A Divided FERC Approves ISO-NE’s Proposal for Regional Fuel Security
On December 3, 2018, FERC accepted ISO New England Inc.’s (“ISO-NE”) proposed temporary revisions to its Transmission, Markets and Services Tariff (“Tariff”) designed to address fuel security by a 2-1 vote. Among other things, the order enables ISO-NE to enter into cost-of service agreements with certain retiring generators that are deemed necessary for regional fuel security and reliability. Commissioner McIntyre did not participate and Commissioner Glick issued a separate concurring opinion. Of particular note was the dissenting opinion filed by Chairman Neil Chatterjee.
On May 1, 2018, ISO-NE filed a petition for waiver (“Petition”) of certain Tariff provisions to allow ISO-NE to retain two retiring generating units during the winter of 2023 and 2024 to maintain fuel security. According to ISO-NE, the potential retirement of these two generating units would both endanger 1,700 MW of winter generating capacity and also threaten the continued operations of the generators’ natural gas supplier, thereby increasing the risk of reserve depletion and load shedding in the ISO-NE region. On July 2, 2018, FERC rejected ISO-NE’s Petition, upon finding that the Petition sought to create a new process to address fuel security concerns outside of ISO-NE’s current Tariff (“July 2 Order”). FERC directed ISO-NE to propose short- and long-term Tariff revisions to remedy the fuel security issues identified in the record, or to show cause why none were necessary.
In compliance with the July 2 Order, ISO-NE submitted short-term Tariff revisions on August 31, 2018. ISO-NE proposal sought to retain certain resources for fuel-security purposes by: (1) implementing a Fuel Security Study Process for determining, based on specific criteria, whether a resource is needed to maintain fuel security; (2) using short-term cost-of-service agreements for such resources; (3) allocating the costs for the retained resources using a methodology consistent with ISO-NE’s previously-approved Winter Reliability Program; and (4) treating such resources as “price-takers” in ISO-NE’s Forward Capacity Market (“FCM”). ISO-NE requested an effective date of October 30, 2018 and explained that its proposed Tariff revisions would be temporary since ISO-NE will submit a long-term market solution to FERC for approval by July 1, 2019, as required by the July 2 Order.