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ISO-NE seeks deadline flexibility for delist bids, citing fuel security work

As the deadline approaches for power suppliers to decide if they will participate in ISO New England's capacity auction to be held in 2021, the grid operator has asked the Federal Energy Regulatory Commission to grant market participants some flexibility to account for an expected fuel security proposal that could have substantial impact on market revenues and costs.

ISO New England on Jan. 8 laid out its concerns with the March 13 due date for delist bids for the 15th forward capacity auction, or FCA, preceding its plan to file a long-term fuel security mechanism with FERC on April 15. Work on this major market redesign to address the region's energy security needs is ongoing.

The submittal of delist bids for review by ISO New England's internal market monitor is the first significant milestone of the FCA 15 qualification process. Delist bids specify the price below which a supplier does not want to assume a capacity supply obligation, with a permanent delist bid signaling a desired exit from ISO New England's capacity market and a retirement delist bid signaling that a resource wants to exit all ISO New England markets.

The grid operator said market participants considering delist bids for the auction slated to be conducted in February 2021 for the 2024-25 delivery year would likely rely on the version of the so-called energy security improvements, or ESI, proposal that a stakeholder committee will vote on in early March to develop their delist bids.

But a vote by stakeholders on the final version of the proposed reforms is not expected until April 2. The proposal could evolve further in that time, and in that case, "the de-list bids might not accurately reflect the impacts of the [ESI] market rules, in the form in which the rules are filed with the commission," ISO New England said.

Because ISO New England's tariff does not include an "express mechanism for modifying or revoking [delist] bids after submittal," the timing conundrum with the ESI filing, which is expected to impact generation resource net revenues, potentially posed "a significant risk" to power suppliers considering a market exit.

As such, the grid operator on Jan. 8 requested a limited, conditional tariff waiver (FERC docket ER20-759) that would allow market participants to adjust or withdraw retirement or permanent delist bids for FCA 15 if the long-term market solution to regional fuel security issues now under development is subsequently revised before being filed with FERC.

Under the tariff waiver, delist bids would still be due March 13. If changes are made after that date to the ESI proposal that is subsequently filed with FERC, a market participant that submitted a delist bid may "update its de-list bid to reflect the impact of the changes to the [ESI] design or withdraw the de-list bid altogether," ISO New England said. But "either option must be exercised within a week" of the final stakeholder vote on the proposal "to accommodate the internal market monitor's review of the de-list bids."

ISO New England argued that market participants developing delist bids for FCA 15 would "want to account for revenues they will earn and costs they will incur once" the ESI rules are implemented in June 2024, which coincides with the start of the capacity commitment period for FCA 15.

The grid operator said it considered delaying implementation of the ESI reforms until FCA 16 as well as moving up the final stakeholder vote on the proposal but found that those were not optimal alternatives to remedying the problem at hand.

Rather, the requested tariff waiver would "prevent unfair and inefficient market outcomes for participants given the potentially significant impact of the [ESI reforms] on de-list bids and market participant decisions on whether to retire or permanently de-list a resource," ISO New England said.

The grid operator asked FERC to act on its request by March 8 so market participants can factor the commission's decision into their determinations on delist bids for FCA 15. Of note, FERC directed the market design overhaul in a 2018 order (EL18-182) mandating short-term fuel-security fixes and telling the grid operator to come up with a permanent solution to better address regional fuel security.

The grid operator has increasingly been struggling with the issue as oil, coal and nuclear plants in the region retire and are replaced by natural gas-fired plants and renewables constrained by the region's infrastructure and weather. The transition of the generation mix has heightened concerns that New England could run out of fuel during long spells of cold weather.

Under the long-term solution, ISO New England plans to create a batch of new ancillary services in the day-ahead market, develop a multi-day-ahead market that spans up to six days, and introduce a seasonal forward market. Given the scope of changes, it has narrowed its focus to the ancillary services portion of its proposed improvements for the filing due April 15.

Jasmin Melvin is a reporter for S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.