EPSA Comments in Support of NEPGA Complaint Against ISO-NE

UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
New England Power
Generators Association
v.
ISO New England Inc.
)
)
)
)
Docket No. EL15-25-000
COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION
Pursuant to Rule 212 of the Rules of Practice and Procedure of the Federal
Energy Regulatory Commission (“FERC” or the “Commission”), 18 C.F.R. § 385.212
(2012), the Electric Power Supply Association (“EPSA”)1 hereby comments on the
December 3, 2014 complaint (“NEPGA Complaint”) submitted by the New England
Power Generators Association (“NEPGA”) against ISO New England Inc. (“ISO-NE” or
“the ISO”) in the above-captioned proceeding. NEPGA requests that FERC issue an
order finding the ISO-NE Tariff provisions relating to the Peak Energy Rent (“PER”)
Adjustment unjust and unreasonable, and directing the ISO to modify the Tariff
provisions on PER Adjustments for the Capacity Commitment Periods 5 through 8 and
eliminate the PER Adjustment for Capacity Commitment Period 9 and beyond. NEPGA
requests action by the Commission in advance of the upcoming Forward Capacity
Auction (“FCA”) for the 2018/2019 Capacity Commitment Period (“FCA 9”) in order to
ensure certainty for market participants seeking to bid into FCA 9. EPSA supports
1
EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These
suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and
competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the
benefits of competition to all power customers. The comments contained in this filing represent the position of EPSA as an
organization, but not necessarily the views of any particular member with respect to any issue.
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NEPGA’s complaint and encourages the Commission to grant the relief requested and
order ISO-NE to amend its Tariff as discussed below.
I.
BACKGROUND
On December 2, 2014, NEPGA filed the instant complaint requesting that the
Commission order the ISO to amend its Tariff to adjust the strike price for the PER
Adjustment impacting Capacity Commitment Periods 5 through 8 and eliminate the PER
Adjustment altogether starting with Capacity Commitment Period 9. Under the current
ISO-NE Tariff, the PER Adjustment, which was introduced as part of the ISO’s
Locational Installed Capacity proposal in 2006, obligates capacity suppliers to rebate a
portion of their capacity revenues based on the real-time energy prices. Initially, the
PER Adjustment was designed to serve as a hedge for load against price spikes in the
energy market and to help mitigate any incentives to create price spikes from economic
or physical withholding by removing profits gained from a rise in energy prices above a
pre-determined level. The PER Adjustment provides a rebate from capacity suppliers to
load for the difference between the PER Strike Price and the real-time energy price on a
rolling, twelve-month average basis.
In October of this year, the Commission directed the ISO to increase the Reserve
Constraint Penalty Factors (“RCPFs”) as part of a larger capacity market redesign
effort.2 Such increased RCPFs will impact the real-time prices which factor into the
determination of the PER Adjustments. As indicated above, the ISO is in the process of
redesigning the Forward Capacity Market (“FCM”) and, as part of that redesign, is
implementing new “Pay for Performance” rules that link a provider’s capacity revenues
2
ISO New England Inc., 149 FERC ¶ 61,009 at P 23 (2014).
2
directly to that providers’ performance during real-time reserve deficiencies. As part of
the proceeding adopting the ISO-NE redesigns, including the Pay for Performance
rules, both the ISO and the Commission noted that the PER Adjustment under the
current market design and structure were outside the scope of the market redesign
proceedings and should be considered in a separate proceeding. The ISO further noted
that it initiated a stakeholder process to consider changes to the PER Adjustment.
However, absent 60% or better stakeholder support, the ISO elected not to file its
proposal to amend the PER Adjustment with the Commission.
In light of the forthcoming FCA 9, the first auction that will operate under the
redesigned FCM including the Pay for Performance obligation, NEPGA filed the instant
complaint seeking relief from the unjust and unreasonable market rules in the ISO-NE
Tariff.
II.
COMMENTS
EPSA supports the NEPGA complaint and requests that the Commission issue
an order granting the relief requested. EPSA agrees with NEPGA that the Tariff
provisions on PER Adjustment are unjust and unreasonable and the Commission
should direct the ISO to modify the PER Adjustment for Capacity Commitment Periods
5 through 8 to avoid unjust and unreasonable results and eliminate the PER Adjustment
for Capacity Commitment Periods 9 and beyond due to the redesigns of the FCM in
ISO-NE including the implementation of the Pay for Performance rules starting with FCA
9.
1. Commission Should Order ISO-NE to Adjust PER Strike Price for
Capacity Commitment Periods 5 Through 8
3
EPSA agrees with NEPGA’s assertion that the PER Adjustment is unjust and
unreasonable and will substantially and adversely impact capacity suppliers. In light of
the increase in RCPFs ordered by the Commission this year, the ISO-NE Tariff
provision on the PER Adjustment will lead to increased costs for capacity suppliers
without a corresponding increase in benefits. As NEPGA points out, the Commission
has a statutory duty to ensure just and reasonable rates which, under these
circumstances, requires the Commission to balance the interests between suppliers and
load under the PER Adjustment rules.
NEPGA proposes that the Commission can restore the transacted outcome that
existed between capacity suppliers and load in Capacity Commitment Periods 5 through
8 in light of the increased RCPFs and the impact that will have on the PER Adjustment,
by mandating that the ISO implement the strike price for the PER Adjustment as it
relates to the Capacity Commitment Periods 5 through 8. These are the Capacity
Commitment Periods for which the FCA has already occurred, but the energy has not
yet been called for or delivered. The Commission previously recognized the need to
adjust the PER Strike Price in order to ensure just and reasonable rates and that the
PER Adjustments function as intended.3 Similar to the actions the Commission has
previously taken to ensure the rates remain just and reasonable, EPSA supports
Commission action in these circumstances to order the ISO to adjust the strike price for
the PER Adjustment for the Capacity Commitment Periods 5 through 8. Such remedial
action by the ISO will mitigate the substantial impact on capacity suppliers from
3
ISO New England Inc., 134 FERC ¶ 61,128 at P 24 (2011).
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increased RCPFs and ensure that rates under the PER Adjustment mechanism are
returned to a level consistent with the original capacity sale.
2. Commission Should Order ISO-NE to Eliminate the PER Adjustment
Mechanism/Rule for Capacity Commitment Period 9 and Beyond
The Commission should grant NEPGA’s request and order ISO-NE to eliminate
the PER Adjustment starting with the Capacity Commitment Period resulting from the
upcoming FCA 9. ISO-NE has recognized that the implementation of a Pay for
Performance obligation eliminates the need for a PER Adjustment, and has begun a
stakeholder process to consider whether the PER Adjustment should be eliminated for
FCA 10, recognizing the unjust and unreasonable impact that such a mechanism would
have on future Capacity Commitment Periods in light of the redesigned FCM that
includes the Pay for Performance obligations. As such, EPSA agrees with NEPGA’s
assertion that it would be unjust and unreasonable to allow the PER Adjustment to
persist through the FCA 9 and beyond. As NEPGA explains in its complaint, the Pay for
Performance obligations replicate the purposes of the PER Adjustment by eliminating
the potential gain from physical withholding and “all resources will be subject to a
Capacity Performance Payment calculated using an administratively determined penalty
rate … for both FCA 9 and FCA 10.”4 Therefore, the reasons supporting the elimination
of the PER Adjustment for FCA 10 exist for FCA 9 and the Commission should require
ISO-NE to eliminate the PER Adjustment for the upcoming FCA 9. Given the recent
market redesigns and the duplicative impact of the Pay for Performance obligations,
EPSA sees no reason why the PER Adjustment should be permitted to overstay its
welcome and impact the prices in the FCA 9.
4
NEPGA Complaint at 25.
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Therefore, EPSA supports NEPGA’s complaint and joins its request that the
Commission order ISO-NE to revise its Tariff to eliminate the PER Adjustment in
advance of the upcoming FCA and for all subsequent FCAs.
III.
CONCLUSION
WHEREFORE, for the foregoing reasons, EPSA respectfully requests that the
Commission consider EPSA’s comments in support of NEPGA’s complaint and
requests that the Commission find the ISO- NE Tariff provisions on PER Adjustment
unjust and unreasonable and issue an order directing the ISO to modify the PER
Adjustment for Capacity Commitment Periods 5 through 8 to avoid unjust and
unreasonable results and eliminate the PER Adjustment for Capacity Commitment
Periods 9 and beyond in advance of the upcoming FCA 9.
Respectfully submitted,
_______________________________________
Nancy Bagot, Vice President of Regulatory Affairs
Melissa Mitchell, Director of Regulatory Affairs and Counsel
Electric Power Supply Association
1401 New York Avenue, NW, 12th Floor
Washington, DC 20005
(202) 628-8200
Dated: December 22, 2014
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CERTIFICATE OF SERVICE
I hereby certify that I have served a copy of the comments via email upon each
person designated on the official service list compiled by the Secretary in this
proceeding.
Dated at Washington, D.C., December 22, 2014.
________________________________
Nancy Bagot, VP of Regulatory Affairs
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