Exelon Corp. will need to continue operating its Mystic River 8 and 9 units in Boston under a cost-of-service agreement through the 2023-2024 capacity commitment period after federal regulators rejected an amendment the company had proposed.
The roughly 1,700 MW of gas-fired capacity will then retire after May 31, 2024, leaving the future of the onsite LNG fuel supply facility called the Everett Marine Terminal in question. The Everett Terminal is also owned by Exelon and provides fuel for the plant.
Exelon had previously announced it would retire the two combined-cycle units, which began operating in 2003, due to unfavorable market conditions, but regional grid operator ISO New England has said the generators were needed for reliability and the cost-of-service plan was reached.
The company had until Jan. 10 to notify ISO-NE whether it would retire the units at the end of May 2023, which is the end of the Forward Capacity Auction 13 capacity commitment period, or whether it planned to continue operating under cost-of-service for another year, through the 2023-2024 capacity commitment period.
However, the Federal Energy Regulatory Commission's order issued late Jan. 9 said Exelon could not unilaterally exit the agreement in 2023 and had to maintain operations, providing capacity until May 31, 2024. (FERC Docket ER19-1164)
Protesters argued that such early termination of the agreement would pose a "reliability risk, disrupt the orderly functioning of the [forward capacity market], and cause price spikes," according to FERC's order.
Commissioner Richard Glick concurred in part and dissented in part, saying that allowing Exelon an option to terminate the agreement one year early would have allowed the company to exercise market power.
"As protesters explained, granting Mystic's request to add a unilateral termination provision to its cost-of-service agreement would give Mystic another opportunity to extract every last penny from the region's customers without any countervailing benefit," Glick said.
Specifically, Glick said the "heads I win, tails you lose" provision would permit Mystic to back out of its cost-of-service agreement, or threaten to do so, in order to "secure additional concessions from ISO New England or otherwise earn an even greater return through the market."
The ISO confirmed the situation on Jan. 10, saying in an email the Mystic 8 and 9 generating facility "will remain committed under the Mystic cost-of-service agreement for the full two-year term of June 1, 2022, through May 31, 2024, which coincides with the two Capacity Commitment Periods associated with the thirteenth and fourteenth Forward Capacity Auctions (FCAs 13 and 14)."
Exelon did not immediately return a request for comment.
Jared Anderson is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.