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Resources did not have notice before de-list bids were due: NEPGA

Group says rule change could reduce capacity auction clearing price

Washington — Echoing retroactive ratemaking concerns raised by the chairman of the US Federal Energy Regulatory Commission, generators are asking FERC to reconsider an order that could impact the price generators would get paid to delay the retirement from the ISO New England capacity market.

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The New England Power Generators Association said a key problem is that generators had no warning that the rules would change before choosing whether to submit a retirement de-list bid, which is the price at which it would accept a capacity obligation rather than retire.

ISO-NE's internal market monitor determines the competitiveness of de-list bids, in part by looking at the expected remaining economic life of the resource. But the market monitor determined the calculation overstates the true economic life of a resource. So ISO-NE in June proposed to change the calculation to assume that a generator would retire as soon as the resource becomes unprofitable.

FERC in November approved the rule change, saying it would prevent inflated capacity prices. The commission said ISO-NE gave generators enough notice because the August 10 effective date of the change is before the start of the 13th forward capacity auction to be held in February.

DE-LIST BID DEADLINE

NEPGA countered that the change amounts to retroactive ratemaking because it came after the March 23, 2018, date by which generators must submit a retirement de-list bid. The rule change "only puts an asset owner on notice that it is too late for it to act on the changed rate," NEPGA said. FERC should instead make the rule change effective for the FCA 14, NEPGA argued Monday in its rehearing request.

NEPGA cited a dissent by FERC Chairman Neil Chatterjee, who said he was open to making the changes for FCA 14 but opposed making the changes in FCA 13.

Chatterjee argued the revisions would deny participants an opportunity to make a fully informed decision about whether to submit a de-list bid. He also raised concern that ISO-NE submitted the plan after it was able to calculate the economic consequences under the existing rules.

"This change would achieve a specific price-oriented outcome based on information ISO-NE possesses due to its unique role as both system operator and auction administrator," Chatterjee said.

Chatterjee was overruled on the order by the Democrats on the commission, Cheryl LaFleur and Richard Glick. The other Republican on the commission at the time, Kevin McIntyre, did not vote on the order due to ongoing health issues. Another Republican, Bernard McNamee, was sworn in Tuesday to fill FERC's fifth seat.

CLEARING PRICE IMPACT

NEPGA in July said that if one of the de-list bids is marginal, the revisions will retroactively reduce the FCA clearing price because the market monitor may mitigate a supply offer. It appears the market monitor was worried that under the prior rules the mitigated retirement de-list bids of the four Mystic units -- which total about 2,000 MW of capacity -- could be marginal in FCA 13, NEPGA said Monday.

In a separate proceeding, FERC approved short-term ISO-NE rule fixes that will allow a cost-of-service agreement to keep two of the Mystic units in Massachusetts running to ensure fuel security.

ISO-NE said the tariff revisions accepted by FERC were designed to ensure a competitive auction in FCA 13 and beyond. "The ISO agrees with the order's conclusions that the revisions do not constitute retroactive ratemaking," ISO spokeswoman Marcia Blomberg said Tuesday.

-- Kate Winston, kate.winston@spglobal.com

-- Edited by Pankti Mehta, newsdesk@spglobal.com