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ISO New England prepares for a post-Mystic future by clarifying market reentry

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ISO New England prepares for a post-Mystic future by clarifying market reentry

New England's power grid operator has issued a memorandum clarifying its position on market reentry for resources electing to retire, as well as related transmission and fuel security needs posed by the planned 2024 closure of Exelon Corp.'s natural gas-fired Mystic River 8 and 9 units in northeastern Massachusetts.

In a recent memo addressed to the New England Power Pool's Participants Committee, regional transmission organization ISO New England reiterated that its tariff language addressing cost-of-service fuel security prevents a resource that is retained for reliability needs from reentering the markets as an existing resource because it specifically states that a retiring resource will have its interconnection service with the grid terminated.

Following such termination, the ISO-NE said, a retired resource seeking market reentry would have to qualify as a new capacity resource, "which it can do only if its owners make an investment in the resource above capacity or cost thresholds specified in the tariff and it establishes a new interconnection service."

The Federal Energy Regulatory Commission in December 2018 approved the ISO-NE's plan to retain about 1,400 MW of capacity from Exelon's uneconomic gas-fired Mystic River power plant in Middlesex County, Mass., for fuel security reasons via cost-of-service contracts for two years. To the dismay of other competitive generators, the ISO-NE made the move to retain two Mystic units after Exelon attempted to retire them in the 13th forward capacity auction, or FCA, which was held in February. The ISO-NE also had rejected Exelon's delistment bids for the units during the 12th FCA held in February 2018.

Now contracted under cost-of-service agreements, the two Mystic units participated as price takers with zero-dollar bids in FCA 13, which covers the June 2022 through May 2023 commitment period. In a recent filing with FERC, the New England Power Generators Association requested that the agency require the ISO-NE's internal market monitor to explain the extent to which the participation of the Mystic River units as price takers lowered the auction's clearing price. The cost-of-service agreements also cover the 14th FCA commitment period of June 2023 through May 2024, although the ISO-NE can terminate the agreement for that year if the units no longer are needed for fuel security while Exelon likewise can opt out of the deal.

In its memo to the NEPOOL Participants Committee, which was dated April 30 but only recently made public, the ISO-NE said it has no intention of modifying the tariff to allow units that seek to retire to reenter the markets as existing resources. "Any other course of action creates problematic incentives," the ISO-NE said. "As a consequence, the region must prepare to meet the transmission and fuel security needs associated with Mystic's retirement no later than June 1, 2024."

The ISO-NE said its plan for preparing for Mystic's retirement is to rely on energy security improvements to address fuel security concerns and to solicit transmission solutions to meet identified local reliability needs. However, as Mystic's expected June 2024 retirement date is outside the three-year window for addressing time-sensitive transmission needs, ISO-NE said it will rely on its FERC Order 1000 competitive process for that purpose.

New England's grid operator also outlined a proposed timeline for implementing its plan for meeting post-Mystic transmission needs, including the issuing of an Order 1000 request for proposals in December.