ISO New England high uplift costs targeted by monitor
ISO New England’s markets were competitive in 2016, and its capacity market generally compensates for retirements, but its uplift costs were more than double that of the New York Independent System Operator, presentations slated for a stakeholder meeting Tuesday say.
During the New England Power Pool Participants Committee, Jeff McDonald, ISO New England vice president for market monitoring, and David Patton, president of Potomac Economics, ISO New England’s external market monitor, are scheduled to present their 2016 annual reports.
In his written presentation, Patton concludes that ISO New England “markets performed competitively in 2016,” reflected by wholesale electricity prices falling 30% as natural gas prices fell 34%.
“The strong relationship is consistent with our findings that the market performed competitively because energy offers in competitive electricity markets should track input costs,” Patton said in his presentation.
For the capacity commitment periods 2017-18 through 2020-21, capacity markets have attracted investment in 2.8 GW of new resources, compared with about 3.5 GW in retirements, and the ISO New England remains long in generation capacity, McDonald said in his presentation.
But uplift costs totaled 58 cents/MWh in 2016, more than double NYISO’s 27 cents/MWh and the Midcontinent Independent System Operator’s 22 cents/MWh, Patton’s presentation said. Potomac Economics is the independent market monitor for NYISO and MISO.
One reason ISO New England’s uplift costs are relatively high is that suppliers have an incentive to operate in a higher-cost mode and thus receive out-of-market Net Commitment-Period Compensation, Patton’s presentation said. NCPC is paid to an eligible resource that did not fully recover its costs from the day-ahead on real-time energy market, according to ISO New England’s glossary.