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Ruling on Dominion complaint, FERC orders ISO-NE to clarify capacity auction rules

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Ruling on Dominion complaint, FERC orders ISO-NE to clarify capacity auction rules

FERCon May 2 partiallygranted a complaint filed by subsidiaries of alleging thatthe ISO New England Inc.improperly disqualified new incremental capacity from participating in theregion's forward capacity auction for the 2019-2020 delivery year.

Indoing so, the commission found that the grid operator's tariff is unclear as towhether new incremental capacity and existing capacity at the same generatingstation must submit a composite offer in order to participate in the FCA.

Theagency did not, however, grant Dominion's request that the auction at issue —FCA 10 — be resettled so the new incremental capacity resulting from uprates atDominion's ManchesterStreet generating station in Providence, R.I., can be treated as ifit had participated in that auction. Citing its "broad discretion in fashioningremedies," FERC noted that it has "generally disfavored rerunningmarkets" due to the high level of uncertainty created by such a move.

FiledFeb. 5 by Dominion ResourcesServices Inc. on behalf of its affiliates andDominion Energy Manchester Street Inc., the complaint alleged that the ISO-NE violated its tariff bydisqualifying from the auction 21 MW of new summer capacity at the gas-firedgenerating facility due to Dominion's failure to submit a composite offercovering both the new incremental summer capacity and the existing wintercapacity for the facility. The problem, according to the complaint, is thatDominion was ineligible to submit a composite offer under the tariff because ithad elected to lock-in the clearing price for the incremental new capacity.

Contraryto the ISO-NE's position, the tariff does not actually require composite offersin the Manchester Street facility's situation, but instead states that separateresources "may together participate … as a single resource" bysubmitting a composite offer, Dominion said. While the utility acknowledged thenecessity of ensuring that a resource's summer capability is matched with anequal amount of winter capability because the capacity purchased in the FCA isan annual product, it said that was not an issue here because the ManchesterStreet facility's winter qualified capacity is significantly higher than itssummer qualified capacity.

FERCagreed, finding that the ISO-NE's tariff "does not specify that a resourceowner must submit a composite offer to create a link between new incrementalcapacity and existing capacity at the same resource." Rather, it clearlystates that any summer qualified capacity of an existing capacity resource thatexceeds the resource's winter qualified capacity must be included as part of acomposite offer with another resource or the first resource's FCA qualifiedcapacity must be administratively set to its winter capacity figure.

"Inaddition, the tariff creates confusion insofar as it states that an existingcapacity resource can qualify new incremental capacity and must indicatewhether it selects the price lock-in when, according to ISO-NE'sinterpretation, that new incremental capacity must be included as part of acomposite offer and, thus is not eligible for the lock-in," FERC said."We find that the lack of clarity regarding the process for new incrementalcapacity and existing capacity at the same resource to participate in the FCAfails to provide reasonable notice to market participants of the requirements,and is therefore, unjust and unreasonable."

Thecommission accordingly gave the ISO-NE 60 days to submit a compliance filingclarifying whether new incremental and existing capacity at the same resourcemust submit a composite offer and, if so, explaining the rationale underlyingthat position. The grid operator further is to justify why the lock-in shouldnot be available to composite resources or, in the alternative, revise itstariff to allow them to do so.

"Indeed,since the intent of the lock-in provision is to incent new entry and provideinvestor assurance, we see no reason why an existing generating resource withnew incremental capacity should not be able to lock-in the price for the newincremental capacity," FERC said.

Despitefinding that the existing tariff is unjust and unreasonable, the commissionrefused to require the ISO-NE to rerun FCA 10, which was held in February. Thegrid operator did not violate its tariff, and Dominion failed to take advantageof a process the ISO-NE has established for challenging disqualificationdecisions before the market is settled in the first place, FERC noted.

"Thecommission has found that rerunning the markets would do more harm to electricmarkets than is justifiable," the order explained. (EL16-38)