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FERC gives nod to ISO-NE's installed capacity requirement calculation for FCA 13

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FERC gives nod to ISO-NE's installed capacity requirement calculation for FCA 13

The ISO New England will need to procure a net value of at least 33,750 MW during a forward capacity auction slated for February to meet the reliability requirements of the region for 2022-2023, according to a Federal Energy Regulatory Commission order accepting the grid operator's method for calculating installed capacity requirements.

ICRs are calculated before each forward capacity auction, or FCA, as a measure of the installed resources projected to be necessary to satisfy New England's peak demand forecast and maintain sufficient reserve capacity. The ICR and related values, such as local sourcing requirements and maximum capacity limits, are used to develop an auction's demand curve, but they first must be approved by FERC.

The ISO-NE consistently has based its calculation of the ICR on load forecasts, resource capacity ratings, resource availability and load "relief assumed obtainable by operator actions during capacity deficiencies," such as tie benefits from interconnections with neighboring areas and capacity from operating reserves, FERC said in its Jan. 4 order (FERC docket ER19-291). But proposed ICR values for FCA 13 drew scrutiny when the grid operator changed the assumption governing the level of system reserves needed for reliable operations during emergency conditions.

That figure had stood at 200 MW since 1980 but was increased to 700 MW for the upcoming auction to account for "changes in the peak load, an increase in the size of credible contingencies on the New England transmission system, New England's limited tie capability to the Eastern Interconnection, and changes in the resource mix," the ISO-NE said in a Nov. 6, 2018, filing.

The New England States Committee on Electricity challenged the reserves assumption increase, arguing that the ISO-NE failed to provide analysis supporting the magnitude of the increase and tends to overestimate the ICR causing over-procurement that has historically been "more than enough to cover the 550 MW by which ISO-NE proposes to increase ICR" under its new assumption.

But FERC found that "the precise reserves assumption is a matter of engineering judgment" and that the ISO-NE had demonstrated the proposed increase was just and reasonable.

FERC added that it was not persuaded by NESCOE's assertion of overestimates, finding that "several of the ICR reductions that NESCOE presents appear attributable to a change in the load forecast methodology, not a bias on the part of ISO-NE," the order said.

FCA 13 will be held against the backdrop of short-term fuel-security fixes FERC approved in a Dec. 3, 2018, order (FERC dockets ER18-2364, EL18-182) allowing the ISO-NE to require resources retained for fuel security to be entered into FCAs as price takers, which submit offers at a price of zero to ensure they clear the market.

FirstLight Power Resources and the New England Power Generators Association took issue with the ISO-NE's use of different tie benefits and outages assumptions to calculate ICR values than were used to implement the interim fuel security study process for FCAs 13, 14 and 15, spanning the 2022 to 2025 commitment periods. That process will apply modeling scenarios to determine whether a resource that wants to retire is needed to maintain fuel security in the region.

But FERC said recalculating the ICR with assumptions used in the fuel security study would be inconsistent with the ISO-NE's tariff. It determined that the ICR and fuel security analyses served different purposes — establishing the amount of capacity to satisfy system peak load in the summer and ensuring sufficient capacity performance during stressed winter conditions, respectively — so using different assumptions was reasonable.

FERC's nod allows the proposed ICR and related values setting certain parameters for FCA 13 to take effect Jan. 5. FCA 13 is slated to begin Feb. 4.

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