Stakeholder Forums in ISO-NE and NYISO Continue to Assess Wholesale Carbon Pricing Proposals
As we noted in October, two of the country’s six Federal Energy Regulatory Commission (FERC)-regulated grid operators have initiated stakeholder processes to explore the integration of wholesale electricity markets with regional public policy goals aimed at decarbonization. As part of their respective stakeholder forums, ISO New England (ISO-NE) and New York Independent System Operator (NYISO) continue to discuss a carbon price as a potential new market design.
NEPOOL’s1 November 10, 2016, Integrating Markets and Public Policy (IMAPP) meeting is the latest to feature updates on carbon pricing in the ISO-NE energy market, with the Conservation Law Foundation and Exelon Corp. advocating for a carbon price. Other moving proposals include (i) a carbon-integrated, forward-capacity market (FCM), (ii) a forward clean energy market, (iii) a clean power plant solicitation proposal and (iv) an FCM two-tiered pricing construct.
NEPOOL’s revised stakeholder schedule puts it on track to vote on one or more of these proposals during late Q1 or early Q2 of 2017. The New England States Committee on Electricity (NESCOE), the organization representing the interests of the six New England governors, continues to express reservations about carbon pricing. NESCOE notes in a memorandum to stakeholders that it “does not anticipate arriving at collective state support” for the current iteration of the carbon pricing proposal, given four main concerns: (i) the carbon price necessary to achieve the level of procurement needed to meet state policy goals leads to higher consumer costs, (ii) a complex cost allocation is required to ensure that one state is not funding the public policy goals of another, (iii) there is potential duplication of existing carbon-related market mechanisms, and (iv) there are jurisdictional and legal concerns regarding the incorporation of a carbon price in the locational marginal price of energy. Exelon addressed several of these concerns by revising its proposal to set the carbon price at $32/ton rather than at $42/ton, but noted that such a low price level would require that a clean energy procurement backstop mechanism be paired to the carbon price to adequately meet state goals.
