FERC Again Rejects Challenge to ISO-NE New Entry Pricing
FERC on Thursday reaffirmed the zero-price offer requirement in ISO-NE’s new entrant pricing rule, again rejecting complaints by Exelon and Calpine that it unreasonably suppresses capacity prices and discriminates against existing resources (EL15-23-001).
The commission denied rehearing of an order from January 2015. (See FERC Upholds ISO-NE New Entry Pricing; Rejects Challenges by Generators.)
ISO-NE’s rule allows new resources to lock in their first-year clearing price for up to six subsequent delivery years by offering as a price-taker with a price of zero.
Exelon and Calpine argued that the rule creates a discriminatory two-tiered pricing scheme, with existing resources receiving lower prices than new ones if clearing prices fall in subsequent Forward Capacity Auctions.
The companies said the commission ignored the precedent it set in 2009 in rejecting PJM’s proposed zero-offer requirement, when it ruled that new and existing resources are similarly situated and should receive the same price (ER05-1410-013, et al.).
In its new order, however, FERC said its view has “evolved” since the PJM case, which was decided by members who have since departed the commission.
Because new resources have little maintenance needs, their going-forward costs are near zero, the commission said, and thus consistent with a zero-price offer strategy that ensures they continue to clear the FCA.
“Based on further consideration, the commission has realized that a zero-price capacity offer from a new merchant resource that has cleared in at least one previous auction and has incurred construction costs can be a competitive offer that reflects the resource’s going-forward costs, not an attempt to lower capacity market clearing prices,” FERC wrote.
The companies said ISO-NE’s new entry rule results in greater price suppression than PJM’s because of a longer lock-in period (seven years in ISO-NE, three in PJM) and broader eligibility. New England’s lock-in option is generally available to any new entrant, while PJM’s “applies only in narrow circumstances and thus is rarely triggered,” FERC said.