An earlier post discussed a complaint filed at FERC by the New England Power Generators Association (NEPGA) arguing that one of New England’s capacity market rules “will have a catastrophic impact on clearing prices” in the upcoming February 3 capacity market auction. NEPGA’s concern is that a large, high-cost generating plant will be counted toward the capacity to be acquired and will be entered in the auction at the low end of the supply curve, thereby artificially suppressing prices. NEPGA wants the rule changed so that the capacity is not counted in the auction. The auction-based wholesale electricity capacity market operated by ISO New England secures one-year commitments to supply electricity three years ahead of time.
Comments both supporting and opposing the requested relief have been filed. Parties opposed to the complaint raise the following:
- Changes to the market rules should go through the stakeholder process. FERC should not act on last-minute complaints that bypass that process and change rules that can have consumer and market consequences. Stakeholders are discussing rule changes on this topic but nothing has been agreed.
- The market rules reflect a balancing of stakeholder interests. It is inappropriate to change just one rule without considering the impact on the integrated package of rules.
- There is no need for urgency. The rule has been in effect for over five years and it anticipates that generators would retire. In fact, substantial amounts of capacity have been retired before prior auctions and the potential for substantial retirements has been discussed as a strategic risk.
- Granting the complaint will set a bad precedent by encouraging parties to file last minute requests for rule changes to get more favorable market outcomes.
Parties supporting the complaint raise the following additional points:
- The 1,500 MW of capacity at issue is 4.5% of the needed supply and putting it at the low end of the supply curve will push out 71% of new resources participating in the auction.
- Timely resolution is needed for investors to have confidence in the supply and demand parameter of the New England market.
FERC has an ongoing proceeding to consider how the capacity markets in the northeast U.S. are performing. Accordingly, FERC’s response to the NEPGA complaint will be closely watched.