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FERC majority would have upheld contested ISO-NE capacity auction results

The Federal Energy Regulatory Commission would have upheld contested results of the ISO New England's most recent forward capacity market auction that went into effect by operation of law, according to a joint statement released Sept. 27 by the agency's Republican majority.

The auction, FCA 13, was held Feb. 4 for the June 2022 through May 2023 commitment period, producing the lowest clearing price in six years at $3.80/kW-month. Those results were challenged by Vineyard Wind LLC. An offshore wind developer formed through a joint venture between Copenhagen Infrastructure Partners K/S and Avangrid Renewables LLC, Vineyard Wind specifically expressed frustration that it was unable to fully participate in the auction as a renewable energy resource.

FCA 13 was notably the first ISO-NE capacity market auction to run under "competitive auctions with sponsored policy resources," or CASPR, rules, a new two-step construct to accommodate state-subsidized and state-procured energy resources. CASPR's secondary substitution auction allows resources interested in retiring to transfer their capacity supply obligations to new state-sponsored resources that did not clear in the primary auction.

The construct allowed the Vineyard Offshore Wind Project to successfully secure 54 MW in FCA 13's substitution auction, prompting consumer advocacy group Public Citizen to assert that FERC and the ISO-NE "botched" the auction. Full participation of the offshore wind project in the capacity auction would have lowered the clearing price paid to all resources by 66.7 cents/kW-month, or more than $270 million, the group argued.

In a separate joint protest, a group of generators ArcLight Capital Holdings LLC affiliate Great River Hydro LLC, NRG Power Marketing LLC subsidiary NRG Power Marketing LLC, Carlyle Group LP subsidiary Cogentrix Energy Power Management LLC, and Vistra Energy Corp. argued that the offer floor price appeared to be inconsistent with prevailing market conditions. They specifically questioned the grid operator's internal market monitor's approval of a unit-specific offer floor for NTE Energy's planned 647-MW natural gas-fired Killingly Energy Center project in Connecticut.

Avangrid Renewables is a subsidiary of Iberdrola SA subsidiary Avangrid Inc., a company previously represented by Democratic Commissioner Richard Glick. Glick announced earlier this month that he will recuse himself from all matters involving Avangrid or its affiliates until Nov. 29 after he was given incorrect legal advice on how to follow President Donald Trump's ethics pledge.

Given Glick's recusal from the ISO-NE auction result proceeding and with FERC having two open seats, FERC announced on Sept. 25 that the FCA 13 results took effect automatically because the agency lacked the minimum three-member quorum needed to vote out an order.

In a statement released two days later, Chairman Neil Chatterjee and Commissioner Bernard McNamee said the agency would have voted to approve the auction results, noting that the ISO-NE's independent market monitor "scrutinized all aspects of Killingly's offer to ensure they were consistent with prevailing market conditions, including all relevant cost components and revenue assumptions that support Killingly's offer."

The majority also said it would have rejected arguments by Vineyard Wind, the Massachusetts Attorney General's Office, and a coalition of clean energy advocates that the offshore wind project should have been exempted from ISO-NE's Minimum Offer Price Rule as a renewable technology resource. While the commission accepted revisions to ISO-NE's tariff that enabled offshore wind resources to receive exemptions from the rule six days before the auction, a waiver request to do so from Vineyard Wind is still pending before the commission, the majority noted.

Chatterjee and McNamee also noted that in approving the two-step construct, the commission already found that "the substitution auction is not rendered unjust and unreasonable simply because it does not guarantee that state-sponsored resources will obtain capacity supply obligations."

The results of the contested auction results can still be challenged in federal appeals court under a 2018 amendment to the Federal Power Act, which treats rate changes that go into effect by operation of law as final orders for the purposes of judicial review. (FERC docket ER19-1166)