The Federal Energy Regulatory Commission on Feb. 23 provided additional reasoning for why it approved an ISO New England request to terminate capacity supply obligations for a 650-MW natural gas-fired power plant seeking to participate in the grid operator's forward capacity auctions.
The commission's order addressing arguments raised on rehearing follows a Feb. 4 move by the U.S. Court of Appeals for the District of Columbia Circuit to stay FERC's approval for 30 days pending commission action on a related rehearing request by the plant's owner and developer, NTE Energy.
The combined-cycle, gas-fired Killingly power plant is being developed in the far eastern portion of Connecticut. Construction of the plant was expected to begin in 2021, according to the developer's website, but has encountered numerous delays due to certain regulatory and legal challenges as well as the coronavirus pandemic.
During the ISO-NE's 13th forward capacity auction, or FCA 13, in 2019 — which procured resources for a 2-year commitment period — the power plant was awarded an obligation allowing it to earn capacity revenues. As such, the plant is required to begin supplying capacity by June 1, 2022. If the facility cannot achieve commercial operations by that date, NTE Energy must still be ready to provide the capacity by purchasing it from another party.
If the plant cannot begin commercial operations any sooner than two years after the start of a commitment period, the ISO-NE may seek to terminate the source's capacity supply obligation for any future commitment periods as well as the plant's rights to any payments associated with any existing commitments.
After determining that the Killingly plant would not be able to begin operations by June 1, 2024, the ISO-NE in November 2021 sought FERC's permission (ER22-355) to terminate that plant's capacity supply obligation for any future commitment periods. As such, the plant would not be eligible to participate in the upcoming FCA 16. It also sought to terminate the Killingly facility's existing capacity supply obligations covering the 2022-2023 commitment period.
FERC on Jan. 3 granted ISO-NE's requests, despite NTE Energy's stance that the ISO-NE's filing was speculative and that the plant is on track to meet the deadline of June 1, 2024.
NTE Energy appealed FERC's Jan. 3 order and sought a stay of the decision both at FERC and the D.C. Circuit. FERC on Jan. 28 denied the requested stay, but the appeals court on Feb. 4 announced it was granting NTE Energy's request. In a dissent to that court opinion, which was not issued until Feb. 24, Judge Robert Wilkins argued that FERC acted within its discretion.
"The best argument that NTE can muster is that FERC did not set forth in detail why it accepted the consultant's report over NTE's interpretation of the evidence," Wilkins said. "But that argument hardly presents a 'strong showing' of success."
In response to the court-ordered stay, ISO-NE said it would calculate the FCA 16 auction results with and without the Killingly facility.
FERC addresses arguments raised on rehearing
In addressing arguments raised by NTE Energy on rehearing, FERC explained that for legal reasons the rehearing request may be deemed denied by operation of law. However, it is modifying the discussion in its earlier order but continues to reach the same result.
In doing so, the commission cited a previously undisclosed report by a third-party consultant hired by ISO-NE to assess NTE Energy's claims that the facility can still achieve commercial operation by June 1, 2024.
FERC noted that the report concluded that "a realistic scenario that incorporates financing availability — even on a 29-month construction schedule — would not result in achievement of a May 31, 2024, commercial operation milestone, and that this deadline would most likely be missed by several months."
The commission added that it cannot rule out the possibility of the Killingly facility achieving commercial operation by that date. "But we are not required to do so to reach the conclusion that ISO-NE carried its burden to show that the termination trigger was met," FERC said.
ISO-NE spokesman Matthew Kakley said in a Feb. 24 email that the D.C. Circuit's stay remains in effect. The grid operator filed a motion to dissolve the stay last week, arguing that it has become moot because NTE Energy "failed to cure a subsequent financial assurance default."
"In sum, whether or not [FERC's] termination order is upheld, Killingly will not have capacity supply obligations," the grid operator said in its court filing. "Thus, the end result is identical in both cases, i.e., Killingly's capacity supply obligations are terminated."
Kakley said ISO-NE will post its latest capacity auction results on its website "as soon as we have more clarity regarding the project's participation in the auction."
NTE Energy declined to comment.
