On September 14, 2026, FERC approved changes to ISO New England Inc.’s (ISO-NE) Day-Ahead Ancillary Services (DA A/S) market to reduce costs and improve efficiency. The market incurred more than $900 million in costs during its first year, and ISO-NE estimates the revisions will save approximately $23 million annually. FERC’s approval of ISO-NE’s proposal will adjust how ISO-NE forecasts next-day energy needs and set a new floor on the price at which resources become financially exposed for failing to perform. The revisions take effect on October 22, 2026.
In 2024, FERC approved the DA A/S market. The DA A/S market procures reserve capacity needed to meet the next day’s expected energy demand. When a resource clears a DA A/S award, it receives an upfront credit and later incurs a close-out charge if the Real-Time price exceeds a preset “Strike Price” for that hour. A separate input, the Forecast Energy Requirement (FER) Demand Quantity, represents ISO-NE’s raw forecast of the physical energy supply needed to satisfy next-day load and directly drives how much reserve capacity the market procures. After one year of operation, ISO-NE and its Internal Market Monitor found that costs exceeded expectations and that the market was procuring more capacity than necessary.
In a joint filing, ISO-NE and the New England Power Pool Participants Committee proposed revisions to adjust four parameters of the DA A/S market that ISO-NE originally implemented in March 2025. First, the revisions adjust the Forecast Energy Requirement (FER) Demand Quantity, which is ISO-NE’s forecast of the physical energy supply needed to meet next-day demand. FERC found that the prior calculation understated the expected contribution of front-of-the-meter wind and solar resources, which have historically cleared only about 40% of their forecasted output in the Day-Ahead market. FERC concluded that adjusting the FER to better reflect these resources’ expected Real-Time output will reduce over-procurement and lower costs without compromising reliability. Second, the revisions set a floor on the Strike Price—the threshold above which resources incur close-out charges. According to the filing parties, the existing Strike Price often fell below the marginal costs of the combustion turbine and combined-cycle resources that clear most DA A/S awards, discouraging participation in the market. FERC found that tying the Strike Price floor to the marginal cost of an efficient combustion turbine strikes a reasonable balance between encouraging broader market participation and preserving incentives to perform when the system is under strain. Third, the revisions set a $3/MWh floor on the Impact Test threshold, which ISO-NE uses to screen DA A/S offers for potential market power. FERC found that the prior formula unintentionally made the test too stringent in certain hours, leading to over-mitigation when market power was unlikely. Lastly, the revisions remove a credit adjustment that had allowed certain Day-Ahead imports without corresponding Real-Time supply offers to receive compensation intended only for resources supporting a reliable next-day operating plan.
A copy of FERC’s order, issued in Docket No. ER26-3176-000, is available here.