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ISO-NE proposes changes designed to retain resources needed for fuel security

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ISO-NE proposes changes designed to retain resources needed for fuel security

ISO New England has asked federal regulators to approve tariff revisions that would allow the grid operator to retain resources needed for fuel security, such as the 1,700-MW natural gas-fired Mystic River plant in eastern Massachusetts.

In May, ISO-NE asked the Federal Energy Regulatory Commission to approve a tariff waiver (FERC docket ER18-1509) allowing it to pursue a reliability must-run agreement with Exelon Corp. to keep Mystic River 8 and 9 units operating to ensure reliability in 2022 and beyond. The units use LNG from the Distrigas import terminal, rather than pipeline gas, for fuel supply. An Exelon subsidiary, Exelon Generation Co. LLC, is purchasing the Distrigas facility from ENGIE North America Inc.

FERC denied ISO-NE ’s request in July, saying it was too big a change to be done through a waiver, and said the grid operator needs to make short- and long-term rule fixes to address fuel-security concerns.

The proposed “interim” changes filed Aug. 31 will only be in effect for the 13th, 14th and 15th Forward Capacity Auctions, which run for capacity commitment periods 2022/23, 2023/24 and 2024/25, according to the filing. The provisions sunset after Forward Capacity Auction 15. A longer-term market solution to be filed by July 1, 2019, will address fuel security concerns affecting later commitment periods.

The ISO-NE noted, however, that given “uncertainties” around designing and implementing the longer-term market solution, along with the “significant reliability issues at stake,” the grid operator believes extending the ability to retain resources through Forward Capacity Auction 15 is the “more prudent approach.”

In January, ISO-NE completed an operational fuel-security analysis, or OFSA, that determined the region’s evolving power generation mix is exposing reliability risks associated with gas pipeline and other fuel delivery constraints that emerge during extremely cold weather conditions. The grid operator also studied the impacts of the Mystic plant’s retirement and found mandatory reliability criteria could be violated and rolling blackouts could result during the winters of 2022/23 and 2023/24.

FERC found the ISO-NE’s methodology and assumptions in the OFSA and Mystic retirement studies were reasonable, and as a result, the grid operator largely based its proposed tariff changes on those assumptions with some refinements gleaned from stakeholder feedback.

Reliability reviews

As part of its proposed rule changes, ISO-NE plans to conduct fuel security reliability reviews when generators submit deactivation notices that would be based on the same underlying model developed for the OFSA. Specifically, the reliability review is designed to examine an entire 90-day winter season — December, January and February — using a range of scenarios, similar to those in the Mystic retirement studies.

The studies would assess the operational impacts created by the retirement of an existing generation resource with capacity market obligations from the forward capacity market. The predefined scenarios consist of three LNG -supply cases, each with six different scenarios, for a total of 18 scenario cases. The LNG -supply cases consider varying levels of LNG injection and each scenario within an LNG -supply case accounts for varying levels of electricity imports and frequency of refilling dual-fuel oil tanks, according to ISO-NE.

“Trigger criteria” will be used to determine whether an existing generating resource seeking to retire should be retained for reliability reasons. Those criteria are depletion of 10-minute reserves below 700 MW in any hour in the absence of a contingency in more than one LNG -gas supply scenario, or the use of rolling blackouts in any hour under emergency operational procedures in any one scenario.

ISO-NE has proposed to allocate the costs of retaining resources needed for fuel security under out-of-market arrangements to load-serving entities on a regional basis. The grid operator said this would be consistent with the commission’s precedent for past cost allocation related to fuel security needs in the region.

However, a New England Power Pool Participants Committee supported a proposal to allocate the costs to “regional network load,” and if FERC agrees, “the ISO will implement that alternative allocator on a region-wide basis,” the filing said.

With regard to handling retained resources with out-of-market compensation in the forward capacity market, ISO-NE proposed to treat them as price takers in the 2019 auction, meaning they would bid in at a price of zero dollars/MWh.

The grid operator said it will work with stakeholders on a market-based solution that could price fuel security benefits into future forward capacity auctions, but did not have enough time to implement such a solution before the 2019 auction scheduled for February. (FERC docket ER18-2364)

Jared Anderson is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.