solution. Rather, the region should collectively engage in constructive dialogue to seek market-based mechanisms that address the future reliability concerns.
“Accordingly, I respectfully dissent in part.”
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